As a result of the COVID-19 outbreak and the repercussions it continues to have on global supply chains, commercial activity and consumer demands, the global CBD market has moved into a new period of potential volatility which will have major impacts on market dynamics for the foreseeable future.
Despite some logistical problems for producers and certain supply-chain bottlenecks that have come about as a result of closed borders, and restricted transport options, manufacturers of both medical and consumer CBD products have predominantly managed to continue operating facilities.
Data suggests that demand across medicinal markets has remained relatively unaffected by COVID-19 restrictions. Research by Prohibition Partners, in March, found that medicinal users are the most likely group to maintain existing levels of consumption. As with other pharmaceutical products, consumers will prioritise these purchases over and above other products and dosage regimens will dictate consistent demand.
Prescribing clinics have also adapted to the current climate by offering tele-consultations and appointments, along with prescription delivery services, which has resulted in this user group remaining relatively stable.
Social distancing, and isolation, is resulting in supply chain adaptation to ensure that people can still access products.
For example, UK-based medical cannabis group LYPHE Group, has agreed emergency measures with the UK’s Home Office to import sublingual cannabis medications for the first time.
As part of LYPHE Group’s COVID-19 emergency planning, an agreement has been made with the Home Office and the Office of Medicinal Cannabis in the Netherlands to allow for the first time ever the export of sublingual medical cannabis oil tinctures into the UK.
The change of policy is a temporary measure to enable patients that have been using the oils made from Dutch based manufacturer Bedrocan’s product, to continue to receive their medicine. This necessary move has been as a consequence of the shutting of borders and cancellation of transport links.
In consumer markets, demand appears to have remained relatively stable, particularly for online purchases. Some retailers are seeing significant growth in custom, as consumers stockpile products and use time at home to explore the CBD retail market.
Restricted movement means that many consumers are switching to online purchases and data seems to suggest that medical and health & wellness products remain a priority among rapidly changing consumer behaviours.
Alphagreen, Europe’s largest consumer marketplace for certified cannabis (CBD, cannabidiol) products, has reported a surge in consumer demand for health and wellbeing products, which has seen a four-fold rise in visitors to alphagreen.com, during March, and a 30% increase in sales.
Elsewhere, other online retailers are also reporting an increase in consumer interest and sales volumes since the beginning of March. As people consider new ways and means to strengthen their immune systems, in response to the COVID-19 pandemic, CBD products are proving popular across Europe and North America.
Similarly, many consumers are switching to CBD for its perceived benefits in managing anxiety and sleep problems.
While some sectors, of the CBD industry, are seeing a reduction in short-term demand, particularly for products aimed at the sports & fitness markets, other areas like skin-care and wellness markets could see increased activity, as consumers prioritise health purchases over other items.
During March eCommerce marketing platform Yotpo, released its Consumers & Commerce 2020 Coronavirus Trends Report, showcasing findings from a global survey highlighting changing online consumer behaviour.
Among the many emerging trends, that are going hand-in-hand with this unprecedented global event, these are some of the main changes in consumer behaviour that marketers for CBD brands should be aware of:
Direct to Consumer (D2C) brands and retailers have an opportunity to grow consumer engagement during this time, and the data suggests that those brands that are able to support existing, or build new, loyal customer bases stand to benefit in the longer-term.
Brands are also innovating in terms of delivery and customer engagement and ultimately these endeavours are likely to establish more robust brands in the future.
The recovery time for any loss in consumer markets is also likely to be considerably less than other industries.
The International Monetary Fund (IMF), have predicted that many global regions will officially fall into recession at the end of the second quarter of 2020. There is already strong indication of this from Q1 economic data. Unemployment has hit record highs in the United States, direct result of the virus, and many countries are seeing significant proportions of their workforce out of work. The length of the current COVID-19 outbreak will ultimately determine longer term impacts on economic climates. Current data suggests that global economies will be feeling the impact of the outbreak potentially for years to come. The Organisation for Economic Co-operation (OECD) has already confirmed that the economic shock is bigger than the 2018 financial crisis.
The effect of COVID-19 on businesses operating in the Hemp & CBD market has already been felt, despite demand remaining relatively stable at present. Staff and personnel availability, logistical problems and supply chain issues are all factors that businesses throughout the cannabinoid supply chain are experiencing. It is realistic to expect that we may see additional issues in the short-term, particularly with investment markets and access to growth funding currently stagnating.