The last two years haven’t been great for the CBD industry. The pandemic cratered in-store sales of CBD. Meanwhile, by choosing not to regulate CBD, the FDA left it in a legal gray area, limiting where it can be sold. If you need evidence of the industry’s decline, just look at Charlotte’s Web, the largest CBD company. In mid-2019, the company’s stock price was flying high at nearly $22. Since then, it’s fallen to just over $1 — a 95% decline. I believe there’s a way out of this mess, but most companies aren’t prepared, or willing, to see it. Let’s revisit the history of the industry to see why. In 2014, the federal farm bill passed, and the hemp industry was reborn. Positive feedback from consumers helped CBD quickly become a craze. It was a product that could help a lot of people and offer an effective, natural alternative to pharmaceutical drugs for a variety of conditions. Investors jumped in—betting on large industry growth—and the largest companies quickly went public (which creates the expectation of more growth). These companies ran the traditional CPG playbook, adding CBD to dog treats, seltzer and everything else under the sun. They focused on selling more to the consumer, not adding value. Thanks to declining sales, large companies are burning cash and goodwill with their investors. They’re banking on a federal bailout: that the FDA will formally regulate CBD, thereby allowing them to peddle their premium products into larger retail channels.
Benzinga Staff Writer, The Fresh Toast, 04/04/2022 10:00:00