Trends & Opportunities in the Beverage CBD and Pet CBD Markets  12/3/2019

Liz Stahura, BDS Analytics

While regulations are still a bit vague as it pertains to ingestible CBD products, buyers and sellers in the food, beverage and pet segments are eager to connect with CBD suppliers and lay the groundwork for when the FDA does come out with an opinion, so they can hit the ground running in the event of what they expect will be a favorable ruling.

In the meantime, ECRM seeks to arm the industry with insights from consumer data that is available around these products, and so we brought in Liz Stahura, President & Co-Founder of BDS Analytics, to lead off ECRM's inaugural Pet CBD and CBD Food & Beverage sessions with a discussion of trends in the CBD market. 

During the programs I spoke with Liz specifically about trends in CBD beverages ad CBD pet products, and what follows are some key takeaways in these CBD categories from her presentation.

CBD Beverages

ECRM: Can you give us an overview of what's happening in the CBD beverage segment? 

Stahura: The beverage market is absolutely fascinating and of course as you know, BDS analytics tracks sales both in the CBD space as well as the full spectrum THC marijuana space. And there are a lot of trends that are being born within that dispensary channel that give us a little bit of an insight into what might be coming next for these CBD products at mass retail. Although there's a lot of interest today in full spectrum cannabis beverages as well as of course CBD hemp beverages, it's still a pretty small percent of the overall sales in the dispensary channel. Just about 1 percent of sales in the dispensary channel are actually coming from cannabis beverages, whether they be CBD hemp or THC-based beverages. 

It is a fast growing category, though, with about 15 percent growth year over year. But what's really interesting is when you to start to dissect out and understand where that growth is happening and what trends are driving that growth. And what we see is that CBD beverages are a huge driver of growth even in the traditional dispensary channels. 

ECRM: I think that's why that even though a lot of the mass retailers can't put these beverages on the shelf yet, they're here to find out which products they want to run with once they can. 

Stahura: Absolutely. The time is now for buyers to start thinking about what products are going to be successful on the shelves when they are ready to pull the trigger. And there are two things that we're seeing really resonate with consumers who are already purchasing these beverages. One is water-soluble powders. This ties into the trends of discreteness, portability and convenience. You can mix them in with just about any beverage products. 

Another is functional ingredients. As we know, right now it's very difficult to navigate the minefield of making health or wellness claims or making claims about what the experience is going to be like for a person when he or she is consuming a CBD beverage. However, at the same time, our trends are showing that what's needed is in fact some explanation of what experience a consumer can expect when he or she consumes one of these beverages. So if you're pairing CBD with functional ingredients, that allows you to help to create that connection for the consumer with an ingredient with which they are already familiar.

'There are two things that we're seeing really resonate with consumers who are already purchasing these beverages. One is water-soluble powders. Another is functional ingredients.' 

ECRM: So an example would be melatonin, which they already are familiar with for its benefits as a sleep aid. 

Stahura: Exactly. Or something similar for energy or alertness or whatever it may be. Because one of the big trends that we do see in the dispensary channel is consumers are gravitating towards products that make experience and mood and effects-based marketing claims. This is clearly harder to do in general retail. But the takeaway there is there is a lot of confusion among consumers. So anything that can be done to help clarify the experience you are trying to create with a product product helps, and adding functional ingredients gives suppliers a very easy way to create those connections. 

ECRM: Sounds like this category has a ton of growth potential. 

Stahura: Our forecast is for the CBD beverages or cannabinoid beverages to be a $1.7 billion market across all channels in the U.S. About 40 percent of CBD beverages are still being sold through the dispensary channel in the U.S., but we're already seeing some of those other mass channels like convenience creating a very viable distribution channel for the CBD coverages. Fast forward a few years, we're going to see that dispensary channel continue to shrink in terms of overall size, though it's still an important for channel for product innovation and a leading indicator to keep an eye on where the trends are heading.


ECRM:  Can you give an overview of the size and makeup of the Pet CBD market?

Stahura: As you all probably know, the pet market is a booming market and across all categories, not just CBD and THC. It's over $75 billion market in the U.S., and what we're seeing is that a lot of the health and wellness trends that are being built around human consumption are now transferring over into how we think about our pets. Our pets are our family. We care a lot about their health and wellness and are looking to take control and play a very active role in their managing their health. So what that translates into is that the CBD and low-THC based pet products are a very fast growing segment of the CBD market, with CBD pet products at about $65 million in sales today. When we look ahead, by 2024, we're looking at up to an $800 million market for CBD pet category. 

ECRM: And that's expected to shift more to mass from the dispensaries and pet specialty. 

Stahura: Absolutely. So just purely by regulations and the way the market is at this time, the dispensary channel still is a very important one for pet and health and wellness products with CBD. But it's interesting that that is actually already a smaller percentage of sales than some of the human-based consumption products. So whereas in general, about 50 percent of pet CBD products are being sold through the dispensary channel today, that's going to change as more and more general retail channels start selling CBD products. But with pet it's already at about a third, a third, a third between pet specialty stores, the CBD channel dispensaries and ecommerce. 

'About 50 percent of CBD products are being sold through the dispensary channel today, that's going to change as more and more general retail channels start selling CBD products.'

And dispensary will continue to garner a smaller and smaller percentage of sales by about 2024. We predict less than 10 percent of pet CBD products are going to be moving through the dispensaries as these other channels of distribution grow their share.

ECRM: What about the trends in the individual product segments? 

Stahura: Today it's primarily tinctures and treats. Those are going to be by far your largest product categories, but there are a lot of new and emerging product categories that are important to pay attention to, such as transdermal patches, gel caps, CBD tablets -- really similar to the expansion of products for human based consumption. According to our consumer research, it's still a relatively small percentage of adults who report that they're purchasing CBD product for their pets -- about 7 percent of total adults, 21 and older, which if you compare that to the percentage that are reporting that they consume hemp-based CBD personally, which is about 15 percent . But what we do see is those that are purchasing CBD products for their pets, they're very likely to already be consuming hemp-based CBD products themselves. Almost 80 percent of the folks who are buying CBD products for their pets are already using CBD themselves.

ECRM: So existing CBD consumers are the low hanging fruit for pet CBD suppliers and retailers.

Stahura: They're the more likely to purchase, because their motivations for purchasing and using a CBD products for their pets are very similar to their motivations for using and consuming products for themselves, such as health and wellness, or to manage stress. One intersting reason they are gravitating toward CBD is to reduce the use of prescription medication. So just like we as a human population are trying to reduce our prescription medications, we're also looking to do those same things for our pets. So many of the same trends that are resonating with us on our personal health care and our personal wellness are translating into how we think about managing the wellness of our pets.

Download the BDS Presentation slide deck here: BDS ANALYTICS ECRM.pdf

BDS Analytics Q&A: CBD Beverages

BDS Analytics Q&A: Pet CBD


Joseph Tarnowski

VP Content

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