Big brands have key role to play in emerging US cannabis market

Cannabis-derived products in the health & beauty and food & beverage categories are a growing and increasingly lucrative market that has yet to be adequately developed. According to a report from strategy consultancy Emerton, traditional brands and companies have the unique ability to help break down roadblocks in consumer information and government regulation, and fully capitalize on the nascent CBD and THC derivative market.

The US market for recreational CBD and other cannabis-derived products is already sizeable at $7.6 billion in 2019 – encouraged by the 2018 Farm Bill that legalized hemp-derived cannabinoid products and paved the way for a flurry of non-psychoactive CBD products.

The US recreational cannabis market is projected to grow approximately 14% per year to reach $15-$20 billion by 2025 in states with legal markets. Less than 30% of the US population lived in one of the 10 states with legal recreational cannabis as of July 2020 – but the states of New Jersey, Montana, Arizona, and South Dakota in November also voted to legalize recreational cannabis. More states will “legalize it” in the months and years to come as consumer attitudes toward cannabis continue to relax.

As such, there is significant room to grow, since even in the states where it’s legal, only about 10% of 18+ consumers use cannabis monthly, according to the Emerton report.

Current recreational cannabis users have very favorable consumer attributes. Many are regular users, regardless of the product – with 54% of cannabis-infused beauty product users, 28% of cannabis food consumers, 41% of cannabis drinks consumers using these products daily or multiple times per week.

They’re also satisfied with the products, with more than 80% rating them very or extremely effective. Consumers also spent a significant amount of money on cannabis-derived products, with 58% of cannabis-infused beverage consumers spending more than $100 per month on the products. 

There are still significant roadblocks to overcome before the cannabis market can reach its full bloom, however. For one, US consumers are uneducated about cannabis derivatives, with just 18% of non-consumers able to differentiate between CBD and THC and their respective effects. Approximately 60% of respondents to the Emerton survey believed CBD is psychoactive or are unsure.

There also regulatory challenges. Though the federal government legalized CBD in December 2019, the FDA has yet to approve any CBD product because there is a lack of scientific research on its effects on the body.

Traditional companies and brands have a critical role to play in overcoming cannabis market roadblocks, according to Emerton. Large corporations in personal care and food & beverage have the resources to accelerate research that displays the safety and effectiveness of products. Some companies, including Johnson & Johnson, have already started conducting research projects to present to the FDA.

Large companies can also reassure consumers on CBD safety and educate them on product usage and effectiveness. Companies can highlight positive consumer experiences via large brands’ social media platforms, as well as multiply sample distribution campaigns, according to the Emerton.

The report also found that 40% of non-users would react positively to large companies’ entry in to cannabis products, while only 18% would react negatively.

“Traditional companies and brands seem to be legitimate to position themselves on the cannabis derived products market in the eyes of consumers,” states the Emerton report. “Existing product experience and brand platforms can be great tools to educate consumers, increase trust, and convert non-consumers into consumers.”