Major companies like Nestlé are investing in this cannabis derivative, which already generates more than $2 billion in sales in the US alone.
From your bakery to the skincare section at Sephora, CBD is everywhere. And some of the world's largest consumer product companies, as well as tobacco industry giants, have taken notice.
Royal DSM, British American Tobacco, Nestlé, and Altria (owner of the Marlboro brand), among many others, are reaching important agreements to take advantage of the wave of consumer interest in this cannabis compound also known as cannabidiol. The cannabis consultancy BDSA estimates that the CBD market in the US is already worth more than $2 billion (approximately €1.7 billion) and could skyrocket to $20 billion by 2025 (approximately €17 billion).
The rise of CBD is due, on the one hand, to the growth of wellness trends and, on the other, to the perception that this compound can help people sleep better, manage pain, or relax in a way that isn't harmful to their health, says Kelly Nielsen, vice president of insights at BDSA.
Nielsen says she's worked with many of the largest health, beauty, wellness, food, and alcohol companies, and that "they're all thinking about how to incorporate CBD" into their products.
It is legal in the US, following the passage of the 2018 Farm Bill, as long as it is a hemp derivative.
However, the US Food and Drug Administration, which regulates CBD, has yet to clarify specific regulations regarding its use in foods and beverages.
Still, some companies are betting heavily on CBD, investing in the compound and including it in beverages and foods.
Nielsen points out that the main obstacle, in addition to unclear regulation, is knowing whether CBD-based products "live up to consumer expectations." "That's an aspect the industry needs to monitor very closely," Nielsen says.
Cannabis compounds are a small but growing part of the overall dietary supplement market. They are expected to reach more than $300 billion by 2026, according to a report by FNF Research, a market research firm.
Royal DSM, one of the world's largest ingredient manufacturers, has led a $32 million funding round in Brains Bioceutical, a company that produces CBD for the pharmaceutical industry, and has also partnered with Mile High Labs, a Colorado-based CBD manufacturer.
British American Tobacco's venture division has led a $25 million investment in Trait Biosciences, which is working on technology to incorporate CBD into beverages and other products. BAT has also invested $75 million in Organigram, a Canadian cannabis producer, to develop CBD products for the US market.
Molson Coors launched a line of CBD beverages in the US in January through a partnership with a Canadian cannabis company.
Nestlé has launched CBD products in both the US and Europe.
The tobacco industry also wants its piece of the pie
Investments in CBD continue. Canopy Growth tapped entrepreneur and TV host Martha Stewart to create a line of CBD products in the US. The company plans to launch a line of CBD-infused beverages.
Startups like Recess and Cann have also launched CBD-infused canned alcoholic beverages.
Altria, the maker of Marlboro brand cigarettes, owns a significant stake in cannabis producer Cronos Group, which sells products containing CBD and other THC-free cannabinoids in the US.
Anheuser Busch-InBev launched a joint venture with Tilray in 2018 to develop CBD beverages for the Canadian market, and The Boston Beer Company, the maker of Sam Adams, established a subsidiary in Canada to develop cannabis-infused non-alcoholic beverages.
For these Canadian cannabis companies, CBD could be a way to gain a foothold in the US market ahead of potential federal legalization, Rick Maturo, associate director of clients at market research firm Nielsen, told Business Insider in an email.
For Maturo, CBD-infused beverages remain a small part of the overall CBD market. Only 31% to 3% of CBD product sales last year were beverages.
Retailers like Walmart and Amazon still don't carry CBD.
A bipartisan group of lawmakers recently introduced legislation urging the Food and Drug Administration (FDA) to clarify regulations surrounding CBD, which could prompt larger retailers, including Walmart, Target, Costco, and Amazon, to begin stocking CBD products.
"There's going to be a domino effect," says Klee Irwin, CEO of the publicly traded supplement company Irwin Naturals. "You can't get close to what this industry will be without them," he notes.
Irwin Naturals began selling CBD in 2018 and has become one of the largest sellers in the US, according to market research firm Brightfield Group.
'A tremendous opportunity for growth'
Frederic Boned, Royal DSM's vice president, who leads the company's North American CBD investments, said the growth rate of the CBD market, coupled with the fact that products are not yet available through large traditional retailers, are key to the company's recent deals and partnerships.
Boned notes that DSM is looking at other cannabis compounds, such as CBG and CBN, but has no plans to develop products containing THC, the cannabis compound that gets you high.
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