- Evolving cannabis sales could increase by the billions as more states legalize the substance.
- Current companies in the market should rise up to customer demand before more products are added to the industry.
Cannabis, for the most part, is still illegal under the eyes of the federal law, even if the states are still looking to legalize this substance for themselves. With these efforts, it is looking like the legalized cannabis and CBD on the market will ultimately lead to billions of dollars in revenue. According to a new report from Nielsen, there’s a chance of developing new revenue for anyone who can capitalize on these opportunities. However, there’s an equal chance of suppliers and retailers looking away from the currency and potential growth that cannabis can bring.
In 2018, Nielsen estimated an $8 billion market for legalized cannabis, which included the sale of CBD that was entirely derived from hemp. That means there’s $8 billion in new profit for a country that only has 11 states that have legalized cannabis. Michigan and Illinois are opening this opportunity for their residents in 2020, and it is likely that other states will follow along. If they do, then Nielsen believes that the total sales of legalized cannabis will reach $41 billion by 2025.
Cannabis is rather broad as a classification, and all of the products that come from it can be divided into two categories – products from marijuana and products from hemp. From that division, the products can be divided into three more categories – ones that cause a high with THC, ones that contain CBD with no high, and once that don’t contain CBD or THC. Confusion between these categories predominantly are due to the fact that cannabis can come from marijuana or hemp.
Retailers, states, and even cities can impose different legal restrictions in thee cannabis market, so the people and companies that enter it need to be exceedingly careful. The environment is bound to change over time. However, apart from legalization, what is driving the market now? Nielsen states that consumer packaged goods (CPG) won’t likely be impacted by the maturation of the industry, but it could impact other categories in the industry.
The recent changes in the hemp-derived CBD products are exactly the reason that companies need to think more broadly. At the end of last year, hemp was officially established as an agricultural commodity, due to the Farm Act. Even with restrictions from the FDA on these types of CBD-infused products, there are many major retailers that have already agreed to sell CBD products that aren’t ingestible, like lotions, oils, balms, and creams. Against the rules of the FDA, there are already companies that are selling ingestible products.
As the legal status of these products event, and more hemp CBD product come to market, it is possible that the introduction of these products will see the same success of other CPG products. Medications, pet care, and other products could end up being the force behind billions of dollars in revenue. Part of the risk in these issues is the “substitutability of existing category purchases by cannabis purchases,” according to Nielsen.
Legalization of these CBD products, along with the potential legislation involving marijuana, could ultimately lead to new revenue streams. That is exactly why every brand should prepare for the ultimate demands of the consumers before more products become available.