With more than 25 million CBD consumers and 3,500 CBD companies in the market and continued double-digit market growth rates anticipated, there’s plenty of optimism about the cannabidiol industry. As well there should be.
There’s ample legroom in this economic vehicle, which is projected to reach $4.7 billion by year-end and anticipated to top $16.8 billion by 2025, according to the Brightfield Group, one of the leading experts on consumer and marketing trends in the CBD and Cannabis markets.
It is a space where many would-be entrepreneurs discover(ed) fertile room for growth.
It’s also a market where CBD brands with as little as seven to eight years of operational history, are considered the “grandfathers of the industry.” A number of those once fledgling operations are now generating hundreds of millions in annual revenue today.
Both CBD and Cannabis represent amazing markets, but the playing field is not as open as it used to be.
Many CMOs and digital marketing directors are telling us it is becoming harder to hit consistent home runs than it used to be.
That’s a clear indication of a more competitive landscape.
The next decade for the hemp-based CBD market has the potential to be a game-changer for the traditional CPG and retail industry, according to Nielsen.
There are already early signals that the CBD industry is beginning to align with global CPG brands and related consumer packaged goods company’s growth strategies. One sure sign of the shift is evident in the hiring trends of major CBD brands, which are hiring executives with CPG backgrounds. Mirroring the patterns of behemoth brands like P&G, which generated $67.7 billion in 2019 is wicked smart, particularly considering the fact that successive growth is a part of that company’s DNA.
Whether the market is up or down, fiercely competitive or not, the company builds sales, market share, and profit margins like nobody’s business.
Doubters need to look no further than the fact that despite seismic global market pressures, P&G still managed to end 2019 with its strongest organic sales growth in over a decade.
We understand how they did that because our founder helped build the $2 billion marketing company behind the world’s largest CPG brands.
That’s why we created this CBD Marketing Guide. We want to help companies take that knowledge of how these massive CPG brands were built and share the key points they used to get where they are today. We’ve put it all here to walk you through the most important things to understand when marketing your CBD brand.
With more and more players entering the market, it is imperative that CBD marketers differentiate themselves from their competitors.
Although there are 3,500 CBD companies in the market today, we expect that the market will consolidate and shrink to about 1,800 brands by year-end. Smaller players will drop. The mid-size and largest CBD brands will get bigger. And new market entrants will include large corporate entities, and well-heeled joint ventures.
If you are a CBD company, you’d likely prefer to be on the top side of that list.
Getting there requires more than just a good product. It requires an outstanding plan. And that plan must begin with an understanding of who you are.
It’s important to avoid attempting to be everything to everyone. Targeting is key.
The one-size-fits-all strategy doesn’t fit today’s market, according to the Brightfield Group’s Executive Director Bethany Gomez, who recommends that brands that use the same approach to reach grandma, a millennial and a pet mom rethink their strategy.
Today, CBD advertising requires personalization in order to be successful.
“Consumers are getting savvier… and see a lack of authenticity from across the room,” says Gomez.
Given High Yield Insight’s 2019 study results, which revealed that more than 40 percent of U.S. adults interested in CBD, there is plenty of room for growth —and some to spare.
Even the world’s biggest brands don’t sell to everyone. They sell to soccer moms, aspiring artists, and ailing adults.
As the market becomes more consumer-centric, CBD brands must focus on developing a deep understanding of the competitive landscape and consumer behavior to stay relevant and increase sales.
The time of free-wheeling growth is over, according to CBD Expo Tour founder Celeste Miranda.
“You know there’s going to be a bigger supply. Oversaturation? Absolutely. So many factors come in at that point then. Things like marketing, branding. Do you have all your checkpoints in place to be the one that survives?” said Miranda in a CBD Wire report.
As consumers learn more about CBD and approach products with more discerning tastes, CBD advertisers will need to start differentiating themselves from their competitors through smart branding and delivering relevant products.
Focus is more critical today than ever. CBD brands need to develop and hone customer personas and incorporate them into digital marketing in order to win.
Personas based on fictional characters help to characterize marketplace characteristics from the demographics, attitudes, and values of key consumer groups to their behavior.
Research shows when personas are present, marketing and advertising efforts are more concise and appealing, which translates to higher ROAS.
To learn more, see The Power of Personas: CBD brands must personalize to profit
There are many ways to stand out. They begin with understanding what’s important. The idea that a CBD brand can be “everything to everyone” does not play in a competitive environment where consumers expect brands to deliver content messaging and offers that are customized and relevant to them.
Brand messaging should distinguish your brand and distance it from competitors. Essentially, it needs to clearly communicate how your brand stands apart from the competition.
Offering high-quality CBD that is third-party tested, supported by a Certificate of Authenticity (COA), and labeled appropriately is merely a license to do business — that will soon become an industry mandate.
Brands must move beyond these expected attributes to remain competitive in the marketplace.
As consumers become more educated, they want to know what makes your CBD different and better than the rest.
For Charlotte’s Web, the largest CBD brand in the United States, that message is rooted in authenticity and education. The company founders’ mission – to make the life of just one little girl named Charlotte better – has expanded into its commitment to making hundreds of millions of other’s lives better, too. It’s Searching for Answers series is helping to support a more informed public, elevated understanding of product efficacy and related quality standards.
The series offers an honest look at CBD, making it easier for consumers to better understand the product they’ve likely heard helps people stay calm, recover from hitting the gym, and even eases everyday stressors, but don’t know as much as they’d like about – – from where it comes from and what it does to how it works. Here are the three episodes from their series.
EPISODE 1: What is CBD?
EPISODE 2: Searching for Answers: How to Use CBD.
A recent Gallup poll finds that nearly half of the American population believes CBD has medicinal benefits, but that does not mean CBD advertisers have unrestricted license to make unproven product claims.
Finding a proper fit for your CBD brand is critical to properly positioning it within existing advertising guidelines, which strictly prohibit against making ANY health claims associated with CBD.
Limited research suggests that CBD, as well as certain CBD blends containing other beneficial ingredients like Melatonin, can be effective against a number of ailments and does not have the side effects of its sister pharmaceuticals.
Although CBD means a great deal to a great many people, it does not mean the same thing to everyone.
Need states like pain, anxiety, and sleep are among the target marketing opportunities CBD brands can address, but they represent a fraction of opportunities to refine marketing focus in the CBD space today.
Despite a hostile regulatory environment and advertising hurdles, CBD advertisers have had success in focusing on CBD’s least controversial benefits: anxiety and stress relief.
Industry leaders like AdAge site some of the limitations:
Reddit blocks all CBD ads except for FDA-approved medications that happen to contain cannabidiol and comply with its pharmaceutical ad policy.
Snapchat allows CBD ads in certain geographies provided that the products contain no THC and that the ads are targeted to people 18 or older where required and don’t make health or therapeutic claims.
Twitter allows preauthorized cannabis advertisers to run ads in Canada if they are licensed by the country’s health department.
Google and Pinterest’s policies exclude all cannabis marketing, with the latter platform specifically banning “products made from CBD, hemp, or their derivatives.”
Facebook now allows ads for non-ingestible hemp products so long as they don’t contain CBD.
There are many digital advertising channels to legally market CBD efficacy with certain need states. Contact us to learn more.
The majority of CBD customers today, 76.3 percent, are Caucasian, according to the Brightfield Group, which reports that African Americans comprise 11.6 percent of the CBD market, followed by Hispanics, who represent 10.2 percent share of America’s CBD market.
Both the African American and Hispanic consumer market offer CBD brands new growth opportunities that are relatively free from competition among a core group of consumers more likely to have a strong preference for natural products.
These black and brown consumer markets are a good place for CBD advertisers to invest in, but CBD brands must be prepared to provide compelling evidence that their brand is worthy of support.
Inclusionary social media platforms, website posts, influencer, and vendor relationships, as well as employees should be evident before attempting to position a brand within these niche audiences that are inching closer to becoming mainstream markets with population growth.
High Yield Insights show CBD users are mostly “stressed out millennials” between the ages of 21 and 35 and baby boomers 56 and older.
Although these dominant audience groups are important to understand and market to, it’s important to understand that consumer demographics vary by market and fluctuate based upon a number of market conditions.
Despite the fact that Consumer Reports sites edibles as the preferred form of CBD among its CBD survey respondents nationally, it does not necessarily mean that edibles are in high demand by everyone, everywhere.
It’s an important distinction for marketers with tight budgets and high ROAS expectations.
Our statistics align with 2020 market insights from the Brightfield Group, which reports that 27 percent of CBD consumers use tinctures. A recent sister survey reports that 48 percent of its survey respondents use oils. The gap reflects the importance of trend monitoring, which allows brands to see real-time market shifts before investing valuable advertising dollars.
In states like California and Maine, our proprietary CBD trend tracking monitor reveals that CBD cream dominates millennial women’s online search activity.
For brands marketing CBD creams, this statistic, coupled with the kind of proprietary insights about CBD cream marketing activity and insights we provide, help elevate campaign targeting and related ROAS.
Whether CBD companies utilize our services, rely upon external or internal marketing support, we recommend they utilize many different variables before they invest in any marketing initiative.
Advertising and marketing initiatives should be product agnostic.
It’s our premise that CBD companies should look for the solution that best fits their target audience.
That’s an important distinction and one that is gaining traction today, as more brands enter the fight to gain market share.
One common characteristic of the world’s largest CPG brands is their thirst for knowledge. They “know what they don’t know,” and when they don’t know, they invest in efforts that test assumptions.
Our largest CBD brands are moving toward this model, which is particularly important in a dynamic marketplace that has no shortage of market variables.
COVID-19 has changed just about everything. Even the largest brands are learning more about consumers, particularly the shift toward interest in well-being.
The outbreak has pushed consumers out of their normal routines, according to Accenture, which is tracking new, and everlasting, coronavirus-related shifts in consumer behavior including:
Accenture research points to overwhelming consumer concern around health and well-being. It recommends brands heed this change and make it a priority to support healthy lifestyles for consumers, shoppers and employees.
The focus on health will become one of the biggest differentiators for brands. Having a “health strategy” will be paramount to success and a strategic differentiator in the foreseeable future.
Consumers are more mindful of what they’re buying, according to Accenture, which notes that consumers are shopping more consciously and buying more sustainable options.
There is no one-size-fits-all solution in the CBD marketplace.
It’s important that CBD brands start small, test assumptions, tweak and evaluate campaigns before investing major marketing dollars.
One and done is not a good business model, and it’s one we particularly counsel younger brands avoid.
We’ve seen a 52 percent increase in digital (CBD ad) activity from QTR 1 to QTR 2.
Coupled with seismic increases in time spent online — 50 percent to 70 percent according to early COVID-19 consumption reports published by Forbes — CBD companies can be certain of one thing: Consumers are better educated than ever.
It’s a perfect storm for brands: More consumers are online and getting more marketing messages than ever.
That signals opportunity for brands willing to invest in understanding the shifting needs of the marketplace.
The origin of those consumer studies we all love to track are in actual consumer behavior.
One campaign may reveal evidence that you hit the right customer at the wrong time.
A follow-up campaign might reveal additional evidence that you hit the right consumer at just the right time, but the message or offer was off.
Such an understanding should not signal a loss.
It takes seven to 10 points of contact to engage new consumers, according to industry experts who warn that its unrealistic to expect a single engagement to woo the loyalty of a consumer.
Hitting a consumer with multiple messages sends a clear signal that you are “in it, to win it,” and is more likely to keep your brand top-of-mind with a consumer, who will remember your CBD brand over a competitor’s brand they received only once.
CPG companies understand this and that’s why they reinvest in campaigns that maintain high connectivity with their core audience.
Research from the Consumer Brands Association (renamed from the Grocery Manufacturing Association) reveals that shoppers are still confused about what CBD is, its safety and efficacy.
Among respondents, 70 percent indicated they would have more confidence in the safety of CBD products if they were manufactured by large, well-known brands, that have more safety controls, employ higher manufacturing standards, would exercise caution and possess more manufacturing experience.
Trust is a major differentiator, and disrupter, in the pandemic marketplace. Consumers expect accountability from brands today and, according to numerous consumer experts, more than 70 percent of them are likely to pay slightly more for a brand they trust as a result of the pandemic.
The fact that the Consumer Brands Association represents the largest trade association of the largest branded food, beverage, and consumer product companies is a signal that CBD is clearly entering CPG’s fast lane.
Regardless of whether your CBD brand is moving toward more retail-centric or eCommerce models, education must remain the centerpiece of your marketing communications efforts. Why?
Only 21 percent of U.S. adults understand the meaning of “cannabinoids,” according to IRI’s Larry Levin and BDS Analytics’ Jessica Lucas, who see education as a key component of growing market share in the CBD space.
The majority of CBD industry growth is still largely dependent on word-of-mouth referrals.
Much of CBD’s popularity is built upon consumers sharing their experiences with others, according to New Frontier, a big data and global intelligence agency for the cannabis industry, which reports that 56 percent of CBD referrals are based on word-of-mouth.
Aside from referrals, the next most popular way that consumers glean information in regard to CBD is via the Internet, according to a National Institutes of Health report that cites 38 percent of people have garnered their CBD knowledge online.
With so little knowledge and trust in CBD, additional education is paramount to CBD company growth.
At CBD Marketing Hub, we recommend that education remain a centerpiece of CBD advertisers’ strategies.
SEO Optimization. Managing SEO optimization helps CBD advertisers maximize their position in organic searches, which contributes to low-cost customer acquisition.
Build Email List(s). Email lists represent an invaluable customer retention tool. We encourage CBD advertisers to employ creative consumer response strategies from monthly sweepstakes, desirable content specific to consumer interests and compelling notification tools.
Content marketing. Customer acquisition and retention are largely dependent on delivering share-worthy content. Consumers are more likely to remain brand loyal to CBD advertisers who educate and engage them. Keyword-rich blogs represent one of the best mechanisms to elevate organic search rankings and site traffic. They also represent a great way to build email registrations.
Social media. Every CBD brand should have an active Facebook, Instagram, Twitter, and Pinterest management plan, along with call-to-action strategies. If your brand is involved in wholesale, LinkedIn represents an excellent communication mechanism and is less restrictive than other platforms.
Be aware that every platform has its own policies in regard to CBD advertising. In the majority of cases, the policies are incredibly restrictive. It is incumbent upon the CBD advertiser to understand and adhere to them.
Public Relations. Sound public relations strategies can augment paid media campaigns and are worthy of investment, particularly if your brand has a new product launch, partnership, event or sponsorship announcement.
It’s perfectly acceptable for a brand to write and issue its own press releases, particularly for local market initiatives. We recommend CBD brands research and follow standard PR formats and invest time in understanding typical focus areas of new outlets/reporters before making contact.
We understand the importance of earned media. Whenever market-leading CBD companies are elevated, the industry wins.
That’s why CBD Marketing Hub provides complimentary PR and media placement services wherever and whenever it can.
Product messages should clearly align with your brand, making it very simple for consumers to see why your brand is better than other competitive brands in market. The following elements are central to any CBD brand message:
Core Values. CBD advertisers need to find a way to separate their brand from others in the marketplace. Is your brand committed to sustainability? If so, communicate how sustainability is represented throughout your organization and the community it serves.
If your brand is the most affordable in the marketplace, make sure that you address quality and other factors, too.
Does your brand help with pain? If so, make sure that your brand message includes statements and imagery that mirror that focus and stay within published FDA advertising guidelines.
CBD leaders may want to take note of Marie Claire’s launch of the Beauty Drawer (Aug, 3), which will award its first 5,000 members with free samples of anti-aging cream from its launch partner, beauty brand StriVectin, according to a report in DigiDay that notes:
Free sampling — an age-old marketing tactic — has been decimated by store closures and lockdown mandates from coronavirus. And there is no doubt sampling works:
Beauty samples are the third-largest driver of full-size product purchases, according to market research firm Euromonitor International.
“Working in skincare, samples are the number-one way to get people into a product,” says luxury consultant Livia Stefanini., pointing to a study from 2015 showing that free sampling was a top-five contributing factor for buying skincare products for over 30% of consumers.
The secret of these campaigns is personalization. Targeting CBD products to specific need states pre-selected by members when they sign up for the service provides invaluable information to marketers, who can not only deliver products that meet specific customer needs, but highly-refined messaging that is appropriate for each consumer segment.
A number of CBD brands are moving their sampling to cost-effective digital offers, which have the added bonus of populating email lists.
CBD-infused skincare and beauty products is expected to reach a large enough consumer audience to become a $395 million market in 2020 – making up 8% of total CBD sales, according to the Brightfield Group, which forecasts the category will grow to a $2.1 billion market by 2025, comprising a 5% share of total CBD sales.
Consumer behavior changed during the Great Recession, making consumers more value-oriented than ever. Coupon use shot up 11 percent, from 64 percent in 2007 to 75 percent over the two-year recovery period (2008 – 2009).
Our proprietary reports align with an external study from Valassis, which reports that nearly half of all shoppers are planning their shopping around coupons and discounts.
The shift has had a profound impact on consumer behavior and investments across all platforms, but most particularly, direct mail.
Thirty-seven percent of consumers say they are more excited to receive mail today than prior to the pandemic. And among those surveyed, 30 percent are spending more time reading promotional direct mail messages.
In competitive markets, frequency is key, particularly for younger CBD brands. We recommend an always-on strategy that includes seven to 10 points of contact with a consumer monthly.
Customer relationships are important. Not surprisingly, brands that have the stickiest relationships with their customers stand among the top-ranking CBD companies globally. The best uses a three-pronged approach including earned, paid, and proprietary placements (see chart below).
Editor’s Note: Larry Berg is the founder and CEO of CBD Marketing Hub and former Sr. VP of Valassis. Over his 35 years there, Larry helped to build its $2 billion revenue base and was responsible for 80 percent of its EBITDA.
Jackie Berg is our organization’s co-founder and CMO. She’s headed several health publications and joint venture partnerships, in addition to leading marketing and social media divisions.
U.S. HEMP ROUNDTABLE: REGULATORY EFFORTS
Focused on elevating the CBD industry and associated regulatory initiatives, the U.S. Hemp Roundtable is making progress on its talks with White House officials regarding forthcoming guidance on CBD products from the U.S. Federal Drug Administration (FDA).
With your support, the Roundtable hopes to ensure that the White House and the FDA establish regulatory certainty for the sale of #CBD products and to provide a safe harbor for products that are manufactured according to all other FDA requirements. Register to keep up with U.S. Hemp Roundtable’s progress here.