CBD Market Sizing: The Art and Science

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Consumer products companies specializing in hemp-derived cannabidiol (CBD) have been responding to unabated consumer demand by expanding distribution, seeking new mainstream channels to reach consumers. Mainstream stores from Walgreens to DSW Shoes to big-box grocery now stock CBD products, from a few SKUs to an entire store-within-a-store. CBD’s unabated popularity among consumers has generated increased interest from the mainstream sector. Consumer package goods (CPG) brands weighing a CBD product strategy are looking to answer three critical questions: what is the consumer demand for hemp-derived CBD, the best “fit” in the CBD space, and the overall market potential of CBD products.

Change is the CBD market’s only constant

Market size estimates help companies understand the expected sales trajectory of a given product. This in turn helps businesses outside the industry decide whether or not to enter the market. It also helps legacy companies in critical decision making, such as inventory projection and budgeting and to inform management decisions on hiring, planting, investment and expansion.

CBD can be found in an increasing array of infused products typically found in the mainstream consumer packaged goods (CPG) market. However, accurately projecting the true size of the CBD market is complicated by factors not usually seen in CPG categories. Traditional market research providers like Nielsen, IRI, NPD, and others have a wealth of inputs at hand when building models to size and forecast a category. However, CBD is a rapidly developing market in an ever-changing industry. Not only are product formats exploding, sales and distribution channels continue to proliferate. Further, in contrast to relatively stable categories of consumer goods, unexpected external factors can render a market projection – inevitably created as a snapshot – outdated virtually overnight.

COVID-19 is the obvious unpredictable factor today but generally evolving regulations have been among the most influential issues to handicapping the growth of the hemp-derived CBD market.

Reports show that the continuing COVID-19 pandemic has led to increases in stress, anxiety and depression among U.S. consumers – conditions known to be treated by consumers with CBD. Some of these consumers are seeking alternative, natural and other non-pharmaceutical solutions to these mental health concerns. While the current impact of COVID on CBD use is still being understood, it is likely that some consumers have begun using CBD to treat pandemic-related mental and physical health issues.

Proceed with caution

The CBD sector’s approach to regulation can make market size estimation complicated. Although CBD was legalized at the federal level through the 2018 Farm Bill, each state has its own specific rules regarding production, processing and sales of hemp-derived CBD products.

The patchwork of regulations and minimal oversight regarding CBD products have left holes in the system allowing bad actors to develop and market CBD products that do not contain as much – or sometimes any – CBD. This presents an additional complication to CBD market size estimation: how to accommodate for consumers who intended to purchase and use CBD but unintentionally purchased a CBD-free product.

On top of all this, consumer behavior within the CBD space and consumer preferences for CBD products are still being understood. Without truly understanding consumers’ motivations for purchasing CBD products generally or the drivers behind their specific choice of format, it can be difficult to project how sales will change in the future.

Taken all together, these factors emphasize the importance of carefully vetting CBD market size estimates. This includes taking into account when the estimation was conducted and what type of data was used for estimation.

Because CBD is a dynamic, quickly changing market, the difference between a market size estimate released this week versus six months ago can be substantial. The type of data used to create the estimate may shed light on the approach used to create the estimate. For example, there may be differences in methodology for an estimate that uses sales data versus consumer survey data.

Plotting several CBD market size estimates on a chart highlights some of these issues.

For reference, BDSA and Brightfield Group are cannabis industry data providers offering market intelligence and consumer insights to companies in both marijuana and hemp. Hemp Industry Daily is a business-to-business media company focusing strictly on the hemp industry.

Although these companies released their estimates at different points in time, the estimates for 2020 are closer together, showing less variation than those projected for 2024. And despite being released only a little more than half a year apart from one another, Brightfield Group’s estimates were released during the pandemic whereas Hemp Industry Daily’s estimates came out not only pre-pandemic, but during the 2019 vape crisis as well. Hemp Industry Daily chose to provide a range of estimates rather than a single point, possibly in deference to the market’s many unknowns.

Leveraging consumer data in market estimations

Based on an upcoming study of the current and future state of CBD consumers, High Yield Insights will model CBD market estimations based on consumer data. This will include a suite of category-level CBD consumer insight reports as well as consumer segmentation analysis, identification of factors that influence CBD purchasing decisions, perceptions of mainstream brands operating in CBD and how using CBD impacts consumption of alcohol and OTC and prescription medications. The 2020-2021 study builds on findings published (and discussed in this space) in High Yield’s 2019 The Consumer Experience whitepaper.

We will couple this with a comprehensive CBD retail pricing analysis to develop the most up-to-date assessment of current CBD consumption. Our estimates will take into account how pandemic-era CBD use may evolve in the future. By disclosing the methodology and accompanying data, companies seeking intelligence on the questions posed above can interpret the results and inform business strategies with the most current and transparent market estimations available.