The Unexpected 2020 CBD Market: COVID-19, Excess Supply, Limited Demand (Op-Ed)

You can find CBD everywhere and in all kinds of products these days. Entrepreneurs have even gone so far as to patent a CBD tampon. But more and more people feel like things are being taken too far. Already, the market is flooded with consumable CBD products making wild claims and not having any safety or efficacy approval from the FDA.

This saturation of ridiculous and potentially dangerous products, paired with over-promised and misappropriated medical claims is driving consumers away from CBD. Another layer of challenge is added by US regulator and lawmaker’s efforts to effectively sabotage the US cannabis market in general.

Think it will get better if Trump is not re-elected? Think again, Both Joe Biden and Kamala Harris are opposed to cannabis legalization and have played roles in supporting The War on Drugs (institutionalized racism) and both have bought into the long disproven “Reefer Madness” stereotypes.

There will not be federally legal US weed anytime in the next four years (and if there is I will gladly eat those words in a weed brownie). The US will continue to fall behind in the global cannabis market, which is why US cannabis companies are straight up moving operations to other countries that have logical and reasonable regulations.

Why does this matter? Well, it matters because hemp prices are falling to new lows and companies will be able to cheaply produce more CBD products than ever. That is great news if you have consumers that actually want to buy the product! This is not the case though.

Hemp biomass prices reached a high of over $40 a pound in July, just before the 2019 harvest came in… Today, it’s trading under $10 a pound following a quadrupling of supply from 2018 to 2019.

…Meanwhile, the CBD consumer market remains limited as the U.S. Food and Drug Administration continues to prohibit the extract in food or dietary supplements, although many sellers ignore that mandate.

“Hemp Prices Plunge as CBD Demand Falls Short: Cannabis Weekly

Indeed, the CBD industry is abundant with desperate sellers and opportunistic buyers. While many saw the coming price drop in hemp flower values, no one could quite predict the influence of COVID-19 on the CBD market. Likewise, CBD companies have been overly optimistic about consumer demand for products and many are still operating under the delusion that it is not a highly competitive market.

… thousands of CBD companies in the United States will likely shutter in 2020 — but the CBD market will remain flooded with some 1,500 brands jostling for market share… The top 20 over-the-counter CBD companies accounted for just 17% of the overall CBD market in early 2020, with some 3,000 other competitors crowding 77% of the market…

The flooded market is a result of entrepreneurial enthusiasm for a booming trend with few established brands. Throughout 2019, the CBD market saw so many new CBD market participants that those earning less than $1 million in annual revenues occupy over 97% of the market, Brightfield concluded.

“Chart: 2020 an ‘extinction event’ for thousands of CBD companies, but industry remains crowded

However, the 2020 CBD market outlook is not entirely doom and gloom. Modest market growth is expected in the coming years.

CBD Oil Market is expected to witness growth at a rate of 31.90% for the forecast period of 2020 to 2027. CBD Oil Market Report analyses the growth, which is currently being owed to the focus of the unconventional application of hemp extract and CBD oil for medical purposes.

“CBD Oil Market Size 2020-Industry Share, Growth, Trends, Revenue Analysis, Top Leaders-Dr. Hemp Me, Green Roads, Royal CBD, CBD Oil Europe, King CBD: Says DBMR Analyst

At a very modest growth rate of only 30% over the next seven years, clearly there will be CBD companies that will go out of business. These estimates also do not account for looming FDA regulatory actions. Should the agency require CBD to be produced according to dietary supplement standards, virtually no small to mid-sized CBD company will have the funding to manufacture its products in a compliant fashion.

So why are those companies even making CBD to begin with? Many entrepreneurs have entered the industry seeing it as a way to make fast cash on an unregulated product. That’s right, companies are intentionally and knowingly producing CBD products in a way that they know is not on par with comparable products that are regulated by the FDA. Many are blatantly ignoring FDA mandates for marketing claims, label claims and data, and their mandate that CBD not be added to any food or drink (yes, CBD gummies ARE ILLEGAL technically).

In many respects, the loss of so many CBD businesses is something to look forward to. Many of these businesses should never have entered the market in the first place and are doing a disservice to customers and the overall legitimacy of CBD. Personally, I would love to see these sleazy low-quality operations escorted out of the market.

There is another type of small CBD business though, the ones that want to do well, try to do well, but still could never afford to produce a product that complies with regulations. For those companies, it is regrettable but realistically no one should be able to sell a pharmaceutically active compound with considerable side effects and adverse reaction potential without complying to some health and safety standard.

The fact that the FDA has gone on for so long without requiring this has demonstrated truly how little they care about consumer safety and has encouraged misguided and predatory CBD businesses. They have done this with the expressed hope of restricting CBD as a pharmaceutical which will earn them considerable money in clinical trials.

No one is winning! There is little interest in CBD clinical trials because most businesses making CBD cannot afford them. Customers are exposed to potentially dangerous unregulated products, and very few CBD companies are thriving (even fewer long term).

Everyone is losing. Canada, the UK, and most of the EU have all found effective ways to regulate CBD products and sales. The US is ridiculously behind the global market in CBD and cannabis regulation.

This prevents US CBD companies from being able to participate in international trade and further restricts the potential market growth. The FDA and the US Attorney General are effectively sabotaging the US cannabis and CBD market in the name of paranoid conservative stereotypes and probably some financial interests (FDA makes money from clinical trials and drug approvals if they can force CBD off the retail market).

The top CBD companies of 2020, such as GW Pharmaceuticals, Charlotte’s Web, and CBD Plus are some examples of companies that are going to last. They have the funding and political alliances to keep moving on no matter what the FDA does and no matter what the CBD market does. Charlotte’s Web has already continued to operate successfully after receiving FDA warning letters for mismarketing CBD products. They have put their products in nation-wide supermarkets, pharmacies, and even pet stores.

So what types of CBD companies realistically have the capacity to continue operating over the next five to ten years?

CBD companies that have already found success will likely be able to continue to grow and operate as long as they can keep up with regulations and keep their businesses funded through those changes to come. Brand loyalty is one of the first requirements to cement your CBD brand in a highly competitive market.

Brands that are already legally compliant in all US states (except Idaho) have already done more work than the average CBD company, the problem is that most CBD brands are not actually compliant in all 50 states (even if they are currently selling there). In addition to already being more compliant with regulations, these brands have established a large distribution network and found their way into competitive retail distribution networks.

Large consumable companies such as Unilever, Colgate, Carl’s Jr, and other food, beverage, and personal care companies have all of the resources to be very successful in developing and selling CBD products. Many are just waiting for the FDA to implement GMP regulations for CBD but are already prepared to launch and distribute CBD products.

Small to mid-sized CBD companies often do not realize how these giants operate, and that they are just lying in wait to take over. Likewise, their close relationships with lawmakers and regulators will ensure that their products are ready for shelves the moment that regulation is cleared.

The hope for CBD is that is will be placed under Dietary Supplement regulations (DS-GMP). Existing supplement companies already understand how to manufacture and distribute goods that are regulated this way and will have the advantage of established distribution networks and retailer partnerships.

Just like consumer packaged goods companies and existing supplement companies, Big Pharma quite obviously has the resources and relationships to dominate the CBD market. While the FDA has been hopeful for the lucrative profits they could make from CBD drug applications. However, there has not been strong interest which is why they must now respond to pressure to regulate CBD as a dietary supplement (which does not make as much money for the FDA). GW Pharmaceuticals has been the major player emerging in the pharmaceutical CBD market, but perhaps others are just waiting for better timing or plotting out their long term strategy.

Canadian cannabis companies have so many advantages because their federal government actually works with them to help the industry thrive! Indeed, it is a stark contrast to the US government’s antiquated and frankly weird fixation on drug wars, reefer madness, and catering to the most extreme members of the population (most normal people do not demonize weed).

By contrast, Health Canada (the Canadian FDA) has clear rules and regulations for CBD and cannabis that protect consumer health and safety. Canadian cannabis companies have struggled, especially with COVID-19. However, they are also already internationally trading and working with lawmakers and cannabis businesses in South America and Europe (Colombia and Germany especially). Likewise, Canadian CBD can comply and compete.

Interestingly, virtually no US cannabis or CBD product is legal in Canada, but Canadian products could be sold in the US, UK, and EU because they are produced under clear regulatory standards that are almost universal.

What is left over at the end of the day for the scrappy small CBD businesses? Not much. Some small to mid-sized CBD companies have made good progress though, and certainly some will survive through the inevitable popping of the CBD business bubble. How do they do this? Mainly by keeping their product prices reasonable, building brand loyalty, and establishing wholesale distribution networks.

Which small business CBD companies will survive? Probably (hopefully) the ones that are not completely belligerent to consumer health and safety. However, there are a shocking number of intentionally ignorant CBD business owners out there at all levels of the industry.

That is why it is more important than ever for consumer voices to be heard by the CBD industry. Now more than ever, it is important for consumers to be heard by both companies and regulators. Hemp and CBD are part of our economy and culture. Ignoring that harms everyone.

Consumers can always vote with their money, but what else can they do?

You can see if your favorite CBD company has been warned for violating FDA policies by going to their website and searching “CBD.”

You can also report CBD companies for regulatory misconduct yourself, something many consumers may be unaware of (if the form cannot be submitted you will be directed to an email address).



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Sabine Downer

After 8 years as a laboratory scientist I have turned my passion for knowledge to content writing.