Industry Reports

Understanding the CBD Market in State-Legal Cannabis

June 27, 2019

Executive summary

This report examines the fast-growing CBD market, via the lens of state-legal cannabis sales. It includes data from as far back as 2015 and shows a pattern of consistent growth in the popularity of CBD products. It also separately examines more recent data, giving insight into how the recent nationwide legalization of hemp-derived CBD products in the U.S. has affected the position of CBD in the cannabis industry. The report will allow you to better understand the ways in which people are purchasing and consuming CBD, what CBD products they’re most interested in, and what role THC plays in the CBD market.

Introduction

When it comes to cannabis, CBD is about the hottest topic there is. Long-revered by medical cannabis patients for its pain-relieving, non-psychoactive properties, the rest of the world has been slowly but steadily catching on, since the first state-legal cannabis markets emerged. And the recent passage of the Farm Bill, which legalized hemp production at the national level, and therefore hemp-derived CBD products, has only attenuated public interest in CBD.

While it might seem like CBD is available everywhere, there is an important distinction between the CBD a consumer can purchase at big national drugstore chains and the CBD available to get at a dispensary in California.  To better understand the CBD products in the market today it is important to know that many people consider hemp-derived and cannabis-derived CBD to be two very different things. Most traditional, high-THC strains of cannabis contain at least a little CBD, in addition to a myriad of other compounds (CBN, CBG, THCV, etc.)

According to the theory of the “entourage effect,” the effects of cannabis are the result of those compounds working in conjunction, not any single one of them (British Journal of Pharmacol. 2011 Aug; 163(7): 1344–1364). Obviously, single compounds have some effect, as CBD in isolation will still provide some pain-relieving and anxiolytic effects (Can Fam Physician. 2018 Jul;64(7):519), but many serious medical patients insist on what is called “full spectrum” CBD products. Patients also maintain that specific ratios of THC to CBD are required to achieve CBD’s maximum effect (Understanding the Confusing World of CBD and THC Ratios. Dec 14, 2018. Mashable.com) so many products are marketed as 1:1, 10:1, and so on. Those products are, thanks to the 0.3% cap on THC for hemp-derived CBD products, only available in the legal cannabis markets.

The number of CBD products available in the market has expanded with many national retailers like CVS and Walgreens now offering CBD products. This trend is mirrored in recreational dispensaries in all four of the states Headset covers (CA, CO, NV, WA).  Indeed, CBD sales in the legal cannabis markets have recently grown at a faster rate than their traditional, high-THC counterparts.

Besides overall growth, this report also includes the more granular data that Headset is known for, like product category and subcategory sales, price per milligram, and basket penetration. This helps us understand not just that CBD is very popular — that should be obvious by now — but what things within the CBD segments are popular, and perhaps why.

Overall, the CBD market is a very interesting one. As demonstrated by the data in this report, it exhibits behaviors unlike traditional cannabis products, though it can’t entirely be separated from them. It has always been a section of the legal cannabis market with strong growth, and that growth shows no signs of waning.

Methodology

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked up to Headset’s data analytics platform. The data in this report pertain to any products that contain CBD in their name, have more than 1mg of CBD in them, or are associated with strains known to be “high-CBD.” The data included span from 2015 to the most recent complete month in 2019, May. Those data are cross-referenced with our catalog of hundreds of thousands of products to provide detailed information on market trends.

Our data comes from licensed cannabis retailers - so most of the data is for products that contain THC and are derived from cannabis. However, more and more cannabis shops are selling hemp-derived CBD-only products, which we also capture. We do not capture hemp-based CBD-only product sales from channels outside of the licensed cannabis industry (drugstore chains, vape shops, online outlets, etc.).

Headset’s data is reliable, as it comes digitally direct from our partner retailers. However, the potential does exist for misreporting in the instance of duplicates, incorrectly classified products, inaccurate entry of products into point-of-sale systems, or even simple human error at the point of purchase. Thus, there is a slight margin of error to consider.

Searching for CBD

This is not from our dataset, but it’s fundamental to understanding the current CBD market. When people want to learn about something or buy something, they Google it. A Google Trends graph of searches for ‘CBD’ shows a massive increase in interest since cannabis first went legal. And the largest spike, over the last two years, lines up neatly with the increasing availability of hemp-derived CBD. CBD has also come to be accepted by the mainstream wellness community in the last two years. (Google Trends, 2019)


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Team Headset

With extensive experience within the cannabis industry, Headset is comprised of a team of industry experts, data scientists and market analysts combining our abilities in technology, design and data to help push the cannabis industry forward.