Editor’s Note: Today’s post comes from Mike Luce, co-founder of High Yield Insights, one of the cannabis industry’s first marketing and strategy firms. Here he presents the first in his two-part series on the mysterious world–and spurious marketing–of CBD, a product I’m sure you’ve seen advertised and made available nearly everywhere. His follow-up will run on Tuesday next week. Stay tuned!
Americans are consumed by fads in food, drink, and wellness. We swing from one subject of fascination to another: antioxidants, açai, resveratrol, fat free, healthy fats, active cultures, spiked seltzers, organic, biodynamic, anything free range, you name it.
Yet the latest fad to hit the USA Today-level is unique in post-WWII America. Interest in CBD, the three letters you see everywhere, has reached a fever pitch. This does necessarily set CBD apart from other fads in consumer goods, but hitting the mainstream radar so fast and so hard puts CBD in the upper echelon. The potential of CBD is largely unknown and the future scale of what’s starting to be known as the CBD industry is unpredictable. Consumers, including those using CBD today, poorly grasp the nature of CBD, lack any precise understanding of how CBD works and what it does, and express significant concerns about safety. Yet forecasts place the CBD market at $15-20 billion by 2025. Contrast those figures with the latest numbers by some household products, and CBD’s estimates truly pop:
- Anxiety and depression treatment: $18 billion
- Organic produce: $66 billion
- US fast food restaurants: $273 billion
Sales of CBD will net out close to $5 billion in 2019, a puny number in comparison. But the last industry on the list above can’t expect more than low single digit annual growth rate. To reach the market size forecasts, CBD will experience compound annual growth rates over 100 percent. That new users will drive that growth should be obvious.
My market research firm – High Yield Insights – set about trying to understand the consumers adopting CBD. We collected the usual data: who is using CBD, for how long, when and at what frequency, why is the consumer using CBD and how. We also wanted to understand the potential consumer. What would tip a consumer from intrigued observer to everyday user? We found a fascinating mix of contradictions: passionate belief backed up by little knowledge combined with startling distrust.
I’ll return to this theme later but to provide a glimpse of what we found, consider this: 80% of current users believe CBD can address physical or mental health issues or both. Efficacy is not a question. Contrast that with how consumers view the safety of CBD products: only one-third of current users are confident CBD products are safe, and a mere 16% feel the same about the accuracy of product labels.
How are such gaps possible? The short answer is prohibition. With the US government staunchly opposing research of cannabis for decades, the horse has nearly left the barn with comparatively little understanding of the cannabinoid. As a result, consumers are left in an unenviable position: a potentially beneficial, if not life-altering and in some cases life-saving, medication of sorts is now available on the market with little to no oversight or standards in place. What exactly is CBD and what is, and what isn’t, in the products people are buying today? Particularly in light of the vaping disaster unfolding in the United States, questions like these deserve good answers. Given the scope of the discussion, many of those issues will be addressed in a second follow-up post appearing soon. Prior to moving forward on that line of questioning, a primer on cannabis is in order.
Rather than risk losing readers, I’ve opted instead to focus on the key points. The rundown below intends to offer high-level information. This should be useful context as we delve into the compelling and controversial state of affairs surrounding CBD.
CBD (short for cannabidiol, pronunced canna-bih-dial) is one of many chemical compounds – collectively referred to as cannabinoids – present in the cannabis plant and produced naturally by the body as endocannabinoids. CBD’s sister compound is the more famous (or infamous, depending) cannabinoid tetrahydrocannabinol (THC). Over 100 cannabinoids have been identified to date. (And some expect less well-known but beneficial cannabinoids such as CBG and CBN to eventually eclipse CBD’s popularity in health and wellness.) Both THC, CBD, and the dozens of other known cannabinoids interact with the endocannabinoid system (or ECS), a biological system present throughout the body’s central and peripheral nervous systems. In effect, the ECS is spread throughout the human body. That such a significant element of our biology remained unknown until the 1990s, almost fifty years after THC was isolated, is amazing.
Acted on by cannabinoids, the ECS is thought to influence a range of processes involved in stress, sleep, appetite and metabolism, pain, memory, and others. Yet “raw” cannabinoids don’t do much. The compounds exist as acids (CBDa, etc.) that must be heated to produce an effective compound in a process called decarboxylation. Our distant ancestors likely discovered this by accident, to be tongue-in-cheek. Dumping an armload of cannabis on the campfire suddenly eased the grind of hunting and gathering, but munching on a sticky stalk of cannabis didn’t produce any relief or pleasurable sensations. (Although cannabis seeds have been used for centuries in all manner of ways. More on this later.)
Manufacturers of the many products on the market today source CBD from hemp. Nomenclature gets in the way here as well. Hemp intended for industrial purposes is sown in closely packed rows of male plants, producing tall fibrous stalks looking a bit like corn or bamboo. Hemp cultivated for human consumption (as a source of CBD) looks more like a bushy plant. Much to the consternation of law enforcement, such “CBD hemp” plants closely resemble marijuana. This only adds to the confusion for many over cannabis, marijuana, and hemp.
Perhaps “sister” is best suited to distinguishing between the two major plant-based sources of CBD: hemp and marijuana. (Note: the word marijuana has a troubled history. Even the cannabis industry struggles for an alternative. For our purposes, we’ll stick with marijuana.) You will often see the two differentiated by describing THC as psychoactive and CBD as nonpsychoactive. This is misleading. For example, if CBD can help relieve anxiety, as initial research suggests and thousands of anecdotes support, it can arguably be described as psychoactive as well. Marijuana contains CBD to varying degrees. Most varieties of marijuana found on the market today contain relatively little CBD in part because marijuana has been increasingly cultivated to produce high concentrations of THC, the cannabinoid responsible for the “head high”. (Or “couch lock” if you that’s what you’re after.)
The pendulum has swiftly swung in the other direction. Following the legalization of so-called “industrial hemp” in the 2018 Farm Bill, products purporting to contain only CBD have cropped up everywhere. Industrial hemp is defined as containing less than a trace (0.3%) of THC and any CBD products thus must contain no more than that amount. CBD’s popularity has impacted the cannabis industry as well as products containing much higher ratios of CBD to THC have hit the shelves of cannabis dispensaries. The boom in availability has followed a groundswell of interest that has been slowly building over time, championed publicly in recent years by mainstream figures such as Dr. Sanjay Gupta and Gwyneth Paltrow and promoted by a sudden rush of celebrities and athletes. Some prominent supporters have been speaking out about CBD’s benefits in the course of multimillion-dollar endorsements and investments.
End of Part I. Come back on Tuesday, 10/1, for the follow-up on CBD’s marketing techniques!