As legal cannabis becomes the new normal, and larger stigmas against consumption continue to erode, one fact shines abundantly bright: Californians love legal weed. Just this year, from January through the end of October, Californians spent north of $2 billion on legal cannabis.
This past year saw tens of thousands of new customers enter the market — many for the first time, or at least the first time in decades. To meet this new demand, hundreds of products and product categories began to emerge. On the whole, consumers have started to grow accustomed to the idea that cannabis is a product that can be used for health and wellness, and not just for “getting stoned” or “high.”
Perhaps nowhere is this wellness trend more evident than in the explosive growth in popularity of cannabidiol, known by its abbreviation CBD. Chris Burggraeve, a former Coca-Cola executive, called CBD the “new avocado toast,” in an interview with Business Insider — and for good reason.
CBD can be derived from the cannabis or hemp plant. It offers relief from a variety of ailments, including pain and anxiety, without any adverse psychoactive effects, like those found in products containing tetrahydrocannabinol or THC. According to a report by the Hemp Business Journal and the University of Colorado-Boulder, Americans will buy “$524 million worth of CBD products this year,” nearing $2 billion by 2022.
There are many reasons for CBD’s explosive growth in popularity. One is that shipping hemp-derived CBD products is legal in all 50 states, allowing for exponential growth in CBD product e-commerce. New York Times reporter Alex Williams thinks CBD’s surge in popularity has everything to do with our anxious, stress-producing lives: “What a convenient time for Mother Nature to bestow a perma-chillax cure that seems to tie together so many cultural threads at once: our obsession with self-care and wellness, the mainstreaming of alternative therapies and the relentless march of legalized marijuana.”
“CBD also provides a great entry point into the cannabis market for new consumers,” says Tamar Maritz, California director of cannabis business intelligence firm BDS Analytics. “Overall consumers are becoming more accustomed to the idea of using cannabis and cannabis derivatives for wellness. We are beginning to see the marketing of cannabis products to remedy particular ailments — daily anxiety, sleep, ADHD, premenstrual and so on.”
The momentum of low-dose or gentle-dose products throughout 2018 also is evident in dispensaries across the state, with exponential growth in the disposable vape pen category. California cannabis dose-focused vape company Dosist (formerly hmbldt) was named one of the world’s 10 most innovative companies in the health sector by Fast Company. Maritz continues, “Disposable vapes are definitely increasing in popularity and beginning to take away market share from nondisposable cartridges — increasing from 8 percent in 2017 to 13 percent in 2018 in total vape sales.” Interestingly, the growth of disposable vaporizers has spurred innovation in packaging. “As disposable vapes have increased in popularity, consumers are becoming concerned about waste, prompting a variety of recycling and more sustainable material solutions to come to market.”
In the world of edibles, microdose (very low dose) products and CBD-focused edible tinctures remain popular. Tinctures are essentially alcohol-based cannabis extract. Many consumers are unfamiliar with tinctures but, “in fact, tinctures were the main form of cannabis medicine until the United States enacted cannabis prohibition,” Philip Bjorge explains for Leafly. Dispersed in a medicine dropper, tinctures are considered by some to be one of the most concentrated and potent delivery systems for serious cannabis relief. If stored in a cool, dark place, tinctures can last for years, and a dropperful of tincture can be integrated into everything from smoothies to salad dressings. The top five tincture products in the state of California in Q3 2018, collectively grossing more than $6.7 million in sales, were all CBD-focused.
Though they're still a very small piece of the market (less than 2 percent of total sales), because topicals are nonpsychoactive, they provide a welcoming entry point for new consumers. As boomers age and look for alternatives to pharmaceuticals when it comes to pain relief, topicals are likely to grow even more. Of note is the brand Papa & Barkley, which is showing tremendous success in this small but mighty product category, generating more than $5 million in revenue so far this year. Nearly half of its revenue came from its CBD Rich ReLeaf Cream.
Cannabis flower, or “bud,” generated more than $800 million in sales this year and remains the largest cannabis product category. It accounts for roughly 40 percent of all legal cannabis sales across the state. Roy Bingham, CEO of BDS Analytics, explains, “In 2018, branded flower took off in California with great progress after the July 1 product rules were implemented.” Frontrunners include brands like Flow Kana, with more than $12 million in sales so far this year, as well as Smoke Stacks, Korova, Nug and Canndescent.
In the sunny state, the introduction of celebrity cannabis brands was another big trend last year. Everyone from Mike Tyson to Whoopi Goldberg introduced legal cannabis products. According to market data, while they are not performing that well at retail, they are succeeding at bringing new customers into the market.
“This year really marks the beginning,” Maritz says. “While there are plenty of great California brands that have been on shelves for years, the new consumer isn’t familiar with any of these brands. They’re a tabula rasa.”
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This is both an obstacle and a huge opportunity for companies across the industry. Few customers are brand loyal, and cultivating that brand awareness with new customers takes a tremendous amount of effort and capital.
Heading into 2019, we are likely to see more brand debuts, more acceptance and the continued influx of new customers.
“I believe we’ll begin to see the adoption of cannabis culture and lifestyle accelerate among mainstream consumers,” Maritz says. “We’re seeing more and more cannabis references, jokes and discussion topics on TV and in the media — both in pop shows and movies, as well as mainstream political and informational news sources.”
The question is what is the next CBD? Will we see concentrates overtake flower to be the top category in California? The unexpected reality of the modern cannabis industry is that as our knowledge expands, so does market potential. The unexpected challenge is keeping consumers as educated as the producers trying to earn their attention.