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All Eyes on the U.S. CBD Market

All Eyes on the U.S. CBD Market

The United States CBD market has drawn a lot of attention from all over the world. This is likely because there seems to be a huge craving for the consumption of medical and recreational marijuana products in the U.S. as against other countries. This notwithstanding, the regulatory framework of cannabis products is still unclear on the federal level, and this could impact the market.

CBD was legalized in the U.S. towards the end of 2018 with the signing of the Farm Bill. This law legalizes the growing, extracting and distribution of hemp-based products, hence making it the only legal way for cannabis companies to enter the U.S. market.

A lot of companies have been ramping up their infrastructures in the U.S. in a bid to take advantage of the growing CBD market. For example, Canopy Growth (CGC) is currently building a hemp industrial park and also acquired AgriNextUSA for its hemp-based business in the country. In the same way, Cronos Group and Aurora Cannabis (ACB) have been developing their intellectual properties for cannabis products in the country.

The potential for CBD-infused products seem endless. Products could be in form of CBD oil, edibles and beverages. Some companies are already developing CBD pet and skincare products. There are also the claims for CBD helping with many medical solutions such as pain relief, anxiety, depression, and stress relief.

Aside hemp-based CBD oils, CBD gummies and other products, cannabis companies could also focus on developing marijuana-based products. However, even though some states (Illinois, Colorado, California, Michigan, etc.) have legalized marijuana, it’s not yet legal at the federal level.

A May, 2019 report by BDS Analytics projects the U.S. hemp-based market to hit more than $24 billion by 2024, and $43 billion when combined with THC market. The report also has it that most of these sales will happen in cannabis products retail locations as against dispensaries.

The Stand of FDA

The FDA (Food and Drug Administration) reserves the sole right to approve CBD products in the U.S. However, the agency is being careful with its approach towards CBD and has continually stated that it would take scientific approach towards CBD products. The type of market in which a hemp-based product is sold will determine the type of investigation it gets from the agency. For example, CBD skincare products will be different from drug related CBD products.

California and the Marijuana Market

Cannabis sales in California is quite strong, as the state has an active recreational marijuana market.  According to a report by Cowen & Co., California recorded a growth rate of 80.5% from cannabis sales and that the dried flower was a common format in the state. Dried flower is a cannabis plant matter that has been dried and cured and is ready for smoking. Cowen also added that vaping (another marijuana consumption format) is taking over the dried flower format.

This accounts for the reason why many cannabis companies are moving towards other formats for cannabis. The most likely step would be for companies to add more value to the already existing dried cannabis. Added value gives the company the opportunity to build a unique product that would enable high profit margins.

Companies like OrganiGram Holdings Inc. (OGI) is already focusing on value added products. The company plans to develop new form factors and then establish its market presence within it. According to them, hemp-infused beverages and vape pens are two of these form factors.

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