This article covers how we approach researching and forecasting the US CBD market and the value it provides our clients.
Scenario Analysis
Why are there forecasts with and without federal regulations?
Given the FDA’s prolonged delay and recent relinquishing of its responsibility to regulate the US CBD market, Brightfield created two forecasts for the industry. The first assumes that Congress will pass legislation that regulates CBD and allow for its sale as a dietary supplement and food additive by 2024, most likely as part of the 2023 Farm Bill. The second assumes no such changes will occur during the forecast period.
The decision to forecast the CBD market for both scenarios helps prepare clients for what to expect if federal delays continue and for changes in the market that would occur upon Congressional regulation.
What do you mean by FDA regulations?
For the purposes of our CBD market sizing, federal regulation refers legislation that would formally allow for the sale of a variety of CBD products, most notably as dietary supplements and food additives. Such changes would allow CBD goods to be sold alongside traditional nutritional supplements and functional food and beverage products. For more details on regulatory matters and what is likely to be included in Congressional legislation, please see the Regulatory Update section of the CBD Introduction & Overview.
When does this scenario analysis start to affect the data?
Both market sizing scenarios – with and without federal regulation – are identical through the end of 2022. Brightfield anticipates that the earliest time that Congress would pass a regulatory framework would be in 2023 as part of the 2023 Farm Bill, taking effect in 2024. The forecasts start to diverge in late 2023, with sales growing in the with regulation scenario as investment and distribution pick up in anticipation of the federal reforms taking effect.
Data Sources
Research Sources
The CBD market is very fragmented, and there is no one source that will accurately capture past sales and future sales forecasts. As with all our research, we use as many sources as possible, allowing our researchers to build strong models for accurate industry forecasting.
Trade Interviews
We conduct extensive in-depth interviews with industry stakeholders such as:
- CBD brands and manufacturers
- Cannabis companies with CBD lines
- CPG or other mainstream manufacturers
- Industry associations
- Hemp cultivators, distributors, and processors
- Local, state, and international government agencies
Data Partnership Network
We have data-sharing arrangements with top CBD brands, and our network is constantly growing.
Retailer Interviews
We conduct interviews and quick-hit surveys with a range of retailers to understand retail penetration of CBD, the fastest-growing retail channels, product assortment on the shelf, and retailer preferences. Types of retailers include:
- Pharmacies & pet stores
- Smoke shops & dispensaries
- Convenience stores & natural food stores
- Gyms, spas, and more
Desk Research
Our Insights team of researchers diligently reviews published financial documents; earnings calls; government data; trade association data; trade and consumer press; website traffic data; and social media posts to inform our holistic analysis of the US CBD market.
Store Checks
Our Insights team regularly visits retail stores and online storefronts to assess pricing, product assortment, new product development, and evolving marketing strategies.
Consumer Insights + Social Listening
Our Insights team factors in quarterly and monthly data from our consumer insights and social listening portals to help paint a more complete picture of the US CBD market and the consumer preferences influencing its development.
Forecast Methodology
What products are included in your CBD forecasts?
Brightfield’s CBD Market Size includes products that feature hemp-derived CBD while maintaining less than 0.3% THC in compliance with federal law. Goods that combine CBD with other cannabinoids, such as a CBG + CBD tincture, are included if CBD is one of the main active ingredients and is not simply present in trace amounts. Products synthesized from CBD or created by solely extracting other cannabinoids, such as delta-8 THC goods or CBN isolate, are not included in this market size. Though other cannabinoids may be present, CBD must be a featured element of the product.
How do you use all this research?
All of these inputs are pulled together and triangulated by our team of analysts and data scientists, and we are constantly adding more data and inputs to analyses. Without official sales data available from any government body, we integrate all the previously mentioned data sources in our forecasting to arrive at estimates for future and historical years that we believe are consistent with the industry's trajectory. All our data is designed to be cross-comparable, and we check against multiple sources to validate our forecasts and brand shares as best as possible. Sources utilized include brand data, government information, and consumer insights data. We are also able to cross-compare on key data inputs (users as a % of the population, penetration by retail channel, etc.).
How accurate have your projections been in the past?
There is no official government data regarding CBD sales, so it is impossible to give a figure regarding projection accuracy. However, since we utilize as many sources as possible to aid in our projections, we have anecdotally found that our CBD market forecasts have been much more accurate than those done by others. We have found that the projections are directionally accurate, allowing you to make sound business decisions. With that said, we are continuously improving our processes to ensure that the data we deliver is reliable and accurate.
Why do your revenue numbers sometimes differ from company financials for your brand shares?
Sometimes the revenue numbers reported in company financials do not account for retail mark-ups in brick-and-mortar outlets, but our brand shares do since the figures represent the total retail values purchased by consumers of any given brand. We review financials, earnings calls, and speak with companies to understand their online and brick-and-mortar splits, as well as the retail markups we utilize in order to calculate final retail sales figures.
My brand is included in your category shares, but I have not shared my data with you. How are you estimating my sales in each category?
We have a strong data-sharing network with top brands in the industry that is a great help in building our brand shares. In order to calculate brand shares for which we have limited information on quarter-over-quarter changes, Brightfield uses statistical methods for time-series data to create accurate forecasts from the market values our experts have obtained or derived. This type of market data lends itself well to the ARIMA (autoregressive integrated moving average) model, which calculates a future value based on the values and movements of the previous historical values. These models can forecast two quarters into the future with a high degree of accuracy. Our market experts use these forecasts as a baseline for adjustments based on additional external factors to provide a highly refined forecast.
When adjusting and deriving initial values for newly added brands, Brightfield draws on a variety of desk research sources. Our analysts continuously and thoroughly review new information and data points for all brands included in our shares as they stand in the market both today and historically. We conduct extensive research using publicly available information on the brand, including a review of product portfolios and new product innovations, social media presence, and representation in a wide range of retail channels and distribution points. We also consider each brand in the context of the broader market and competitive landscape, seeking to understand the brand’s performance against competitors with similar positioning, portfolio mix, and retail distribution.
We would be happy to work with you to further refine our numbers to ensure that your brand is accurately represented in our data. Please contact your account manager to receive information on how to submit financials to our analysts and/or to set up a call with our Insights team.
How do you work with brands to get their sales data?
In addition to reviewing publicly available financials, we work directly with brands to understand total sales revenue, average retailer markups, percentage of online vs brick-and-mortar sales, and their product category breakdowns by revenue. In many instances, we also follow-up with in-depth interviews to understand brand nuances, general performance trends, and future outlooks to help us create the most realistic view possible of the US CBD market.