PROHIBITION PARTNERS SPECIAL | UK CBD MARKET FACING SHAKE UP
Over the last two years, the UK CBD market has enjoyed low barriers to entry, a lack of regulatory standards and extremely high premiums for inconsistent high street products.
July 17th, 2020
However, consumers are advancing their knowledge of CBD and expecting a higher-grade product in return for their investment. With the introduction of real consumer brands on one side and budget brands on the other, along with the inevitable shift away from oils and higher standards across the board, is the age of high margins and poor quality products finally behind us?
A combination of consumer interest, changing legislation and the growing base of knowledge around CBD has led to a rapid increase in CBD sales over the last three years, with poor quality products retailing for a premium. However, the fall of raw material prices, as a result of the immense development of global hemp cultivation, is driving the commoditization of CBD, eroding producers margins and encouraging the emergence of new brand-led value propositions and value added products like CBD-infused food, drinks and cosmetics.
UK market beginning to diverge
Despite the UK being the largest CBD consumer market in Europe, the cultivation of hemp for both CBD and industrial use is comparatively small, estimated at under 1,000 hectares, compared to 50,000 hectares in the USor 18,000 hectares in France. While CBD in the UK is imported owing to restrictions on extraction, analysis from our proprietary price database shows that the evolution of retail prices in the country is more nuanced than what international wholesale prices may suggest.
High-demand categories, like oils and tinctures, have experienced a fall in price per item over the last 12 months. This reflects the strategy of a growing number of producers to cut their prices in order to compete and stand out in this increasingly crowded marketplace. At the same time, we’re observing an increase in the average price of value-added infused products, like edibles and topicals. This would appear to mark a fork in the road of the CBD market as producers are choosing between a pathway of price undercutting and commoditisation or taking steps toward the added value of brand development.
Quality and branding to shape new phase of development
The association of CBD with ‘expensive’ is nine percentage points higher among oil users than in all consumers, despite oils being the cheapest category in terms of cost per mg of CBD.
Conversely, consumers of more expensive formats in terms of CBD content, like topicals and food, aren’t as bothered by…For the full article and thanks please visit the Prohibition Partners website by clicking this link