While growth of the cannabis industry continues to be delayed by business and regulatory setbacks, the legal cannabidiol (CBD) market is ready for takeoff.
“The CBD gold rush has begun,” said Marijuana Business Daily president and incoming CEO Chris Walsh, in his annual “state of the cannabis industry” address. “Retail sales could double in 2019,” he predicted at the MJBizCon trade show, which attracted a record 35,000 cannabis industry execs to Las Vegas last week.
CBD, the cannabis-derived compound intended to provide therapeutic benefits without the "high" of THC, is popping up everywhere -- in products sold on Amazon, and on the shelves at CVS, Kroger, and other chain stores. Nationwide, CBD sales are expected to top $800 million in 2019 and exceed $1.1 billion in 2020, according to the research firm Statista.
CBD may be the new “it” product for health and wellness, but Walsh sees trouble ahead. A tidal wave of retail products is creating oversupply -- and consumers are paying high prices for untested products.
“Overproduction [of hemp products] and unregulated use or labeling could lead to some pain for this market in 2020,” he warned.
Meanwhile, the US recreational marijuana market continues its slow trudge toward legalization, with some big wins and losses. Most notable: Illinois will become the 11th state to allow recreational sales, starting next year.
What does all this mean for consumers seeking CBD, medical marijuana, and other cannabis products in the coming year? Green Bee Life caught up with Walsh during the conference to find out.
Photo credit: Laurie Berger, writer/editor, Green Bee Life
CBD: Boom or Bust?
Green Bee Life: Is CBD just another wellness fad?
Chris Walsh: I don’t think so. Many in the industry fear that the CBD bubble will pop, making it another health fad like echinacea. Remember when we were all taking echinacea? CBD is very different, because it has properties that you can actually feel.
Many former marijuana smokers now use CBD as they’ve gotten older; they don’t even want the THC. It’s amazing how many people of all ages and political leanings say it works for them, even without research behind it. So the future of CBD is great.
How widespread will CBD become?
Walsh: You can bet companies will be innovating all sorts of CBD products. The spa industry, for example, has already implemented it. CBD massages have become really popular across country. And with CVS and Kroger now selling CBD, it will eventually become just another ingredient in a wide range of consumer products.
Although hemp and CBD production is now legal [except in food], there are some bad actors out there. How can consumers tell if they’re buying snake oil?
Walsh: It’s still hard for consumers to tell what’s real or not. Some products may not have the stated amount of CBD – or any at all -- because there are no testing or labeling regulations. That will come in time. For now, consumers should do their research, find a reputable company that has been in business for a while, and avoid shopping by price [alone].
Do you think CBD is as “dangerous” as the updated Food & Drug Administration (FDA) rules claim?
Walsh: You could be affected by an illegal product that wasn’t tested and may have impurities. Chances are you won’t get sick and end up in the hospital unless something else in the product is off. It’s a complicated issue for consumers right now, but if you do research, you can find reputable companies.
Given that legal CBD products don't have to be tested, is it only a matter of time before we witness a public health crisis, similar to the vaping crisis?
Walsh: If kids get hold of it accidently and 10 more end up in hospital, that’s not good. But people are not dying from marijuana and definitely not from CBD. The vape issue did catch people by surprise, but we learned it was coming primarily from illegal vape producers.
Price gouging on CBD products seems to be a problem right now, especially since it’s hard to know how much CBD they contain. Should this be regulated?
Walsh: It can’t be regulated right now. But all the forces that affect other consumer products will eventually come into play here. It may be one, five or 10 years down the road.
You mentioned there may be some bumps for the CBD sector in 2020. Where will they come from?
Walsh: There will be lot of growth, but there might also be some pain along the way, as in any new market. That’s because the products are not tested, yet people are opening stores, and there’s very little regulation. It’s hard to say how the industry will respond to [federal regulations and oversight]. But CBD is here to stay. It will be worked into every product imaginable.
Future of Dispensaries
Most cannabis dispensaries have done a poor job at educating consumers about which products are right for them. Why is that?
Walsh: The demand for cannabis was pent up for so long, and the legal market is still so new. Right now, anyone can get away with selling marijuana or CBD, and not know what they’re talking about. Consumers will still buy it.
Which dispensaries will survive?
Walsh: Dispensaries that educate consumers are the ones that will survive in the future. But they need to train their staffs to help customers find the right products. That will set them apart from other dispensaries and help build loyal clientele.
Which dispensaries may not survive?
Walsh: Some dispensaries owned by large multi-state operators (MSO) grew too quickly. Now, they’re getting pressure from investors and having to sell off assets or conduct layoffs. We’re seeing that in Canada, too. Like many other industries, when there’s a lot of interest and money coming in, some companies get ahead of themselves and make bad decisions.
How has the growth of this industry impacted your conference and trade show?
We’re becoming a global industry. Last year, we had 27,000 attendees. This year, it’s up to 35,000 representing 75 countries. “What we’re seeing here reflects the industry as a whole. People come to learn as their markets develop.
We also attracted 1,300 exhibitors this year, up from 1,100 in 2018. The big trend: Larger booths. Many exhibitors are taking bigger spaces, to set themselves apart. In a sea of booths, you have to do something different to stand out.
Legalization: The Future
Other key achievements and predictions in Walsh’s state of the union address include:
Big Wins in 2019
The “highlight of the year” was legalization of recreational marijuana use in Illinois as of January 1, 2020 [following Michigan, which occurred on December 1, 2019], Walsh explained.
It creates a $2 billion market that will be second largest behind California, with “the potential to open up the Midwest. But it won’t happen right away due to the 500 retail license limit,” he predicted.
Disappointments in 2019
Negotiations to end recreational prohibition in New York and New Jersey collapsed this year due to disagreements over taxes, social equity and other issues, according to Walsh. “It would have been a massive trifecta, along with the Illinois passage, that would propel everything forward,” he said. “It was a surprise to many of us, but we expect legalization will happen in 2020.”
California, the largest and fastest-growing recreational market in the US, has suffered the most from regulatory confusion, excessive taxes, corruption, a strong black market, and other issues. “It feels like a game of survivor right now and there will be more pain [before it gets better],” said Walsh. “[The] majority of companies, especially in Los Angeles, are struggling to break even.”
2020 Predictions: Recreational
On the recreational side, Walsh predicts that a bloc of Northeastern states could approve recreational use (New York, New Jersey, Connecticut, Pennsylvania and Rhode Island) as governors of those states collaborate on a “blueprint for legalization.” Other states to watch, he said, include Arizona, Delaware, Florida, Minnesota and New Mexico.
2020 Predictions: Medical
“There’s a lot of optimism in the medical market,” Walsh said. This past year, new markets opened up in Louisiana, North Dakota, Arkansas, Missouri and Utah. “Oklahoma, which is now the fastest-growing state for medical marijuana, "deserves to be recognized for the free market it created in medical, too,” he added. “Five percent of the population is now registered.”
The remaining states -- including Alabama, Mississippi, South Dakota, Kentucky, Nebraska, and South Carolina -- are “seriously considering” legalizing medical usage in 2020. “Seven to 10 years ago, we never thought they’d do it,” Walsh noted.