It may still be the early days of cannabidiol—a naturally occurring compound found in cannabis and hemp that reportedly relieves stress and other ailments—but the category is growing rapidly. With the potential to reach $16 billion in U.S. sales by 2025, cannabidiol (CBD) has retailers pondering which forms and products to invest in.
For many, the most prominent forms of CBD fall into a segment Vivien Azer calls “nutraceuticals,” which includes tinctures, capsules and gummies. But nutraceuticals are hardly the only option.
“Interest is broad-based across multiple form factors,” said Azer, managing director of New York-based Cowen, while presenting at the CBD and the Future of Cannabis Forum in April, an event held by WGB sister brand CSP. “Even in the early days, usage is diverse.”
Cowen tracks six different segments: nutraceuticals, topicals, beverages, food, beauty and vapor. Worth an estimated $6.4 billion, nutraceuticals is the largest form. Topical products are worth an estimated $4 billion—more than food and beverage products combined. The industry is still determining just how to break those segments out, especially as new products emerge. One simple option is categorizing products as edible, nonedible, ingestible or non-ingestible.
The U.S. Food and Drug Administration (FDA) is seemingly looking at the category in the same light. The agency has repeatedly stated its authority to regulate food and dietary supplements containing CBD. Nonedible products are not under the same restrictions as long as they do not make specific health claims. So it’s not surprising that more and more retailers are turning to nonedible options either as a low-risk entry into the CBD business or as a profitable way to grow an existing CBD set.
Defining the ‘Nonedible’ Subsegment
Topicals: “Topicals are primarily focused today in the form of balms and creams, though we expect rapid innovation,” says Ashley Grace, chief marketing officer of Roswell, Ga.-based HempFusion Inc.
Topical products can also include sprays, roll-ons, salves, bath bombs and patches. Though these products typically don’t enter the bloodstream in the same manner that an ingestible product would, Blake Patterson, founder and CEO of MarketHub Retail Services, a Denver-based distributor of hemp products, says good topical products can be just as effective.
“Any time you put something on your skin, if it’s a good product, it’s going to find its way deeper into your body,” he says.
Alexandra Merle, president of Floyd’s of Leadville, Leadville, Colo., says topicals have proven especially effective for active consumers of any age.
“A tweak in the knee, tennis elbow, it gives them relief,” she says. “With the right products, this stuff really works.”
Beauty: Somewhat adjacent to topicals, the beauty subsegment includes CBD-infused makeup, hair products and even beard care. While topicals tend to be used to ease physical symptoms—stress, migraines or pain—beauty products focus more on appearance.
“Once you drift over to the beauty category, it’s a whole new animal,” says Patterson.
Cowen estimates that CBD beauty products will reach $1.12 billion in sales by 2025 (on par with CBD food sales).
“There’s a new product every week,” Patterson says. “It’s going to be in just about everything that we can consume or put in our bodies because it’s so good for them.”
Pet: Technically, pet products are edible—just not by humans. This subsegment includes a wide variety of options, including pet food, treats and tinctures similar to those meant for humans. It’s fast becoming a popular subsegment for consumers, retailers and manufacturers. Martha Stewart is even launching a line of CBD pet products with Smith Falls, Ontario-based Canopy Growth Corp.
“The pet market is coming on strong,” says Vincent Gillen, VP of sales for Tampa, Fla.-based Hemp Bombs. “A lot of stores are worried about the legal risk, so pet is an easy way for them to test the waters with CBD.”
The Pros of Nonedible
One of the biggest selling points for retailers regarding nonedible CDB products is the lack of legal uncertainty. CBD regulations thus far—both at the federal and local level—have focused almost exclusively on ingestibles.
“Nonedible is just a safer space because of the confusion surrounding the FDA’s statements or different municipality statements,” says Patterson of MarketHub Retail Services. “Retailers have to be safe.”
It’s why many of the major grocery and drug retail chains are choosing to launch CBD with just nonedible products. It’s the path Kroger, Walgreens and CVS have all opted for.
“The announcement that CVS was going to carry topicals, I think, helped a lot of other retailers become comfortable with topical-only CBD,” says Merle of Floyd’s of Leadville.
And for retailers already carrying ingestible CBD, nonedibles can be a way to grow the category without the risk of cannibalizing existing sales. While a customer may choose to purchase either a tincture or a capsule pack, that same customer might also pick up a CBD salve or dog treat.
“It’s really trying to come up with different items that sell but don’t take away from sales on the other items,” Gillen says.
Picking the Right Product
As with any hot new category, there is an inherent risk in carrying the wrong product.
“If a CBD product doesn’t work for my mother’s eye wrinkles, she’s not going to think it works for sleep,” says Patterson. “If it doesn’t work, you’re going to lose the category.”
Nonedible CBD products require some unique vetting. Patterson notes that there are certain ways tinctures and gummies are made. Not so with beauty, pet products and topicals.
“The topical-product category seems rushed in most cases,” says Grace of HempFusion Inc. “Many products have seemingly been quickly thrown together and utilize ingredients such as parabens that are counterintuitive to health and wellness and to the CBD movement.”
To ensure a quality product and supplier partner, retailers are encouraged to:
- Test the products, making sure the CBD dosage advertised is what’s in there.
- Determine boundaries for full spectrum, broad spectrum or isolate. Although there’s less of a chance of tetrahydrocannabinol, a psychoactive ingredient of cannabis known as THC, entering the bloodstream with a nonedible product, it’s still a possibility.
- Have a prepared list of questions. Where are products manufactured and by whom? Is it the suppliers’ unique formula, or did they purchase it elsewhere? What are the ingredients?
Lastly, Grace emphasizes the importance of education. “Invest in companies that understand, value and are prepared to deliver to this reality. Consumer demand is strong, but so is confusion,” he says.
And demand for nonedible products spans nearly all ages and demographics. “We are all one or two degrees away from someone who can really benefit from CBD,” Grace says.
That's why nonedibles can be an opportunity for retailers eager to safely play in the CBD space.
“You have all these subcategories: pain, beauty, pet, inflammation, anxiety, sleep—everybody needs that,” says Patterson. “It’s not an age thing, it’s not a gender thing. It’s the blueprint for a multibillion-dollar category.”