Understanding the CBD market in state-legal cannabis

Team Headset
January 17, 2020
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Heads up! This report was published a while ago and is now considered out of date. To get all of the latest insights into the vapor pen market, check out our most recent report!

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.


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.


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)


CBD is not for smokers

This chart breaks down the popularity of CBD in inhaled vs. non-inhaled forms. Looking back over a few years of cannabis sales data, we can see that, even as CBD became more and more popular with the general public, its share of the overall cannabis market has not even reached 10%. But when you break out non-inhalable products that are infused with CBD, the trend line correlates with Google search trends. As of 2019, over one third of all sales in non-inhalable infused product types go to CBD products. This demonstrates a clear preference among CBD customers for things like Topicals, Tinctures & Sublingual's, and Edibles. It also suggests that the CBD market is expanding on top of the existing market for high-THC, psychoactive inhalable products, rather than inside of it. Essentially, instead of cutting into sales of more traditional Pre-Roll and Vapor Pen products, CBD sales are bringing in a new and distinct customer base. And, one can infer, a more health-conscious one.


CBD product categories

Within that non-inhalable product area, where CBD is most popular, we see steadily rising sales in five main categories: Beverage, Capsule, Edible, Topical, and Tincture & Sublingual. Of the five, Edibles started with the largest market share of the five and have retained it. Edibles are a common form of consumption for high-THC products, so it makes sense that customers would gravitate to the high-CBD versions. Tinctures and Topicals & Sublingual have both grown from very tiny portions of the non-inhalable CBD market to significant players, with several million in sales in Washington State and Colorado. Capsules, on the other hand, have not seen much sales growth, likely because they are a very specific form of consumption, and one usually associated with medical conditions. Clearly though, CBD is being used as some form of treatment or therapy, if not a full-on medication. Edibles are popular with people who want a slow, steady absorption of cannabinoids, and the wellness applications of Tinctures & Sublingual's, as well as Topicals, are self-evident.


A significant sales growth

Looking at the past 12 months sales growth for non-inhalable CBD products in comparison to non-inhalable THC products, CBD clearly outstrips traditional products across the board. IN Topicals, sales of high-CBD products grew by nearly 60%, while high-THC products enjoyed just a 10% increase. Obviously, it’s a lot harder to get high through one’s skin, but CBD products are touted as being anti-inflammatory and great for direct application on painful areas. But while it’s not surprising to see CBD topicals outpacing their conventional cousins, the same is true in both Edibles and Beverages, categories that do typically have lots of popular high THC products in them. There is clearly a burgeoning demand for eating and drinking CBD. We’ve outlined before how more consumers are gravitating towards Beverages to avoid alcohol consumption, so the rapid growth in high-CBD beverages might be tied to that trend as well.


How do you eat your CBD?

Among Edibles - the highest revenue non-inhalable category in our data - not all segments are created equal in their propensity for CBD sales. For example, in the Brownie, Blondie and Cereal Bar segment only 2.3% of sales this year have gone to CBD products. This makes sense, given how iconic brownies are as a THC-infused food. On the other end of the spectrum, almost a third of all Honey, Sugar, and Sweetener sales were for CBD products. While this is an impressive proportion, this segment is one of the smallest by total market share within the category. Current and future edible producers should instead pay most attention to the third bar on this chart. So far in 2019, almost 50% of all dollars spent on edibles were spent on Gummies - it is far and away the largest segment by total market share. Over 20% of that spend was towards CBD products. If your company is producing Gummies, but not CBD Gummies, you may want to adjust course.


With CBD, you get what you pay for

As expected, the more milligrams of CBD a product contains the higher the average item price. However, it’s not always a simple upward trend. In this analysis we have included two linear trendlines; one line for products with 500 or fewer milligrams of CBD, and the other for products with more than 500mg. When products have more than 500mg of CBD per package the relationship between average item price and milligrams of CBD changes. Packages with 500mg CBD or less see increases in price at approximately $0.08 per milligram, while packages with more than 500mg increase at only $0.02 per milligram. Examining the two categories of Topical and Tincture & Sublingual, we see that Tincture & Sublingual can have significantly higher milligram counts in general. Topicals, it’s also worth noting, have some high-priced items with relatively low milligram counts, which could indicate that the base for the CBD is more luxurious or sought after. Tinctures tend to be suspended in alcohol, but CBD can be infused into some very high-end Topical products. Each Category has its own AIP to milligram story, and we’ve just picked these two for the purposes of this report.


Big spending on CBD

Speaking of spending money on CBD, the trendline over time for both AIP and basket penetration, which measures how many baskets a product appears in, has gone up quite steadily. AIP has risen about $5 since 2015, while CBD went from only 3% of baskets to about 7%. The rise in AIP has been more measured, but basket penetration had a steep rise around Spring2018, likely coinciding with CBD being in the news more frequently. Taken together, these two statistics show that consumers aren’t only more interested in CBD, but also more willing to spend money on it. If just AIP were rising, it could mean that costs had increased. But if both are rising, it’s safe to say that something is resonating well with consumers, as CBD clearly is.



All signs in this report point to CBD becoming more and more popular, but we don’t think it’s hit a plateau. While hemp-derived CBD has been available almost nationwide for awhile, it only recently hit traditional retail outlets. More consumer familiarity with the compound means more consumers who are comfortable with the idea of cannabis, and clearly some of CBD’s nonmainstream audience is making its way into a dispensary. Sales and interest at licensed cannabis retailers has only gone up since the Farm Bill passed, perhaps even faster because of it. Also, because the public is particularly fascinated with CBD as something of a miracle cure, it is becoming a common topic in scientific studies. Those studies tend to have good things to say, as with the one that concluded CBD was an effective treatment for IBSS (CLIN Invest. 2018;128(9):4044-4056.), or the one that came out most recently, showing that CBD had serious antibacterial properties and was not yet able to be resisted by so-called “super bugs.” (American Society for Microbiology) There are also the numerous cases of children whose seizures have been stopped or alleviated by CBD treatment regimens. It might not mean that it’ll be the next big lifesaving antibiotic right away, but it at least gets customers Googling. As we’ve seen in this report, the increase in Google searches for CBD roughly parallels the increase in things like basket penetration and AIP in the state-legal CBD world, so getting people to Google it might be half the battle. Either way, as a sector of the legal cannabis industry, it is not one that can easily be ignored. Where it once was a bit of a fringe item, thought to be something parents of epileptic children sought out, now everyone in town is taking it. Every ache and pain and sprain can be helped with CBD, it seems, and our data show sales that reflect it. If current trends continue, CBD will eventually take up the majority of sales among non-inhalable products, and potentially even the cannabis industry at large. Given how popular it already is, and how popular it is set to become, CBD is a serious force to be reckoned with.

About Headset

Headset is a consumer data analytics platform that provides market intelligence for the cannabis industry. Our extensive Industry Reports deep-dive into specific categories and aspects of the industry to help businesses better monitor the market and perform exhaustive category analysis. Reports are generated via aggregate, real-time transaction data to get a unique and thorough analysis of what’s happening in the cannabis industry as the data becomes available. Headset offers three distinct products that help retailers,dispenaries, brands, product manufacturers, distributors, and investors move ahead in the industry.

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Team Headset
January 17, 2020
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