After years of falling prices, retail costs for
“There were some massive price cuts that took place during the (COVID-19) pandemic, and those look to be ending,” said Bethany Gomez, managing director at Brightfield Group.
Gomez compared the CBD market to that of the apparel industry, where steep and frequent discounting encourages consumers to avoid paying full price. Similarily, extensive markdowns on CBD products throughout 2020 “really trained consumers to hunt for discounts.”
So far this year, however, things are beginning to change. Brightfield reported that prices have remained steady through the first two quarters of 2022. While CBD prices at the wholesale level have remained low, increasing costs for manufacturers and retailers as inflation rises have put the brakes on price discounting for the first half of the year.
The stabilizing prices marketwide are not necessarily resulting in higher prices for consumers, however. Late last month, NuLeaf Naturals, a manufacturer of products containing CBD and other cannabinoids, announced that it was reducing prices across its product lines by an average of 38 percent.
“Price shouldn’t stand in the way of wellness. NuLeaf Naturals has been a leader in the CBD space for almost a decade now, and with this comes a great responsibility,” NuLeaf Naturals’ CEO Ian Kelly
And Bharat Ayyar, general manager of Sunsoil, a Vermont-based hemp cultivator and CBD products manufacturer, said that consumers may see more price drops as 2022 continues.
“I think price is going to continue to get compressed,” Ayyar told MJBiz Daily.
Dropping CBD Prices Affecting Financial Performance
The falling prices at the retail level seen over the last two years have had an impact on the financial performance of some CBD companies. On Tuesday, Colorado-based Charlotte’s Web reported a decline of 21.8 percent in net revenue and an operating loss of $7.9 million for the second quarter of this year, compared to a loss of $6 million for the same period in 2021.
“We use price promotions more than we should, and have had a subpar user experience on our site,” Charlotte’s Web CEO
But the company still sees plenty of opportunity in CBD. Charlotte’s Web COO Jared Stanley said that the firm is currently concentrating on the CBD sports products category, noting that Major League Baseball announced in June that it would permit sponsorship partnerships with CBD companies. Stanley characterized the move as “a landmark change for a professional sport” that could set a precedent followed by other leagues.
“This forward-thinking move by the oldest professional sports league in the U.S. signals the value of CBD to audiences across the nation,” said Stanley.
Brightfield Group’s report on the CBD market also noted other industry trends. CBD tinctures are the most popular product type, accounting for about 19.2 percent of sales, although gummies, beverages and other edible products are projected to gain market share. E-commerce platforms were the most popular way for consumers to buy CBD, bringing in 39.2 percent of sales while pharmacies rang up 19.5 percent of purchases, followed by specialty retailers with 10.7 percent of sales. Despite the third-place ranking, however, Gomez expects specialty CBD retailers to remain a significant segment of the industry.
“People are starting to go back into the world again, and some really do prefer to talk to someone about the products,” said Gomez.