Cannabis analytics firm offers a look into hemp-derived, pharmaceutical CBD oil markets
By Brandon A. Dorfman
Aug 30, 2018
Earlier this week, cannabis analytics company New Frontier Data hosted a public presentation on the state of and current trends in the CBD oil market. The “CBD 2018 Industry Outlook” was an hourlong overview of the CBD industry discussing everything from medical research to mergers and acquisitions activity in Canada. Also in the spotlight was GW Pharmaceuticals (NASDAQ:GWPH) Epidiolex, the CBD-based drug recently approved by the FDA to treat rare forms of childhood epilepsy.
New Frontier Data's Chief Intelligence Officer, John Kagia hosted the presentation, along with the organization’s Director of Hemp Analytics, Sean Murphy. Joining them was Lex Pelger, the Science Director of hemp extract and CBD company Bluebird Botanicals. The trio began by discussing the projected demand for legal cannabis in the US over the next decade, with numbers expected to reach $23 billion combined for medical and recreational cannabis by 2025.
“One of the catalytic reasons has been this extraordinary shift towards cannabis and specifically towards medical cannabis,” said Kagia about the public perception of cannabis. “Based on the Quinnipiac poll released earlier this year, support for medical legalization in the US mounted to 91 percent.”
According to statistics, an additional 58 percent of those polled support the legalization of recreational cannabis. More importantly, support comes from all demographics and bridges all political spectrums, with 95 percent of Democrats and 80 percent of Republicans in favor of legalizing medical marijuana.
CBD oil in the local grocery store
Kagia continued the conversation by noting that CBD oil growth in popularity among consumers has much to do with its availability in local retail outlets.
“Another reason that... CBD products have captured the public imagination somewhat in the way that recreational cannabis has not...and that’s because in many states around the country CBD is being sold in traditional retail channels,” noted Kagia. He went on to present the audience with a CBD brochure that he picked up in his local grocery store.
By 2025, New Frontier Data predicts that combined sales from each CBD sector — marijuana-derived, hemp-derived, and pharmaceutical —will total $2 billion. According to the presentation, while marijuana-derived CBD products currently dominate the market, that could soon change as strict regulations, and federal law sends consumers to hemp-derived CBD oil. In fact, in 2017, hemp-derived CBD accounted for 23 percent of all hemp products in the US.
A changing market for hemp-derived CBD oil
While hemp-derived CBD oil is perhaps the fastest growing sector of the market, it is also one of the most rapidly changing. Director of Hemp Analytics for New Frontier, Sean Murphy pointed out that although the market expects to grow by $646 million by 2022, online sales while remaining dominant, maybe less so than at the current time.
“The dominant category where hemp-derived CBD products are being sold [is] online,” said Murphy. “The other really strong and quickly growing market, you’ll see there 14 percent to 28 percent over the next five, six years is the natural and specialty channel. This is, for example, Lucky’s Market, Fresh Time, and additionally though the products don’t exist there yet, Whole Foods.”
Meanwhile, the pet CBD market is heating up. In 2017 sales of CBD for pets were $13 million, out of a total $190 million for the sector. New Frontier Data expects sales to reach $125 million by 2022.
Currently, the hemp-derived CBD oil space is dominated y a few major players that make up nearly 70 percent of the market. Companies like Charlotte’s Web and Diamond CBD bring in upwards of $20 million to $40 million annually, having cornered the market.
A growing market for pharmaceutical CBD
Earlier this year, the FDA’s approval of GW Pharmaceuticals Epidiolex, the CBD-based drug that treats two forms of childhood epilepsy shook up the CBD market. And while early on some were worried that a prescription form of CBD would push other suppliers out of the market, the presenters this week took time to note that Epidiolex is in a class of its own.
“It’s a completely different market category,” they noted. “That’s not to say the product is different, we see isolates, we see extracts, but this is a drug everyone, it takes a drug timeline, it’s a completely different process than the other two categories.”
Still, and with a price tag of $32,500 per year, the team at New Frontier Data expects pharmaceutical-level CBD to bring in $625 million by 2022. Nearly two-thirds of the market expect to come from US sales, while the rest will be in Europe.
The CBD oil market is heating up
From a business perspective, the CBD oil market will continue to grow exponentially. And, according to New Frontier Data, big business is catching on as well, with millions of dollars poured into the sector.
“The other [thing] is the big money that’s coming into this. There is historic valuations, there’s VC funding —it’s such a hot time to be around it,” noted the presenters earlier this week.