By Carl Edstrom, IRI
Legal cannabis is turning into a game-changer for the CPG industry. Many retailers’ shelves that currently hold plant-based hand creams and herb-infused kombucha can expect an extra ingredient to make its way into those products soon: cannabidiol (CBD).
In several states in the U.S., cannabinoids derived from the cannabis plant are now legal, including tetrahydrocannabinol (THC) and cannabidiol (CBD), with CBD derived from either the cannabis or the hemp plant. BDS Analytics’ research shows that cannabinoid product sales will reach $45 billion by 2024, with CBD serving as a formidable ingredient in products across categories – from edibles (food, candy, beverages) to topicals (beauty, skin, wellness). And, as cannabis ingredients continue to grow in legality and popularity, the cannabinoid market is one of the most significant new market opportunities for the CPG industry. Consumers are purposeful, multi-faceted and complex in their consumption – and CPG manufacturers and retailers should expect that cannabinoids will disrupt nearly every category in the store.
Opportunity for Consumer Education
No “One” Cannabis Consumer
Earlier this year, IRI began a partnership with BDS Analytics to track legal cannabis sales and the cannabinoid market and cannabis dispensary data are now being integrated into IRI Liquid Data®. To understand the market and the opportunity, it’s important to know who cannabis users are. Of course, there is no “one” average cannabis consumer. According to information from BDS Analytics, the average cannabis consumers are both men and women who are about 42 years of age; work full-time and live in cities; are social, creative and outdoorsy; spend more for quality time, try new products and are generally more satisfied with life. Among adults 21+ in fully legal U.S. states, two-thirds consume cannabis or are open to it. Among current cannabis consumers, 32% consume for recreational/social and health/medical reasons, so understanding the impact of the dispensary channel is relevant for all CPG manufacturers and retailers.
Consumers are certainly getting more intrigued by cannabis, but they are also overwhelmed by the product varieties, dosages and branding available to them. On top of that, labeling for hemp-derived products has been inconsistent, further promoting consumer confusion.
According to research by BDS Analytics, only 22% of U.S. adults 21+ understand the meaning of the term "cannabinoid," and 55% are unsure of the differences between THC (the intoxicating version) versus CBD (non-intoxicating). As the cannabinoid market continues to grow, so does the need for consumer education.
Cannabis Consumption Preferences
Consumer preferences and behaviors with cannabis are beginning to take shape, and IRI and BDS Analytics’ partnership showcases trends on cannabis-related products. A few key data points include:
- The convenience of the product format influences approximately half of cannabis consumers.
- Nearly three out of every four consumers use cannabis products for recreational or social purposes, while over half consume for health and medical reasons; roughly one-third consume for both.
- Consumers are actively looking for trusted and controlled experiences, with 44% of cannabis edibles consumers preferring low doses of THC (<10mg).
- Consumption is multi-functional. When selecting edibles, 54% of consumers base preferences on CBD content. A higher CBD:THC ratio (i.e., 10:1) produces minimal intoxicating effects.
Impact of Legal CBD on Retail
Major retailers have already started stocking their shelves with CBD products, and consumers will soon be purchasing products containing CBD across channels – whether at grocery, mass, drug, a coffee shop, their chiropractor, or a dispensary. In fact, dispensaries are and will remain the largest retail channel for CBD in the next five years, providing significant competition to more traditional retail outlets, so their performance must be understood by anyone competing in cannabis.
In the often slower-growth world of CPG, virtually nothing is growing like cannabis (pun intended). Being able to track retail sales across all distribution channels, as well as get the latest consumer and non-consumer insights, will help brands and retailers better understand how to leverage new insights and gain an advantage in this evolving landscape.
To learn more, watch the IRI/BDS Analytics webinar on cannabis exploding in CPG, reach out to your IRI representative or contact IRI@IRIworldwide.com.