CBD poised to disrupt the OTC industry

Hemp-derived CBD could be a $22 billion market by 2022
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The rapidly expanding use of hemp CBD (the more popular name of cannabidiol) is big news. The U.S. market for federally legal hemp CBD broke past $390 million in 2018 and reports project that figure to reach $22 billion by 2022.
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With this market size, we are seeing game-changing opportunities in the consumer-packaged goods (CPG) industry with data supporting an initial encroachment on the drugstore market. In fact, CVS and Walgreens have already announced the sale of hemp CBD products in topical forms, such as creams, lotions, patches and sprays.

The CBD and THC difference

CBD is a non-addictive compound found in marijuana and hemp plants that provides a relaxed, ‘blissed out’ feeling. It is not THC (tetrahydrocannabinol), which is the psychoactive component of cannabis that leads to feeling ‘stoned’ or ‘high’ and gives cannabis its bad rep. The 2018 Farm Bill legalized all CBD made from hemp, which contains a very low amount of THC (less than 0.3%). The bill removes hemp from the definition of “marijuana” and excludes the THC found in hemp from the definition of a controlled substance. This legislation has paved the way for an anticipated market explosion over the next few years.

CBD for wellness and ailments

Headset and Nielsen recently teamed up to collect data on cannabis sales, consumer interest and needs, and the impact of cannabis on the CPG industry. Our study found that there was potential opportunity for cannabis across various states and CPG categories. These include, but are not limited to: experience enhancement and social enablement now being addressed via tobacco products, alcoholic beverages and non-alcoholic beverages and drink mixes; pain management and holistic health for both people and animals via over-the-counter (OTC) and prescription meds, supplements, beauty care and food; and mitigating habits via odor control, air fresheners, etc.
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When we looked specifically at the potential impact of CBD on the CPG industry, it became clear that usage has the greatest cannibalization effect on OTC medicines and, secondarily, on tobacco-related products. Why? CBD is known for its calming, anti-inflammatory, pain management properties.
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Of those we surveyed who use CBD to treat an ailment, most do so to relieve some sort of pain (arthritis, 32%; severe muscle spasm/stiffness, 30%; back and neck pain, 23%; headaches/migraines, 18%). Other popular therapeutic usages include treating anxiety/depression/PTSD (27%); sleep issues (24%); cancer symptoms (24%); digestive issues (14%); epilepsy/seizures (12%); and more – feminine pain, motion sickness, diabetes, acne/skin conditions and alcohol/tobacco addiction.
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It makes sense, then, that data show the greatest disruption on OTC medicines that treat these types of ailments. We found that CBD usage makes consumers less likely to use OTC pain/inflammation meds (38% less likely), sleep aids (33%), arthritis pain reliever (32%), headache/migraine reliever (31%), anti-nausea meds (23%), and digestive aids (17%). Interestingly, CBD usage also decreased consumers’ likeliness to use tobacco products and cigarettes by 21% and e-cigarettes by 18%.

The effect of the spotlight

The hemp-derived CBD industry will benefit greatly from shelf placement by mainstream retailers. In addition to expanded reach and more powerful marketing and promotion, we anticipate that consumers will “meet” CBD in a familiar environment (as opposed to cannabis dispensaries) and with trusted retailers, upping their comfort level. There will be increased awareness/visibility arising from consumers’ non-CBD-related ‘regular’ shopping. And there is potential for lower pricing across the cannabis ecosystem (growing, cultivating, selling) due to economies of scale.

As our colleague at Nielsen concluded in an article about our study, it is still too early to understand all the implications of CBD sales for the future of today’s drugstore health and wellness, OTC and prescription offerings. That being said, there is no doubt that consumer interest in CBD puts it in a strong position to disrupt the OTC drugstore market.