The market for CBD products has outgrown the dispensary and the next stage of growth is happening at the retail space.
According to a new report by BDS Analytics and Arcview Market Research entitled “CBD: Cannabinoids Escape the Dispensary”, the US CBD market is expected to hit US$20 billion by 2024. Sales at dispensaries and pharmacies are projected to reach US$5.3 billion and $US2.2 billion, respectively. Sales in non-cannabis-related retail distribution channels are expected to take the biggest share (63 percent) of CBD infused product sales to total US$12.6 billion.
This latest forecast shows that CBD has truly gone mainstream. As part of the exploding US$4.2 trillion health and wellness market, the non-psychoactive cannabinoid’s ability to relieve pain, inflammation and anxiety has given rise to a wide range of CBD infused products that are being marketed as essential aspects of a healthy lifestyle and ideal beauty regimen. Even CBD pet care lines are finding their way to store shelves. Major retailers such as CVS Pharmacy (NYSE:CVS), Walgreens (NASDAQ:WBA), Rite Aid (NYSE:RAD) and Kroger (NYSE:KR) now carry CBD topicals including creams, sprays, roll-ons, oils, lotions and salves.
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All of this was made possible by the removal of major legal barriers in the United States in the past year. In December 2018, the US Farm Bill was passed, effectively legalizing the production of hemp and the interstate transport of hemp-derived CBD products. Earlier in the year, the federal government had removed hemp-derived CBD from the Controlled Substance Act.
Now that those barriers are down and the country’s major retail chains are on board, the market is experiencing a flurry of co-branding partnerships between CBD companies and top brands.
CBD products entering the mainstream
Following in the footsteps of retail giants like Walgreens and Kroger, clothing and beauty retail brands are now getting in on the action, signing agreements with cannabis companies to give shelf space to CBD consumer packaged goods.
Urban Outfitters (NASDAQ:URBN) has a deal with CBD For Life, a brand owned by dispensary operator iAnthus Capital Holdings (OTCQX:ITHUF), to carry CBD infused products at select stores in California and New York as well as on the retailer’s e-commerce platform. Cosmetics retailer Ulta Beauty (NASDAQ:ULTA) announced it plans to join other beauty companies like Sephora in carrying CBD skin-care products.
Early in 2019, Authentic Brands Group (ABG) inked a long-term revenue-sharing deal with cannabis company Tilray (NASDAQ:TLRY) to develop and distribute CBD products globally. Under the agreement, Tilray will pay up to US$250 million over a 10-year period for 49 percent of the net revenue of co-branded product sales. ABG has several key brands under its umbrella, including Aeropostale, Juicy Couture, Jones New York and World Golf Hall-of-Famer Greg Norman’s brand.
In a related deal, Green Growth Brands (CSE:GGB,OTCQB:GGBXF) is partnering with Tilray to produce a line of CBD-infused products for active men and women under the Greg Norman brand, which is available in over 3,000 retail locations across the United States. “I played professional golf for 40 years, hitting more than five million golf balls that have caused significant wear and tear on my body,” said Greg Norman. “Having been through it all, on the golf course and in business, I am thrilled to partner with GGB Beauty to distribute Greg Norman® CBD products throughout the country.”
Green Growth Brands also has a partnership agreement with retailer Designer Brands (NYSE:DBI) (formerly DSW) to stock nearly 100 US stores with Seventh Sense Botanical Therapy branded CBD infused personal care products. “We have seen recent shifts in consumer behavior accelerate changes in the retail industry,” said Roger Rawlins, CEO of Designer Brands. “North America’s widespread adoption of the use of CBD products is one of the best examples of these shifts, and we could not be more excited about our partnership with Green Growth Brands and the introduction of their products to our customers.” Seventh Sense products are also being distributed by major retail brands including Abercrombie & Fitch (NYSE:ANF) in more than 160 stores across the United States.
CBD products creating co-branding opportunities
These co-branded collaborations have many benefits for CBD product companies in a highly competitive, emerging sector in consumer packaged goods. “First of all, such partnerships bring validation to CBD as a product category in this marketspace and legitimize CBD infused products into mainstream consumption,” Peter Horvath, CEO of Green Growth Brands, told Investing News Network. Horvath is a retail veteran who has served in critical senior management roles for brands such as Victoria’s Secret, DSW and Limited Brands. “The cannabis industry as a whole has encountered many roadblocks to raising capital, however these partnerships signal to investors that major retailers recognize the growing consumer demand for CBD products.”
Obtaining a spot on the shelf is the holy grail for any emerging consumer goods company, and even more so for cannabis companies. The brand recognition provided by major retailers like Abercrombie & Fitch is an important step towards establishing market share and the ability to put your own brand in front of the current target market is a huge opportunity. Companies capable of establishing relationships with retailers and building brand awareness with consumers through hemp-derived CBD are paving the way for cannabis-derived products while capturing a coveted first-mover advantage.
The growing mainstream demand for CBD based consumer products made possible by the US Farm Bill has led to “wellness” as a third category in the cannabis market alongside medical and recreational. Co-branding partnerships offer CBD product companies an effective route to brand recognition and the potential to capture a great share of the market.
This INNSpired article was written according to INN editorial standards to educate investors.