As cannabis starts to appear in the headlines around the world, both consumers and companies have started to show interest in experimenting with cannabis products. Including CBD as an ingredient is a perfect opportunity for this as it lets consumers and companies build cannabis into a broader consumption occasion landscape. This is the reason why it is important to understand the potential role CBD can play in the different fmcg industries.
CBD’s presence across fmcg peaked in 2021 with more than 3,000 online SKUs with the “CBD” claim across five fmcg industries globally. The normalised growth of SKUs with the claim slowed down in 2022 after two years with double-digit growth. In comparison, other health-related claims declined in the same period – this happens as brands and consumers look for more functional and value-added alternatives rather than restrictive or limiting claims. The challenge for CBD is to continue to create that functionality connection within a challenging regulation environment.
CBD in packaged food
Hemp products are a first step into the cannabis market
Regulatory hurdles are impeding the development of more CBD products and making CBD a big risk for multinational companies. More standardised regulation could sprout more innovation. On the other hand, hemp products seem to be trying to take advantage of the consumer appetite for cannabis products which are becoming increasingly available around the world.
CBD's functionality must reconcile with consumers' snacking occasions
CBD has opportunities across several snacking pillars, like rewarding/treating, meal replacement and distraction. In snacks, this will be if the product displays an attractive and easy-to-grasp functionality and positioning while targeting specific niches that make sense for CBD as an ingredient, like sports nutrition where the result and functionality become more important than the ingredient itself.
CBD in drinks
CBD plays well into niche need states in drinks
In 2021, drinks rapidly became the fastest-growing category for CBD claims, with more than 100% normalised growth in number of SKUs with the claim. The current CBD drinks offering is curated to a very niche audience and consumption occasion. The inclusion of CBD in a broader spectrum of consumption occasions or pairing with other functionalities could expand its opportunities.
Adult non-alcoholic drinks will benefit from casual functionality
Several examples of cannabis-infused drinks with CBD like Aplós aim to imitate spirits and other adult beverages like beer and RTDs. CBD can thrive in categories where modest lower-intensity functionality and casual consumption can justify a premium positioning. However, there is significant challenge for CBD drinks to overcome in order to succeed in this space as consumers stack up the functional and concrete effects of the CBD dosage present in this type of product against other available options such as THC drinks and/or non-alcohol alternatives with various natural actives and adaptogens
CBD in consumer health
Is collagen a good model for CBD?
Collagen supplements are a well-known and common part of people’s routines and dietary supplements around the world. However, their start was as a modest supplement for joint health in ageing consumers. Today, thanks in part to long education campaigns and information sharing, the role of collagen in general health and even beauty is well understood by consumers. Word of mouth and familiarity with the ingredient can be a driver for growth but with limited reach for CBD. Pairing up with existing well-positioned and similar-functionality ingredients could increase its reach.
Beyond CBD and stacking is the potential next move
With limited potential as a stand-alone ingredient, CBD’s immediate future is as part of multi-ingredient formulations that help expand both the consumer base and functionality. CBD products are already looking into the future by expanding their functionality and claims by including more ingredients. On the other hand, multicannabinoid products that expand consumer options beyond just CBD could also help expand product cycles and avoid consumer burnout to just one ingredient.
CBD in beauty and personal care
The paradox of general wellness vs specific beauty functionality
High price points and vague claims and results make consumers jump to the next trend or brand rather than sticking to just one CBD product, especially with CBD competing for space with other botanicals in the market like lavender and camomile which are already playing into relaxation and anti-inflammatory properties. A different way could have CBD as part of a broader ingredient combination with some of its competitors in the mix.
Major opportunities and challenges for CBD
Positive regulatory changes will create tailwinds for the industry and will make it easier for companies to innovate in this category as well as bigger companies jumping in. Companies need to look at consumer occasions and need states first and use formats and claims that fit into those. Pairing with other functional ingredients could help CBD to create a stronger functionality claim and more familiarity. And finally, going beyond CBD is a way to maintain positive momentum and consumer interest.
On the other hand, the mainstream consumer’s lack of familiarity with the product and its real functional impact and efficacy will limit the potential growth for CBD. Limitations on specific claims, marketing, channel distribution etc make it difficult to connect with consumers and become ubiquitous products. Competition from the adult use market will continue as consumers see CBD more for its therapeutic use. Finally, short product lifecycles paired with prohibitively high prices limit the category to a niche market.
For further insight, read our related briefing, CBD Global Market: Opportunities Across Fmcg