The past few years have seen an upsurge in cannabidiol’s (CBD) popularity. The hemp extract was barely known three years ago, but just a year after legalization, the CBD market is already worth millions in sales, with earnings projected from $591 million to $22 billion by 2022, according to the Brightfield Group.
Like all cannabinoids, cannabidiol has medicinal properties, and limited research has found that it can be effective against a number of ailments, ranging from high blood pressure and insomnia to chronic pain and anxiety. On top of that, it doesn’t have the side effects pharmaceuticals are known to cause, making it an extremely attractive option for people looking for alternatives to traditional medications.
This has created immense demand for CBD products, and processing companies are happy to comply. Over time, the number of CBD products, such as tinctures, oils, topical creams and nasal sprays on the shelves has grown substantially. This is on top of the plethora of CBD infused edibles, beverages, and spirits on the market.
According to Celeste Miranda, founder of CBD Expo Tour, the time for free-wheeling growth is over. “You know there’s going to be a bigger supply. Oversaturation? Absolutely. So many factors come in at that point then. Things like marketing, branding, do you have all your checkpoints in place to be the one that survives.”
Presently, there are over 50 well-known CBD brands in the country, and as the industry is barely a year old and growing at an exponential rate, we can expect that number to rise as time passes. And anytime there’s oversupply, prices are bound to reduce.
But, a lot of resources go into making the final CBD product, and this drives up operational costs. The increased pressure on CBD’s price will make it harder for companies to turn a profit, especially smaller companies that lack the liquidity and purchasing power to cushion themselves.
A number of companies have turned to the minor cannabinoids like cannabigerol (CBG), cannabinol (CBN), and cannabichromene (CBC) to try and keep their profit margins afloat. Including CBD and THC, hemp produces over 100 cannabinoids, and they all have medicinal properties. Most of them are very low in supply but have high demand, and this could offer an opportunity for a processor looking to add another cannabinoid to its line.
Last December, the National Institutes of Health (NIH) set aside $3 million to investigate the potential pain-relieving properties of minor cannabinoids, signaling a subtle shift away from CBD to the lesser-known cannabinoids. Brands that choose to invest in them may be able to distance themselves from the intense competition that’s pervasive in the CBD sector.
Industry watchers believe that sector players like SinglePoint Inc. (OTCQB: SING) could be working intensely behind the scenes to diversify into other cannabinoids in order to put themselves in pole position for the future.
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