U.S. Market For Hemp-Derived Cannabinoids On The March Despite Challenges
November 28, 2023While the U.S. market for hemp-derived cannabinoids such as CBD and Delta-8 THC has been slowed by a lack of clarity from federal regulators as to the rules of the road, consumers have warmed to the segment, which is now estimated to be about the same size as craft beer. The finding comes from an analysis from Whitney Economics, which says its “conservative” estimate of U.S. demand for hemp-derived cannabinoids is $28.4 billion annually.
To put that in context, Whitney’s estimate puts the total market for hemp-derived cannabinoids above that of combined legal sales for medical and adult-use cannabis. The research group added that the hemp-derived industry employs 328,000 workers earning $13 billion in wages and has an overall economic impact of $79 billion. “While they may seem large, these estimates are actually conservative, because they do not account for demand and employment from gas stations, grocery stores, and convenience stores,” Whitney said. Its survey gathered responses from 800 hemp cultivators, manufacturers, distributors, and retailers in 45 states.
Currently, hemp-derived cannabinoid sales are unrestricted across 23 states, with nine states allowing them with certain restrictions and 19 states prohibiting sales outright. “Although retail sales are illegal in 19 states, consumer interest remains strong there, and is supported by other distribution channels, such as online sellers,” Whitney noted. “The amount of demand coming from prohibited states is a clear indicator that market opportunities remain.”
But while hemp-derived cannabinoids have gained an impressive foothold in the market, they continue to be held back by a lack of cohesive regulations. The Food and Drug Administration announced early this year that it would not create a framework for CBD products. The decision came after a lengthy review period which was expected to end in the formalization of rules governing CBD’s inclusion in food and drink. Instead, the agency concluded that its regulatory tools are not up to the task of overseeing CBD and punted the decision to Congress. The lack of clear regulations has prompted some players, such as Southern Glazer’s, to hit pause on their CBD businesses.
“The potential popularity of CBD as an ingredient is deprived by a lack of government regulation, which is currently hindering the whole category,” says Brett Wiley, cofounder of Aprch Beverage Co., whose CBD sparkling waters are sold across eight states and online. “The future of CBD drinks is promising, but the industry’s regulatory challenges could impact growth and acceptance in the mainstream market.”
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