CBD competition heats up as celebrity brands like Martha Stewart brand gain brand awareness

Summary

New Jersey has legalized marijuana, allowing residents to possess up to six ounces without legal consequence. Despite the delay in legal sales, the state's move is a significant step in the northeast cannabis market. Meanwhile, CBD products, like Canopy Growth's Martha Stewart line, are booming, with Martha Stewart's brand outselling 94% of all CBD brands in the US, just four months post-launch. The CBD market, driven by e-commerce and digital marketing, is expected to reach $17 billion by 2025, while the broader U.S. cannabis market is projected to hit $45 billion.

Takeaways

• 📜 New Jersey has legalized marijuana, with Governor Phil Murphy signing laws allowing residents to possess up to six ounces without legal consequence.
• 🌿 Legal sales and licensing for marijuana in New Jersey are still in progress, indicating a gradual approach to full implementation.
• 🔥 The CBD market continues to thrive, with Canopy Growth's Martha Stewart line of CBD products outselling 94% of all CBD brands in the US just four months post-launch.
• 🎯 A Brightfield Group study showed that 15% of CBD users were aware of Martha Stewart's CBD brand and 15.4% for CBD by Playboy, highlighting the power of celebrity endorsements.
• 💡 Brands are focusing on e-commerce and digital marketing as more consumers shift to online CBD purchases, with a significant increase from 22% in Q4 2019 to over 52%.
• 📉 Despite the CBD market's growth, some established players like CV Sciences have seen a drop in share value, suggesting market volatility and the need for strategic adaptation.
• 🛒 The importance of converting brand awareness into purchasing intent and customer loyalty is emphasized, as not all brands with celebrity endorsements achieve the same success.
• 🏆 Quality is key for CBD brands to retain customers and create a competitive edge, with some brands attracting higher-value consumers to boost their market position.
• 📈 The US cannabis market is expected to reach $45 billion by 2025, showing strong growth potential, while the CBD market is projected to hit $17 billion by the same year.
• 🚫 Regulatory challenges, such as the FDA's guidance, could influence the trajectory of the CBD market, with the potential for another growth surge expected in 2022.

Q & A

What significant action did New Jersey take regarding marijuana legalization?

New Jersey Governor Phil Murphy signed laws that provided a legal framework to legalize marijuana, allowing residents to possess up to six ounces without legal consequence.

What is the current status of legal sales and licensing for marijuana in New Jersey?

Legal sales and licensing for marijuana in New Jersey will take some time to work out, as the state is still in the process of establishing the necessary infrastructure.

How has the celebrity endorsement affected the CBD market, particularly with the launch of Martha Stewart's CBD line?

Celebrity endorsements, such as Martha Stewart's, have significantly boosted brand awareness in the CBD market. Martha Stewart's CBD brand is outselling 94% of all CBD brands in the US just four months after its launch.

What percentage of CBD users are aware of Martha Stewart's brand according to a recent study?

15 percent of CBD users are aware of Martha Stewart's brand, as found in a recent Q4 study that surveyed more than 5000 CBD users.

How has the COVID-19 pandemic impacted the CBD industry?

The pandemic hit the CBD industry hard, particularly in Q2, with brands that relied heavily on brick and mortar channels struggling to promote and sell their products.

What shift in consumer behavior has been observed in the CBD market due to the pandemic?

There has been a dramatic shift towards online purchasing, with more than 52 percent of consumers now buying CBD online, up from only 22 percent in Q4 2019.

How have established CBD brands like Charlotte's Web responded to the challenges posed by the pandemic?

Charlotte's Web has been able to recover by focusing more heavily on e-commerce performance and digital marketing, adapting to the new consumer behavior of purchasing CBD online.

What strategies have been effective for Canopy Growth in leveraging celebrity endorsements and e-commerce?

Canopy Growth has leveraged celebrity endorsements, such as Martha Stewart, to increase brand awareness and drive consumers to their e-commerce platform, benefiting their entire portfolio of brands.

What is the importance of repurchase rates in determining the success of CBD brands?

Repurchase rates are crucial in determining the success of CBD brands as they indicate customer loyalty and the ability to retain customers, which is key in the competitive CBD market.

What are the projected market values for the U.S. cannabis and CBD markets by 2025?

The U.S. cannabis market is projected to hit $45 billion by 2025, while the CBD market is expected to reach approximately $17 billion by the same year.

How does the expected FDA guidance in 2021 potentially impact the CBD market?

The expected FDA guidance in 2021 is anticipated to lead to another year of rapid growth for the CBD market in 2022, as it would make CBD products more widely available across the country.

Outlines

00:00

🌿 New Jersey Legalizes Marijuana and CBD Market Insights

New Jersey has legalized marijuana, allowing residents to possess up to six ounces without legal repercussions. While legal sales and licensing are still being established, this move is significant for the northeastern U.S. In the CBD market, Canopy Growth's Martha Stewart line has seen remarkable success, outselling 94% of all CBD brands in the U.S. within four months of its launch. Celebrity endorsements are proving effective for brand awareness, but converting this awareness into purchasing power and loyalty remains a challenge. The COVID-19 pandemic has impacted the industry, with a shift towards e-commerce as the primary sales channel, increasing from 22% to 52% of consumers purchasing CBD online from Q4 2019 to the present.

05:02

📊 CBD Market Dynamics and Future Projections

Despite celebrity endorsements like Martha Stewart's, not all CBD brands experience the same success. The CBD market is highly competitive, with quality and consumer trust being key to retaining customers. Established brands have a higher value consumer base, which helps maintain their market position. The U.S. cannabis market is expected to reach $45 billion by 2025, showing consistent growth with incremental legalization across states. In contrast, the CBD market, which has seen rapid growth, is expected to reach $17 billion by 2025. The addition of FDA guidance and the potential for more states to legalize marijuana could lead to another significant growth year for CBD in 2022.

Keywords

💡Cannabis Legalization

Cannabis legalization refers to the process of making the use, possession, and sale of cannabis legally permissible. In the context of the video, New Jersey's initiative to legalize marijuana is highlighted, showing a significant step in the broader movement towards cannabis legalization in the United States.

💡New Jersey

New Jersey is a state in the northeastern U.S. where, as mentioned in the script, voters have overwhelmingly approved the legalization of marijuana. This event is a milestone in the region's approach to cannabis policy and is indicative of a growing trend towards legalization.

💡Psychoactive Compound

A psychoactive compound is a chemical substance that affects mental processes such as mood, consciousness, or perception. The script discusses THC, the primary psychoactive compound in marijuana, which is now legal in New Jersey for adult use.

💡CBD

CBD, or cannabidiol, is a non-psychoactive compound found in cannabis known for its potential therapeutic benefits without causing a 'high'. The script notes the continued popularity and business surrounding CBD products, such as those endorsed by Martha Stewart.

💡Canopy Growth

Canopy Growth is a company mentioned in the script that has launched a line of CBD products in collaboration with Martha Stewart. It exemplifies the business opportunities arising from the growing acceptance and legalization of cannabis-derived products.

💡Celebrity Endorsements

Celebrity endorsements refer to the practice where famous individuals promote products or services to leverage their popularity and influence consumer behavior. The script highlights how Martha Stewart's endorsement has significantly boosted the awareness and sales of CBD products.

💡Brand Awareness

Brand awareness is the degree to which a potential consumer recognizes a brand. The script discusses how celebrity endorsements, like Martha Stewart's, can rapidly increase brand awareness in the crowded CBD market.

💡E-commerce

E-commerce involves buying and selling goods or services using the internet, and it has become crucial for CBD companies during the pandemic. The script indicates a significant shift towards online purchases of CBD, illustrating the industry's adaptation to new consumer behaviors.

💡Regulatory Stall

A regulatory stall refers to a slowdown or pause in the development of regulations that govern a particular industry. The script suggests that a stall in CBD regulation may have contributed to a slowdown in the growth of some CBD companies.

💡Market Expectations

Market expectations pertain to predictions about the future direction or performance of a market. The script provides insights into the projected growth of the U.S. cannabis market, with expectations of reaching $45 billion by 2025, indicating strong and sustainable growth.

💡Hockey Stick Growth

Hockey stick growth describes a phenomenon where a business or industry experiences a sudden, sharp increase in growth after a period of slow or steady performance. The script anticipates such growth for the CBD market in 2022, following anticipated FDA guidance.

Highlights

New Jersey has legalized marijuana, with Governor Phil Murphy signing laws providing a legal framework for its use.

New Jersey residents can now possess up to six ounces of marijuana without legal consequence.

Legal sales and licensing for marijuana in New Jersey are still being worked out.

Celebrity endorsements, such as Martha Stewart's, are driving brand awareness in the CBD market.

Martha Stewart's CBD brand is outselling 94% of all CBD brands in the US, just four months after launch.

15% of CBD users are aware of Martha Stewart's brand, and 15.4% are aware of CBD by Playboy.

Celebrity endorsements help grab consumer awareness but do not guarantee sales conversion.

The CBD market has seen a significant shift towards online purchasing, with over 52% of consumers buying CBD online.

Brands like CBDMD and Charlotte's Web have adapted to the pandemic by focusing on e-commerce and digital marketing.

Canopy Growth has leveraged Martha Stewart's brand to drive consumers to their e-commerce platform.

The CBD market is expected to hit $17 billion by 2025, smaller than the overall US cannabis market.

The US cannabis market is expected to reach $45 billion by 2025, with incremental growth from more states legalizing marijuana.

Quality and customer retention are key for CBD brands to create a competitive advantage.

The CBD market has experienced rapid growth, with regulatory shifts leading to a 'hockey stick' pattern of expansion.

The FDA is expected to provide more guidance on CBD in 2021, which could lead to another year of significant growth for the CBD market in 2022.

Transcripts

[Music]

well

in today's cannabis focus new jersey

finally made good on its ballot

initiative to legalize marijuana which

voters overwhelmingly approved last year

new jersey governor phil murphy signing

the laws that provided a legal framework

to move forward on that new jerseyans

can now possess up to six ounces of

marijuana without legal consequence

legal sales and licensing will take some

time to work out in that state

but it's a big step forward particularly

in the northeast

when it comes to legalizing the psycho

psychoactive compound in marijuana or

thc

the non-psychoactive compound of

cannabis though cbd

continues to be a big business with

canopy growth most recently celebrating

the explosive launch of its martha

stewart line of cbd products in the us

on the earnings call

the company noted that martha stewart's

brand is already outselling 94

of all cbd brands in the us just four

months after launch

according to their numbers so join us uh

now on all things cbd is the smartest

person i know that covers the space

uh brightfield group managing director

bethany gomez joins us once again

bethany thanks for taking the time i

mean you guys have

great data on which brands consumers

trust around this you fact check the

martha growth as well as

what playboy's ceo told us about a week

ago or so

on their cbd product my jaws hit the

floor and looking at their numbers

but cbd users actually know the playboy

brand so talk to me about what you're

seeing

sure so in a recent q4 study that we

surveyed more than 5000 cbd users we

found that already

15 percent of cbd users were aware of

martha stewart's brand

and a similar number um 15.4 percent for

cbd by playboy as well

so this is a really strong testament to

the ability of these brands to

leverage these strong celebrity

endorsements out of the gate to grab

awareness in that very crowded cbd space

so they're they're off to the races

there from an awareness standpoint which

is

is really great to see for the brand now

they still have a great deal of work

ahead of them

um in order to convert all of that

awareness into

um into purchasing and into loyalty but

those initial metrics are

are very strong there as well yep brand

awareness and then getting them to buy

it

is another thing purchase intent and

then getting them to buy it again is

also another thing

as well we're still we're showing we're

showing hemp

we're showing hemp fusion here too as

one of those new entrants they just

recently ipo'd i mean

their shares when they in that ipo uh it

was a dollar a piece

we've seen them now trade above three

dollars a share what's interesting

though is the cbd space

overall has not necessarily seen the

same boost

uh in some of those leaders charlotte's

web out there as well

uh when you look at it is that

potentially because there's been that

stall on the regulatory front where

people were expecting cbd to get added

to everything like we saw before

coffee what have you so where are we at

now in kind of that

i guess advancement of the overall cbd

market

yeah so it's been a very 2020 was a very

interesting year for cbd to say the

least right um

on the one side um the industry was hit

very hard by the pandemic um

particularly in q2

you know we saw you know brands that

were very heavy through the brick and

mortar channels

um really struggle to be able to

continue to promote their products and

get those

out to consumers um we also saw some

significant price drops that impacted

the industry so

charlotte's web for example was um you

know had been very very strong through

brick and mortar channels

and took a bit of a hit when the

pandemic hit

now what brands have been doing to be

able to

you know adjust to the new normal here

is really lean in on their ecommerce

performances

really lean in on digital marketing

today we see a more than

52 percent of consumers are now

purchasing cbd online

this is up from only 22 percent

in q4 2019 so that's a very dramatic

shift

um charlotte's web has been able to see

a bit of recovery from

focusing much more heavily on those

e-commerce uh

performance but brands like cbdmd and

that were very strong in e-commerce to

begin with

were able to pick up a great deal of um

of boost

from that switch to e-commerce canopy

for example

has um some pretty clever strategies

there to be able to leverage martha

stewart on brand awareness

drive consumers into their ecommerce

platform

and then their whole portfolio of brands

is able to benefit from that increased

awareness so

you know their first and free brand

which is one of their flagships was able

to see a boost

um you know in conversion um as a result

of more consumers coming to the site

because

of martha stewart so this is a a great

indication

um of how well the brands in the the

space have been able to pivot um and

focus much more heavily on e-commerce

as well well we've seen canopy stress on

the earnings call that they kind of

built on their brick and mortar rollout

too getting into some pretty important

stores with both those brands

but for me you know covering cannabis

not just on the marijuana side but also

the cbd side

we haven't necessarily seen this bounce

back from a lot of these cbd names and

my question

to you just to wrap things up would be

kind of those leaders who had

established

themselves in the space seem like it

seems like it's pretty easy all you need

to do is slap martha stewart or some

other big celebrity onto a cbd label all

of a sudden you're up there with the big

boys because you look at cv sciences

one of those companies we talked about

before that had been a leader in the

space

share's down 87 percent since april of

2019 they haven't necessarily seen that

bounce back so

talk to me about maybe protective moats

for some of these cbd players that had

been in the space

relative to new entrants like canopy

rolling out martha

yeah absolutely so you know the

celebrity endorsements can be helpful

for those awareness grabs but that

doesn't necessarily mean they're going

to be able to

convert through the funnel so martha

stewart is kind of the shining example

of the celebrity endorsements um

but most celebrities right now you'll

see in cbd

you know everything from dog the bounty

hunter endorsing cbd

to shaq and brett marvin you know you

name it there's

dozens and dozens and dozens of um

brands that are

endorsing um of celebrities sorry that

are endorsing cbd

that don't have the same level of

success of martha so

she is certainly a kind of crown jewel

of the celebrity endorsements because

she has so much equity and trust

um amongst consumers so it's not quite

that easily replicable

um what we see right now is it's

definitely very steep competition in

in the digital space very steep

competition amongst brands in the cbd

space overall

but really retaining those customers

comes down to quality

and many of the market leaders you know

have much higher value consumers

um you know that are able to um you know

to come back and back and back and boost

that um boost

that roi um and that value of um of each

consumer so brands like

you know green roads are um and

functional remedies are able to

gather more um high value consumers to

boost their overall

um performance and create a bit of a

moat there to help protect them

in that space so yeah we'll keep an eye

on those repurchase rates to really

figure out who's winning but lastly i

guess

and this is a tricky question because i

i assume that it might stem from the

timeline for when we're going to see

legalization of cannabis on a federal

level but when you think about the

growth of cbd versus

you know marijuana products here what

are your guys's market expectations for

that to come full circle as we see new

jersey now

start to get legal sales off the ground

hopefully by the end of the year

talk to me about which side of the

cannabis business

is worth watching absolutely

so at this juncture we are expecting the

um the u.s cannabis market to hit 45

billion dollars by 2025.

um so that's really strong kind of

consistent growth

um the u.s cannabis market even with

legalization

in place um increased access to

legalization in place that we expect

over the forecast period

is a matter of incremental growth more

states like new jersey

uh you know and in the future um you

know new york and other states like that

i'm adding on adult use markets piece by

piece by piece right um this

leads to that strong incremental growth

over time that is strong and sustainable

um the cbd market has been able to

experience a lot more of this

very rapid hockey stick growth right

where

you know when regulatory shifts come

into play um it's very

rapid to be able to push products you

know throughout the country

um in a very very quick turnaround so

you know with

the addition of more fda guidance um

that is expected in 2021

we would expect another hockey stick

growth year um you know in 2022

for cbd as those products become more

widely available but that market is

expected to hit

about 17 billion by 2025 so you know

smaller in nature

than um you know then the us cannabis

market if that gives you a beat on it

no for sure it does and still i have to

get used to seeing playboy up there as a

list

on our cbd companies but uh evan gomez

appreciate you joining us here

brightfield group managing director

thanks again