09: Is the CBD wave over?
Once the buzz word on every industry insider's tongue, is the era of CBD over before it began?
If you’ve been paying attention to the beauty industry, you’ll know that for the past couple of years, it’s been impossible to escape the momentum of CBD-products. CBD (cannabidiol) is the non-psychoactive active derived from the hemp plant, most famously an essential component of medical marijuana. At its height, investors almost seemed to add extra multiples to beauty brand valuations if there was a CBD component, and many expected that with further legislative and social acceptance, CBD would be a permanent mainstay category in beauty.
This week, Lord Jones, one of the most notable early success stories for CBD when they sold for $300M just four years ago, whose tagline is “World’s Finest CBD products,” just announced they were shuttering their US operations, as well as the full closure of their CBD-based beauty category.
It’s just the latest in a long line of bad news for CBD-based beauty brands, which includes the closure of WLDKAT, which initially launched as premium CBD-based skincare, before enduring a series of pivots that saw them land on being a mass-market clean CBD-free skincare brand, as well as reports of financial difficulty at leading CBD-wellness oriented retailer, Standard Dose, where many brands have discontinued their wholesale accounts citing reported non-payment of bills.
So how do we reconcile the overblown hype with the lackluster reality? Here’s our analysis:
Much of the CBD hype was built on potential rather than genuine sales data. Meaning, people “expected” the sales to reach into the hundred-billion-dollar category (despite sales now for the entire CBD wellness category reaching short of $1bn per year, many forecasts still believe it will somehow swell to $300bn within 4 years), with little actual data to justify it other than the primary premise that broader legalization would mean wider utilization, which isn’t necessarily true.
Market saturation. New entrants, and existing brands making a CBD-play with launching products and collections focused on this active have meant tons of overlap, and an over-abundance of choices for a customer who is still relatively new to this category. The influx makes it difficult for any brand to reach sustainability, much less profitability.
Communication. Whether it’s clean beauty, or CBD beauty, the beauty industry is suffering from a case of all flash and no substance in that platforms and retailers are quick to jump on trends without providing educational information to genuinely communicate the benefits, and purpose of new products. This is also partly due to the Tik Tok generation’s need to communicate memorable soundbites within seconds, leading to restrictions on the depth needed to convey meaningful product information.
It’s already seen as having jumped-the-shark. Let’s face it, we’re seeing CBD everywhere. Accessibility plus poor communications, means it’s difficult to differentiate quality, leading to dulled appeal and burnout.
Legal is not advancing as quickly as expected. CBD (and their corollary THC) based products are not reaching the protected legal status that many assumed back in 2017-2018, when laws were first becoming more accepting. There is still much in the air, and a ton of legal processes that make CBD-products confusing for both the brand and the end-customer.
Our verdict
While we don’t have a vested interest in how things pan out for CBD-based products, it aligns with our earlier expectations that at-best, CBD-based products would become a strong ingredient trend much like rosehip, or argan oil before that, where full retail campaigns and individualized attention may be bestowed, but ultimately they’d fall into the background when the next star ingredient story comes along.
Many of the CBD-based brands like Juna, and Saint Jane Beauty, have quietly pivoted into their broader categories within wellness and beauty, respectively, while moving away from using CBD in formulas, and embracing a brand message that is no longer centered on CBD.
We don’t think CBD is dead, but it won’t be the “next big thing.” Optimistically, we believe it’s going to be a widely accepted ingredient, but it won’t revolutionize beauty and wellness. Like argan oil, it will likely become an ingredient you’ll find on a deck of a product you pick up at Sephora, and think “cool I’m good with this ingredient.”
Disclaimer: Analysis, by nature, may be speculative, and should not be taken as fact. Views and opinion expressed are just that, and should not be taken as endorsements, nor advice (financial or otherwise).
Disclosures: Newsletter may use affiliate links. Underneath It All is run by Garçon’s Media, which is not a shareholder of any beauty company, nor vice versa.