Eat it, drink it, apply it—CBD’s formulation possibilities are as abundant in variety as there are cannabis strains. While the industry is known for having hype ingredients that only last a season, CBD and cannabis have deeper roots in overall holistic wellness, giving the ingredient more future potential, extending beyond beauty into medical fields and mental health treatment. The global cannabis extract market is expected to reach $28.5 billion by 2027, with 17% annual growth. The CBD skincare market alone will reach $1.7 billion by 2025, demonstrating 32.9% CAGR. LIM College even launched a Business of Cannabis BBA program for 2022, breeding the next generation of plant-based entrepreneurs.
However, the conversation around CBD has undoubtedly changed. A few years back cannabidiol was the ultimate star ingredient. From brands like House of Wise and Equilibria receiving $2 million in seed funding, to bestsellers like Milk Makeup’s Kush mascara, things were looking rather green indeed. Despite the increasing legalization and normalization of cannabis, the hype seems to have quieted, at least in the beauty realm. According to Spate, CBD searches declined year over year by 27.3%, CBD supplements by -17%, CBD skincare by 33.9%, bath and body by -15.2%. The only product category that saw a slight increase was CBD cream (+1.4%). However, not all hope is lost— it is simply changing form.
Searches for CBD gummies grew by 8.8% growth since last year, with 83.1K monthly searches; those for CBD essential oils increased by 49.8% since last year, but the overall searches only average 4.2K. The bigger development is CBD making way for its cannabinoid siblings. PEA (palmitoylethanolamide), an endocannabinoid found in the human body, is used as an anti-inflammatory supplement. Cannabinoids such as CBG (cannabigerol) and CBN (cannabinol) present the next generation of actives, with Bawdy Beauty recently launching a CBG and CBD oral lubricant as one example. Mab & Stoke recently launched Mab Sticks, a range of sugar-free powdered supplements containing CBG (for their recovery blend) and CBN (for the calm variety), as well as a Recovery Cream containing cannabinoids for muscle ache relief. Searches for CBG are growing +20.5% since last year, constituting 67K searches per month, mostly in the form of oil, flowers, tinctures, and gummies. Searches for CBN (cannabinol) oil are at an average of 5.4K searches, with a little less than half being for “CBN for sleep.”
Mab & Stoke founder Christina Mace Turner states that “the demand for cannabinoids is swiftly increasing. Consumers are just starting to learn about cannabinoids beyond CBD, but this is a trend that will stick around because they are so exceptionally efficacious. CBD has been the buzzy one for the past few years, but the new ones to watch are definitely PEA, CBN, and CBG.” Benefits include stress relief, muscle ache relief, and improved sleep.
Brands such as Frigg, which uses CBD in its Functional Edibles, and a mix of both CBG and CBD in its Facial Tonic and Hair Potion products, are combining the best of both worlds for genre newbies and experts alike. Kimberly Dillon founded the brand in 2020. The eponymous brand’s name is derived from the Viking goddess, which is rather fitting given that archaeologists uncovered traces of cannabis in North America in 2018, tracing back to said civilization and its possible use of the plant for medicinal and recreational purposes. With her brand, Dillon hopes to demystify the plant and introduce it to a wider audience, using beauty products as a way to reduce the fear around CBD and cannabis. Her message hit home: the company was announced as a member of the Credo for Change Class of 2021 and won Tower 28’s Clean Beauty Summer School Program. “Coming out of the pandemic, a lot of that stigma and the shame has dissolved pretty quickly. People are really stressed and [a lot more] open to whatever the treatment options are. There is this desire to turn to a safe natural alternative first,” she comments.
Despite the investment and hype, starting a CBD brand is not without its challenges. One hurdle is accessing social media advertising, be it because of controversy around certain cannabis-derived ingredients and the resulting restriction around advertising, or the missing funding for largely growing advertising costs. “The fact that CBD brands are in this grey area, it's really hard to get traffic to your website, which kills the model for DTC. Secondly, if you don't have a lot of retailers who are willing to put CBD on their shelves, you have a distribution problem,” Dillon adds. Furthermore, CBD is illegal in the states of Indiana, Kansas, Kentucky, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, and Texas, and that is only within the US.
From a formulation perspective, regulations are also much tighter. “I don't think a lot of consumers are aware of how much testing one has to do, and the scale factor. If I was to do a CBD version of a body butter, I would do that in a GMP-certified factory and send it to get testing, that could be anywhere between $500-700 per batch. The cost of doing business is higher and the legal framework is more challenging for emerging brands on the regulatory, marketing, and distribution side,” Dillon emphasizes.
There are knowledge gaps from both a retailer and consumer perspective on CBD, leading to some brands altering their original mission statements to expand beyond cannabinoid messaging in order to expand reach, but at the same time increasing competition. “CBD brands tell a different story of plant-based wellness, and then emphasise the other ingredients or launch non-CBD SKUs, which is probably to do better marketing. But then you're not competing with other CBD brands, you're competing with other products in your category,” Dillon explains.
Breaking down the stigma and old stereotypes around CBD has been a huge aid in the category’s growth. “A lot of people in the space are trying to change those old stereotypes and traditional trains of thought. There's just so many helpful benefits, that it's really important for us to continue to educate and provide that information to people,” Jamie Lea, founder of Toastyy, explains.
The former Uber executive turned entrepreneur founded the brand in response to the effective application of CBD for her athletic recovery and Hashimoto’s treatment. “When people first heard that I was going into CBD and cannabis, they still looked at it as someone selling drugs. It’s so hard to navigate getting a website and payment processing up, because some companies don’t like to work with CBD brands,” she explains. The female-focused brand includes a range of CBD tinctures, topicals, and supplements, with an inflammation-reducing face mask currently in development.
Lea sees an even split of customers who purchase the company’s broad- versus full- spectrum products. “You still have people that are learning about it, maybe they don't want to consume THC or get drug tested within their jobs, so they love to purchase the broad spectrum. But for the most part, anyone who is a normal user, it's full spectrum all the way because THC really activates the cannabinoids and allows you to get a better response,” she comments. Full-spectrum CBD contains terpenes, other cannabinoids, and up to 0.3% THC, while broad spectrum is usually completely THC free. The third form of CBD is an isolate, which carries no additional cannabis plant compounds.
Launching during the pandemic, Lea self-funded the enterprise, as one of the less than 4% of Black-owned cannabis companies. “It's important that we have representation. If I see someone that looks like me, they understand my upbringing, and are creating a product that I stand by, I'm definitely going to buy it,” she explains. “Black and Brown people are still negatively affected by the industry and locked up for what we consume on a day-to-day basis. It just doesn't sit right with me and that's definitely something that I want to change.”
Interpreting all the data, what does the future hold for the CBD market? Increasingly sophisticated formulations and more emphasis on ingredient education are two pillars. “We're going to see a shakeout,” Dillon proclaims. “It was a gold rush in those early years and the brands that are dedicated to working with these ingredients and figuring out how to elevate them, how to use them synergistically with other ingredients, will be the winners. It’s a long game and we're still in the beginning to middle of it.”
Terpenes, CBC, CBG, and a merging of CBD and THC in formulations are all on Dillon’s radar. “If we are really going down this path of holistic beauty, there is an opportunity to be closer to whole plant medicine,” she adds, pointing to the combination of mushrooms and cannabinoids throughout history. “A lot of cannabis VCs are looking at psychedelics, and then within beauty, CBD investors are looking at other trends that CBD could fit into, like beverages,” Dillon comments. “Generic CBD offerings, I don’t see that getting a lot of funding anymore, because I don’t think any of those companies have gotten huge returns.” Just as consumer interest in specific strains has increased immensely, so too will the options they seek in their CBD beauty and health & wellness product. It takes more than pot leaf packaging to win this crowd over, but those who put in the research effort, and continue doing so, can expect a loyal customer base to follow them into the plant-based future.
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