The Rise of CBD in an Unregulated Market

Over the past year, the rise of cannabidiol – also known as CBD – in everyday products has been nothing short of explosive.

This substance, a derivative of hemp or cannabis plants, is being hailed for its medicinal properties. Brands and active users claim that it can reduce anxiety, help with trouble sleeping, and ease the symptoms of physical pain, among other benefits. 

With all the excitement surrounding CBD, it’s established itself as a modern “miracle drug” of sorts.

And the effects of this trend across industries are both real and very lucrative; analysts predict the hemp-derived CBD market will reach a projected value of $22 billion by 2022. 

At this point, demand in the market has developed far more rapidly than what government regulation, or even our own knowledge of the substance, can keep up with. 

In February of 2019:

57% of U.S. internet users we surveyed felt knowledgeable about the differences between marijuana, CBD, THC, and hemp in February — by May, this figure had risen to 65%.

In the U.S., the FDA is only just beginning to take steps toward developing a regulatory framework.

The agency held its first public hearing on CBD at the end of May, during which 120 stakeholders addressed a representative committee by providing over 10 hours of testimony, both in favor of and against various levels of regulation.

Regardless of their position, what all stakeholders in the debate seemed to agree on was that the FDA needs to determine a regulatory framework for how it will tackle CBD in the U.S. — and fast. 

A bespoke study we conducted in the U.S. and UK sheds some light on this pressing issue of regulation. Our findings reveal that there is a precarious balance between strong consumer demand and weak consumer knowledge.

Internet users, especially in the U.S., feel overwhelmingly positive toward CBD, yet there is so little research to support any of the popular claims around its health benefits or, importantly, around any of the risks for its long-term use.

This environment of uncertainty has created a ripe opportunity for brands, especially small, independent brands, keep to exploit the trend and essentially shape their own marketplace. 

Strong consumer confidence

The majority of internet users from both the U.S. and UK believe that CBD is at least somewhat effective at alleviating the symptoms of anxiety-related mental health issues.

The rate of those who see CBD as effective for physical health issues, such as cramps or muscle soreness, is even higher.

Among those who have actually tried CBD, 85% in the U.S. believe it to be effective for physical ailments and 84% believe it to be effective for mental health symptoms. 

Additionally, CBD has been extremely well-received by those who have tried it. Among recent users in the U.S., 3 out of 4 report that they’re likely to continue using it based on their experience.

Advocacy is also strong, with 3 out of 4 users in the U.S. indicating they’d recommend CBD to friends or family members. 

The knowledge gap

Despite positive experiences with CBD, the data to validate its effectiveness is limited. This underpins a severe knowledge gap between consumer perceptions of what they think they know and the reality of what they know. 

40% of internet users in the U.S. felt themselves to be “‘knowledgeable” about how the dosage system for CBD works. 

However, when asked to identify the minimal dosage to effectively treat anxiety via oral ingestion, only 7% of users chose the correct option. 

While 38% of users admitted that they did not know the right dosage, nearly 30% selected 25mg.

The majority of indigestible CBD products available for purchase, such as gummies, advertise dosages between 20-125mg per serving size, far lower than the 300mg oral dose that was found to be effective in improving anxiety and insomnia symptoms in one of the few human-based trials recently published. 

And it’s not just a misunderstanding about dosage that characterizes this knowledge gap.

Only 30% of U.S. internet users consider themselves knowledgeable about how the FDA regulates CBD products.

A similar question asked among UK internet users reveals only 14% have an understanding of how the MHRA (Medicines and Healthcare Products Regulatory Agency) regulates CBD, underscoring how much less developed the market is in that region. 

Shaping an emerging market

As consumer demands come up against regulation and safety concerns, the CBD industry is caught in a place of both immense opportunity and risk.

For household names like Coca Cola, the potential legal challenges of acting outside of clear FDA guidelines could be devastating; the company has already denied rumors that it was planning to enter the CBD beverage market.

But the risk for small, independent companies is much less. And as big name brands are treading carefully, these independent producers have been able to thrive and shape the market.

In the absence of input from the FDA, they have even played a pivotal role in educating the public on CBD and its benefits. The effect of this is evident through the industry’s success in establishing a baseline level of credibility without much to go on.

Users not only perceive CBD products as effective in treating their ailments, but also place an enormous amount of trust in the generally unknown brands that make up the market — even more trust than they place in the traditional pharmaceutical industry.

In the U.S., 54% of internet users agree that the claims of CBD companies are “trustworthy”. The number who feel the same about the claims of pharma brands is lower — at just 48%. 

Looking ahead

One major barrier to the CBD industry’s full expansion is restrictive advertising.

Digital and social media platforms do not currently allow CBD brands to advertise through their channels, and many companies who have tried have felt the blowback of having their accounts deactivated. 

As more clarity around regulation emerges, there’s a very real possibility that digital advertising restrictions will loosen. This would be a game-changer for the industry. 

So how do brands hoping to enter and stay afloat in the industry approach this?

Firstly, they’ll have to tread carefully when making health claims about CBD.

To date, the FDA hasn’t had the resources to go after thousands of small brands that make inaccurate health claims. Once a regulatory framework is established, however, much of the current leniency that stands will disappear. 

Brands that manage to achieve long-term success with CBD will likely be those that can distinguish themselves from the gray area of healthcare and emphasize more lifestyle benefits.

Personal care is a clear winner for this, and already the CBD-based beauty and cosmetics space has begun to grow by tapping into this idea. 

Producers of ingestible CBD products, however, will be subject to much greater scrutiny. Many may eventually be regulated through the FDA’s framework for “dietary supplements,” which is much looser than the oversight of medical drugs.

This path promises a faster way to legality for legitimate producers, essentially positioning them in the same category as vitamin and supplement makers. 

2 out of 3 U.S. internet users would consider trying CBD. 

Whatever the long-term resolution may be, the need for at least a short-term public education campaign is evident. The majority of U.S. consumers would now consider trying CBD-infused products, an indication that the market is moving from niche to mainstream.

As demand continues to build, both the industry and the public can only continue to wait on the FDA’s next move.