Pet CBD Industry Outlook
The market for hemp and CBD products is at an all-time high. More humans and their pets are consuming hemp derived products than ever before. The overall global market for all hemp products (lubricants, textile and personal goods) continues to grow at an average of 15.8% per year.
Pet hemp/CBD is still very much a fragmented, cottage industry with a handful of emerging brands in the marketplace. Hemp and CBD animal supplement sales are difficult to accurately calculate considering the myriad of off-brands widely available at Amazon and other on and offline retailers. Estimated annual US sales of hemp derived animal supplements is $80,000,000. This sub-category has grown 35% every year due to increased awareness for hemp and CBD products and increased retailer adoption.
Pet ownership is at an all-time high and will hyper accelerate 2021+ growth in the category. Pet hemp and CBD sales are growing at an even faster pace than the human side of the industry.
Demographics of a pet hemp/CBD buyer (online)
- Likely has a pet with medical condition(s)
- Likely female (67% female - based on the past 500 hempwell.com customers)
- Prefers organic products
- Looking to replace or supplement current medication(s)
- Multi pet household
Legality of hemp in the United States
This month (January 2021), the USDA finalized federal regulations governing US hemp production. The final rules become effective on March 22, 2021.
Idaho, South Dakota and Mississippi are the only three states where growing hemp is illegal despite the federal government legalizing hemp in the 2018 farm bill. Federal law, however, does not restrict the inter-state travel of hemp between these states; ie. a truck can travel through Idaho carrying hemp to another state. Federal law acknowledges state’s rights to permit or deny hemp cultivation.
Most states do allow for the cultivation and sale of hemp products and some have implemented tax/regulation schemes. Most states are taking a common sense approach to regulations and will fully adopt federal regulations outlined by the USDA. A handful of states are more difficult to navigate.
Challenges to the industry
Increased insurance requirements for hemp manufacturers and hemp farmers is a challenge to industry participants. There are very few hemp product companies able to secure A better rated liability and recall coverage that larger retailers may require. Insurance rates are 30-100% higher for the hemp industry compared with similar supplement products despite never killing one dog, cat or human. Farmers are often unable to find affordable hemp crop insurance. Many focus on other crop production due to the barriers of securing adequate coverage.
The licensed acreage of hemp in the United States (34 states) in 2020 decreased 9% from the 511,442 total licensed acres of hemp in 2019. With the current demand for soybean and other crops; increased state licensing fees; requirements for product testing; inspection fees; and hemp crop insurance costs farmers will likely plant even less hemp in 2021 despite increased demands.
Without a regulated framework at the Federal level, and after adequate time to adopt at individual state levels, retailers, growers, manufacturers and processors face increased regulatory requirements in the interim. Imagine having your product requiring licensure, reporting and taxation in each individual state. Navigating the patchwork of varying state hemp laws will continue to be a challenge for hemp companies seeking a national reach.
The possibility of increased credit card processing rates exists. Several retailers have experienced increased processing rates after the addition of hemp/CBD products within their stores. Online sales of CBD pose greater scrutiny and additional merchant processing fees. Some retailers have mandated that the purchase of CBD be made in person with physical swipe.
The promotion and advertising of hemp derived supplements like CBD on Google Shopping, Google Ads and social media platforms is expressly prohibited. It is wise for retailers to not add CBD products to their Google Shopping feeds until they are comfortable with the process or risk interruptions with their ad account(s). Promoting restricted products on Google could potentially lead to the shutdown of your ad account.
Retailers need to ensure the products they sell do not violate FDA guidelines or state level AAFCO regulations. Some manufacturers of hemp products make egregious drug claims “cure, miracle, healing’ and, more often, food claims that expose retailers to stop sale orders from AAFCO. The industry trend of top pet retailers is to source hemp pet products only from manufacturers who have attained certification and membership with the National Animal Supplement Council to help ensure their store offers the most compliant products.
Products containing CBD are not sold through many large retailers and within food drug mass markets. Amazon, Chewy.com and Walmart, as example, do not sell products containing any levels of cannabidiol (CBD). You can find products with hemp seed extracts for sale at these retailers.
This policy exists mainly because of pharmacy license concerns. A synthetic version of CBD has received drug approval from the FDA and is available for sale at these locations. Retailers with pharmacy licenses have opted not to sell plant based CBD products on either the human and pet side..
This restriction has been a boon for retailers without pharmacy licenses, primarily independent pet specialty stores, increasing their sales of CBD.
Big box retailers and Amazon have been selling more hemp seed products than ever. This trend has increased consumer awareness of hemp beyond the early adopters (20%) of hemp based supplements. Retailers and consumers will continue to embrace the benefits of hemp’s seed and its flower (CBD) as an alternative to supporting their pet’s health. More informed buyers at the store level, increased regulations and industry hurdles has led us to a more transparent marketplace with better quality sourced products.
More educated consumers are quickly moving past the research phase and starting to focus on brand awareness.
Ryan Richmond, Founder and CEO
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