While experts predict the CBD market to reach upwards of $23 billion in value within the next five years, a new report paints a much bleaker picture for the nascent cannabidiol sector. According to Hemp Industry Daily, 2020 will likely mean the end of thousands of CBD companies, due in no small part to the continuing coronavirus pandemic and the ensuing economic downturn that it has caused.
Cannabis research firm Brightfield Group is out with a new report showing that the CBD industry is set to contract over the next few months, as COVID-19 wreaks havoc on the global economy. They believe that as smaller players fall off the map, an estimated 1500 companies will remain to fight for market position.
Hemp Industry Daily shows that the Brightfield Group presents some impressive numbers. According to the cannabis number crunchers, 17 percent of the CBD industry has been cornered by the top 20 companies, with an additional 3,000 competitors fighting for another 77 percent of market share. Epidiolex maker GW Pharmaceuticals claims 6 percent of the industry to itself, thanks to its innovation in the pharmaceutical sector.
Manufacturers and distributors making less than $1 million accounted for a whopping 97 percent of the CBD market, as reported by the Brightfield Group via Hemp Industry Daily, resulting from the quick rise of the consumer CBD sector over the past few years.
Experts believe that 2020 will see what they are dubbing an “extinction event” in the CBD industry, as the COVID-19 pandemic continues to stymie world governments, keeping businesses closed and forcing people to stay inside to flatten the curve. Bethany Gomez, managing director of Brightfield Group, tells Hemp Industry Daily that at least half or more of the CBD companies currently in business are expected to shutter their doors by the end of the year.
“A lot of companies that were kind of dabbling in the category have found it to be unsustainable for them,” Gomez told Hemp Industry Daily. “A lot of brands that had tried this out, it’s not something that they’ve been able to turn a profit on.”
But which companies will survive? According to Brightfield Group, there is a particular set of characteristics that will determine whether or not a company will be able to thrive. Long-running brands and multi-state operators will have the most success, as will supplement brands and consumer packaged goods. That last category includes groups such as Anheuser-Busch and Unilever, who are waiting for regulators to clear a path for them to enter the industry.
Brightfield group also believes that Canadian MJ operators, pharmaceutical companies, and what they call “scrappy disruptors” or newer entrants that “have made tremendous headway over the course of months, many being picked up by large retail chains and thrust into the spotlight” can also survive the upcoming industry purge.
“With retail outlets closing their doors around the country, it has made it persistently difficult for a lot of brands to be able to scale and to reach their ambitions there. And it really favors the larger brands in the market,” Gomez told Hemp Industry Daily.
Last week, the Food and Drug Administration submitted their long-awaited draft policy guidelines to the White House Office of Budget Management, which will bring much-needed regulatory oversight to the CBD industry. It is expected that new rules and regulations will help the sector, but that they will also drive out many fly-by-night retailers.
The news isn’t all bad, however, as Brightfield Group reports that CBD sales have, for the most part, remained steady throughout the coronavirus pandemic.
“As we look at consumer behavior … people do not want to be without these products, right? They really rely on these products more than ever,” Gomez told Hemp Industry Daily. As she noted, THC and CBD are being used by consumers to relieve anxiety and other issues created by the extended quarantine.
“None of those issues are going away. And they’re a lot more heightened in the middle of a global pandemic,” she continued.