CBD Industry watchdog the leafreport.com recently undertook an analysis of CBD brands in the U.S. to determine price trends over the course of 2020. Among the key findings the data suggests that 70% of CBD brands reduced their prices in 2020.
Additional findings included:
The data suggests that the depreciation of prices that we have seen across all wholesale hemp and CBD raw materials is now starting to filter down the supply chain. Where manufacturers had previously been able to sustain premium prices for particular products, or brands, the sheer volume of new market entrants, that we have witnessed over the past couple of years, is now resulting in fierce competition for market share.
For consumers this price erosion is a positive step and presents an opportunity to broaden the appeal of CBD products to new market segments.
As we start to see more CBD products across the full price spectrum the consumer base, as a whole, is likely to continue on the upward trajectory we have seen over recent years. More products and brands combined with a greater range of price points will see new opportunity for both manufacturers and retailers alike.
Price reductions also mean reduced margins up and down the CBD supply chain, which will have profound impacts on some parts of the industry. As manufacturers and retailers address the increased competition, marketing and branding budgets are also going to increase as brands attempt to differentiate themselves within an increasingly crowded marketplace.
While it is unlikely that CBD products will see a rapid race to the bottom, in terms of prices, the need for differentiation is becoming increasingly apparent.
Brands need to identify their specific niche and aggressively target those consumers. This means that customer experience, brand identity, quality and authenticity are becoming critical elements of success.
With so many manufacturers and retail opportunities it is reasonable to expect some significant consolidation across the industry in the coming year. Well-funded brands looking to leverage scale in order to maintain margins and market share are likely to perform well in this more competitive landscape.
Author: Matthew Driver, Senior Analyst