Huge consumer companies from Nestle to Altria are vying for a slice of the exploding CBD market
From your local bakery to the skincare section at Sephora, CBD is everywhere. And some of the world's largest consumer companies and tobacco giants have noticed.
Royal DSM, British American Tobacco, Nestlé, Altria, and more are striking deals to take advantage of a wave of consumer interest in the cannabis compound cannabidiol, or CBD.
The research firm BDSA estimated that the US CBD market is already worth over $2 billion and could balloon to $20 billion by 2025.
The rise of CBD is driven in part by the broader consumer wellness trend, and the perception that the compound can help people sleep better, manage pain, or chill out without negatively affecting their health, said Kelly Nielsen, a VP of insights at BDSA.
Nielsen said she's worked with a lot of the largest consumer-packaged-goods companies across health, beauty, wellness, food, and alcohol.
"They're all thinking about how to incorporate CBD," she said.CBD is legal in the US, and big companies are getting more comfortable with it
CBD comes from the cannabis plant, but it doesn't get you high. It became legal in the US, as long as it's derived from hemp, under the 2018 Farm Bill. The US Food and Drug Administration hasn't yet clarified regulations around CBD, such as rules for adding it to food and drinks.
Still, some corporations are slowly getting comfortable investing in the compound and putting branded beverages, food, and supplements containing CBD on store shelves.
Nielsen said the key hurdle — aside from the muddled regulations — is whether the CBD products "live up to consumer expectations."
"That's an area the industry needs to keep a really close eye on," Nielsen said. "Making sure the product is doing what it's supposed to be doing."
The cannabis compound is a small but growing chunk of the overall market for dietary supplements, which is expected to reach over $300 billion by 2026, said a report from FNF Research, a market-research firm.Here's a rundown of deals and partnerships: Royal DSM, one of the world's largest ingredients manufacturers, led a $32 million funding round in Brains Bioceutical, a company producing pharmaceutical-grade CBD, and struck a partnership with Mile High Labs, a CBD manufacturer in Colorado. British American Tobacco's venture arm led a $25 million investment in Trait Biosciences, which is working on technology to infuse CBD into drinks and other products. BAT also invested $75 million in Organigram, a Canadian cannabis producer, to develop CBD products for the US. Molson Coors launched CBD beverages in the US in January through a partnership with a Canadian cannabis firm. Nestlé has launched CBD products in both the US and Europe. Martha Stewart and Big Tobacco find ways in
Cannabis companies want a piece of the action as well.
Canopy Growth tapped Martha Stewart to create a line of CBD products in the US. The company is also planning to launch a line of CBD-infused beverages. Startups such as Recess and Cann have launched CBD-infused seltzers.
Altria, the maker of Marlboro cigarettes, owns a significant stake in cannabis producer Cronos Group, which sells products containing CBD and other non-THC cannabinoids in the US.
Anheuser Busch-InBev launched a joint venture with Tilray in 2018 to develop CBD drinks for the Canadian market, and The Boston Beer Company — the maker of Sam Adams — established a subsidiary in Canada to develop nonalcoholic, cannabis-infused beverages.
For these Canadian cannabis firms, CBD could be a way for them to get a "foothold" in the US market ahead of potential federal legalization, Rick Maturo, an associate client director at market-research firm Nielsen said by email.
To be sure, CBD-infused beverages remain a tiny part of the overall CBD market. Only 3% of CBD product sales last year were beverages, Maturo said.Retailers such as Walmart and Amazon still don't stock CBD
A bipartisan group of lawmakers recently introduced legislation pushing the FDA to clarify regulations around CBD. That could push the largest retailers — including Walmart, Target, Costco, and Amazon — to start stocking CBD products.
"You'll start to see a domino effect there," said Klee Irwin, the CEO of the publicly traded supplements company Irwin Naturals. "You can't get close to what this industry will become without them."
Irwin Naturals started selling CBD in 2018 and has become one of the largest sellers in the US, market-research firm Brightfield Group found.'A tremendous growth opportunity'
Frederic Boned, a VP at Royal DSM who leads the company's North American efforts in CBD, said the growth rate of the CBD market, coupled with the fact that products aren't yet available through traditional big-box retailers, was the key reason for the company's recent deals and partnerships.
"When you see all of that and that it became what it became, I think you understand the promise of this category," he said of CBD.
He said DSM is looking at other cannabis compounds, such as CBG and CBN, but that DSM has no plans to develop products containing THC, the cannabis compound that gets you high.
But other companies are clear that CBD is part of a broader cannabis strategy, once US law allows it.
"We believe a legalized cannabis market in the US presents a tremendous growth opportunity," Salvatore Mancuso, Altria's CFO, told investors and analysts on a recent call.
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