Growing CBD Industry Still in Murky Regulatory Environment

·3 min read

Image by Julia Teichmann from Pixabay

When the 2018 Farm Bill legalized the production of hemp as an agricultural commodity, it opened up a new world for companies that extract cannabinoids from the plants. Entrepreneurs across the United States have since built businesses that focus on manufacturing products that are infused with the extracts.

These companies are infusing everything from gummy edibles and vaporizers to topical creams and lotions and even beauty products with cannabidiol (CBD), a nonpsychoactive compound found in the cannabis plant.

Hemp is a cannabis plant, but it’s different from marijuana in that it cannot contain more than 0.3% of THC — the compound in the plant that’s associated with getting people who use it high.

Even though the Farm Bill legalized the cultivation of hemp, it did not legalize CBD, and it still requires those who grow hemp to be licensed.

Because CBD is still in a gray area, it’s kept many consumer packaged goods companies from entering the market, but some are starting to explore the possibility.

Established food and beverage manufacturers that are looking at producing CBD products include Coca-Cola (NYSE: KO) and Anheuser-Busch Inbev (NYSE: BUD), and early this year, Molson Coors Beverage Co. (NYSE: TAP) and Hexo Corp. (NASDAQ: HEXO) rolled out a line of nonalcoholic CBD-infused sparkling water in the United States.

Even though the competition in the CBD market is stiff, there’s still room for companies like Henderson, Nevada-based Grove Inc. (NASDAQ: GRVI) that make high-quality CBD-infused products.

Grove’s CBD-infused brands include Zest oil, gummies and tinctures that give consumers the ability to shop by effect; CBD Infusionz lotions, tinctures, gummies, coffee and pet products; and GRN gummies, tinctures and lotions.

The gummy vitamin market is estimated at $5.9 billion this year and is projected to grow to $10.6 billion by 2025, according to a recent report from ReportLinker, which attributes the rising incidence of vitamin deficiencies, undernourishment and growing demand for on-the-go supplements that taste good.

But Grove is more than just a CBD company. With the acquisition of VitaMedica, Grove enters the global supplement and nutraceutical market, which is expected to reach $441.7 billion by 2026, according to a market study by Global Industry Analytics Inc. The acquisition of VitaMedica is expected to drive more growth for Grove as consumer demand for plant-based supplements and nutraceuticals increases.

Many makers of CBD products add other functional ingredients such as turmeric, spirulina, elderberry or vitamin C, which begs the question: Is CBD an industry or an ingredient? Grove, for example, adds melatonin to its GRN line of gummies designed to induce sleep; and it adds lavender to GRN’s CBD-infused lotion.

The growth in the overall CBD market was driven by e-commerce in 2020, and brands that have concentrated on building their online presence have been the most successful, according to Brightfield Group’s 2021 mid-year CBD report, “CBD: Industry or Ingredient?”

Brightfield’s research also revealed that millennials and Gen Xers account for 71% of CBD users. These generations are more informed about the CBD doses they take than baby boomers, but they learn about it in different ways.

Millennials are more likely to get their information about CBD from social media, in-store browsing or a budtender while Gen Xers learn about it from doctors, news sources or print ads.

CBD is still in a regulatory gray area, but with guidance expected to be issued by early 2022, and consumers returning to brick and mortar stores, the industry is poised for explosive growth next year.

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