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Starting a Business | Data-Driven Reports

3 Reasons CBD Will Overtake THC in the Legal Cannabis Market

Valerie D’Orazio

WRITTEN BY: Valerie D’Orazio

Published August 12, 2020

Valerie has more than 10 years of experience writing about business, pop-culture, and the media. Her expertise is featured throughout Fit Small Business’s listicle and statistics content.

The $13.6 billion legalized cannabis industry is booming; it’s projected to grow to a whopping $85 billion in sales in 2030. But not all cannabis products are the same.

There are two major types cannabis-derived products:

  1. THC-based: Made with tetrahydrocannabinol, the primary psychoactive component of cannabis. THC gives the user a “high,” and is far more regulated. Marijuana is a high-THC variety of the cannabis plant.
  2. CBD-based: Made with cannabidiol, which is not psychoactive, and mostly medicinal. CBD generally does not give the user a “high,” so it’s more mainstream. While it can be extracted from marijuana, most common CBD products are instead derived from hemp (cannabis plants containing less than 0.3% THC).
  • THC-based products have been on the legal cannabis market since 1996, with California’s legalization of medical marijuana.
  • CBD-based products only really took off in 2018, when the 2018 Farm Bill greatly expanded the legalized uses of hemp.
  • US CBD sales are forecast to reach $20 billion by 2024, more than 10 times the $1.9 billion they generated in 2018.

Will sales of CBD products surpass marijuana and other high-THC items in the marketplace within the next five years? We think so, and here are three reasons why.

1. CBD Is Easier to Regulate Than THC

CBD products are easier to legalize and regulate than those containing THC because CBD isn’t psychotropic. Once a product is approved by a regulatory agency like the U.S. Department of Agriculture or the Food & Drug Administration, it’s easier to sell.

  • After the pending FDA approval of the CBD-based epilepsy treatment drug Epidiolex hit the news in March 2018, the stock price of its producer GW Pharmaceuticals soared 36% within two months.
  • The 2018 Farm Bill legalized the regulated production of hemp—defined by the USDA as a cannabis plant containing less than 0.3% of THC, which many of the most common CBD products such as gummies and oils qualify for.
  • Growth for the CBD industry itself following the passage of the 2018 Farm Bill was projected to increase 562% by 2019.


As of this writing, Epidiolex is the only officially FDA-approved CBD product available—even though around 11 states currently allow CBD in food, and another 16 allow it with restrictions. There’s such a “Wild West” situation in the market, as illustrated in the cannabis legalization map of the US below, that companies are hesitant to expand and promote their products, for fear they will run afoul of a particular state’s regulations.

Cannabis Legality Status By State

But an amendment to the Federal Food, Drug, and Cosmetic Act proposed at the beginning of 2020 would define CBD as a dietary supplement, paving the way to allowing it in food products. Movement on the amendment is currently stalled because of the pandemic, but if it eventually passes it could reshape the marketplace.

2. Growing CBD Niches: Edibles, Skin Care, Pet Products

Many are familiar with inhaling cannabis, but there is increasing consumer interest in CBD-infused edibles, skin care products, and pet supplies. Though most of these products can be made with THC or CBD, the relaxed regulations on the latter make them ideal to stock in supermarkets and other mainstream outlets.

  • More than half the respondents in a 2019 Ipsos poll indicated that they were likely to consume CBD in food.
  • Analysts have predicted that the CBD edibles market might reach as much as $22 billion by 2022, with gummies in particular selling $6.94 billion globally by 2025.
  • The global CBD skin care market is projected to achieve $959 million by 2024, surpassing its 2018 value by 35%.
  • Market growth of CBD products for pets might top $1.7 billion by 2025, which may not be surprising considering an estimated 74% of CBD buyers have pets.

Cannabis edibles in general have much higher profit margins than smokable products. Hemp-derived products are an easier sell to the mainstream market than those derived from marijuana—they promote wellness, but not getting high. As the chart below shows, it is projected that sales of non-psychoactive hemp-derived CBD products will nearly double those derived from marijuana (which contain significant amounts of THC) by 2022.

Chart comparing Hemp-Derived and Marijuana-Derives CBD Sales in the US

 

3. Cultural & Marketing Differences Give CBD the Edge

Cannabis comes with cultural baggage—until recently, it’s been countercultural, associated with illegality even as decriminalization has spread. Hemp-derived CBD products are a different story. They lack the amount of THC needed to produce a high, but their advantage is in their mass-market legitimacy.

In the chart below, more people consistently cite health benefits such as controlling inflammation, seizures, anxiety, and pain as reasons they turned to CBD rather than THC.

Infographic Comparing Desired Effects When Using THC vs CBD

And a look at the demographics of CBD vs THC users reveals perhaps one of the most vital reasons for the projected ascendance of the former: the female consumer.

  • More women (55%) prefer CBD than men do (49%).
  • Women account for 85% of all consumer purchases, as well as a whopping 93% of over-the-counter medication purchases.
  • It is estimated that as many as 75% of CBD brands have female founders or general managers.

According to research, If CBD companies continue to court the female market, the products may indeed have an excellent shot at surpassing THC sales.

A Note on Blended THC/CBD Products: ‘The Entourage Effect’

In addition to tetrahydrocannabinol (THC) and cannabidiol (CBD), there are other substances derived from cannabis known as terpenoids or terpenes. Some researchers believe that terpenoids can temper THC’s psychoactive effects. Moreover, they theorize an “entourage effect” regarding various blends of THC, CBD, and terpenes, in which the efficacy of these hybrid compounds is greater, with less intense side effects, than “pure” varieties.

Could these cannabis blends be the “wild card” that changes everything, combining the best of both the worlds of CBD and THC, as well as a variety of terpenes?

At the moment, the validity of the entourage effect is still being debated. However, the curious can purchase “sampler packs” from companies like Care By Design Hemp with products containing different ratios.

The Bottom Line

Legal cannabis-derived products are here to stay. But what will come to dominate the market: THC, or the considerably more domesticated CBD? Sometimes a mainstream hit comes from an edgy origin.

Coca-Cola, for instance, was originally sold in the late 1800s as a type of “medicinal” beverage, and had quite a bit of cocaine in it. The mainstreaming of home video, as well as a number of advancements in the technology, partially owes its success to the adult movie market. Will cannabis products, and CBD in particular, have a similar journey to the mainstream? We think so.

About the Author

Valerie D’Orazio

Find Valerie OnLinkedIn

Valerie D’Orazio

Valerie D’Orazio is a staff writer at Fit Small Business specializing in business trends. Before joining the team, she worked as an editor and blogger at MTV.com. She has also written articles for various websites on topics such as human resources, artificial intelligence, biometrics, employment law, and personal branding. She has been interviewed by such outlets as MSNBC, Bloomberg, Reuters, and CTV News.

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