Episode 53: Year in Review with Brightfield Group




Joe: On this episode of the "CBD University Podcast," a look back at the CBD industry in 2020 with the Brightfield Group, how the events of the year shifted consumer behavior, including the emerging trends of buying CBD during a pandemic and the effects on consumers in different channels, plus what could be ahead in 2021. This is the "CBD University Podcast" and it starts right now.

I'm Joe Agostinelli, the host of the "CBD University Podcast." If you are returning listener, welcome back to our podcasts. And if you are a new listener, we are glad you found us on your podcast platform of choice. Don't forget full video episodes of our podcast on the Global Widget YouTube channel and the YouTube channels of our brands, Hemp Bombs and Nature's Script. And as we go through the holiday season, 2020 is quickly coming to an end. And in this challenging year for us all, how did the CBD industry change and what's in store as we look ahead to 2021? I want to welcome to our podcast via Zoom, the marketing director of the Brightfield Group Connor Skelly. Connor, thanks for taking the time to join me from Chicago.

Connor: Yeah. Thanks so much, Joe. Thanks for having me. I'm really excited to be here.

Joe: Connor, for those of our listeners and viewers who may not be as familiar with the Brightfield Group as we are and many of us in the CBD industry, why don't you tell our listeners and viewers a little bit about what you guys do?

Connor: Yeah, absolutely. So, Brightfield Group is the leading research firm for the CBD in cannabis industries. Our approach you know, because these emerging markets like CBD and cannabis are so volatile, we take a multi-source approach to ensure we get the most complete picture possible. We collect all different kinds of data into a single environment, so our clients can understand the latest brand, consumer, and market trends so they can drive effective marketing and product strategies.

Joe: And speaking of product strategies, it's been an interesting year in the CBD industry. And first off, let's discuss a report. We'll go back to mid-year when it came out just about then, and it's right when we started to see a shift in consumer behavior, what did that report show?

Connor: Yeah. So, our mid-year U.S. CBD report, the biggest thing highlighted in there, no surprise is just how COVID-19 devastated the industry and ultimately, how CBD consumers were responding to those changes. So, what we saw earlier in the year, many CBD brands had cut pricing on their products, some as high as 40%, you know, as the cost of hemp was decreasing and their addressable market was increasing. And so, this may have quickly helped those brands from a volume standpoint but the ones who were really affected by the pandemic were those retail-focused brands, the ones who were really focused on brick and mortar.

And so, we saw nearly half of consumers plan to move their CBD purchases online, and from Q1 to Q2 of this year, the amount of consumers who reported buying online increased 61%. So, it's a massive jump just in a few months of time. So, consumers were really responding quickly. And so, the brands who had a strong digital presence, good shopping experience, and overall strong D2C strategy were really in the best shape. Outside of that, the report also highlights innovation in CBD, which absolutely did not slow down this year. More brands launched products with other cannabinoids, like CBN or CBG in an effort to better position their products in the minds of consumers and create some differentiation across their SKUs.

Joe: Now, let's move forward into Q3 of 2020. Was there any change in late summer when it comes to consumer and retail channels?

Connor: Yeah. So, you know, those questions that we were asking consumers in Q1 and Q2 about what they are planning on doing in response to COVID, we saw those behaviors really start to take shape. And so, in a way, COVID helped show that the fundamentals of the CBD industry were strong, you know, sales volume remain strong, consumers continue to purchase online. And back in late summer, August, September, 75% of CBD consumers agreed that CBD helps them deal with the stress of the pandemic. So, while we saw a new user growth decline in Q2, we did see it come back up in Q3. Nearly half of consumers in Q3 reported buying CBD from physical stores again, and while this is all happening.

So, brick and mortar is still very important to consumers, especially specific consumer segments. And so, while this was all happening, heavy users, you know, people who use five or more days per week, sometimes multiple times a day, they have consistently increased the entire year. So, what brands really need to understand is that the lifetime value of many CBD consumers is continuing to increase. So, if you're able to make these consumers and their related segments loyal to your brand, then you're setting yourself up for a really healthy marketing and sales funnel.

Joe: And do you see at all consumers purchasing differently online than if they were shopping you know, at retail? And you know, in addition to that, obviously, we should make it known that a retail experience may be different from an online experience where some retailers may not be carrying as much CBD products through the, you know, local regulations.

Connor: Right. Right. Exactly. Yeah. So, from a product standpoint, you know, gummies and tinctures, you know, still some of the top products irregardless of the channel or consumer segment, but you do start to see some nuances when you're looking at the different kinds of retail channels. So, we're seeing a significant in consumer reported purchasing from CBD specialty retailers, for example. And so, a couple of those were like your CBD store or CBD American Shaman. And because education is so important in the customer's journey, consumers are starting to prefer these channels, which they're really popping up everywhere.

I mean, I'm in Chicago right now and there must be at least like six of these within a mile of me. And so, when looking at mainstream channels like mass merchandisers or C stores, you can't really expect a worker at a Kroger or a 7-Eleven to be well-versed on the dynamics of CBD. So, outside of their own online research, consumers are getting that in-person experience through these specialty retailers as well as independent pharmacies too, where the workers may be more equipped to educate and to being in...in COVID, people are more likely to go to those pharmacies anyways for, you know, immunity products or prescriptions or things like that.

Joe: And when it comes to the trending products and categories, what are we looking at to some of the most popular types of products this year?

Connor: Yeah. So, yeah, as I said before, minor cannabinoids really started to come into the mix this year, CBN, which is said to aid in sleep and it is popular in a sleep-positioning product has shown up a lot in new launches this year. Outside of that, we saw beauty and skincare products surpass therapeutic topicals for the first time. So, beauty and skincare topicals ones that are positioned for more of that did surpass therapeutics. And a big reason for is this growing self-care movement that has only been exacerbated by the pandemic as consumers move those routines, those self-care and wellness routines into the home and topicals are an easy entry point for a lot of consumers and they're widely available across a variety of channels.

So, it was really interesting to see the rapid growth of that product type throughout the year, as people were, you know, navigating the world. New users started to enter the market with a lot more information, and CBD knowhow than in the past you know, a lot of CBD brands have been creating their own educational content on their own sites in order to own that part of the customer's journey. So, I expect to see a shakeup in the products those consumers are attracted to in the near future.

Joe: And then one quick point on the education point I should point this out to our viewers on our YouTube channel, even those listening on our podcast platforms for any of our branded products, if you scan the QR code in the back, this is just a package of our Hemp Bombs gummies, if you scan the QR code title "Learn CBD," that'll take you to the CBD 101 website that we have that gives you all the education you need on CBD. So, that just goes back to your point of the education being provided to consumers. So, as we conclude 2020 and head into a new year, I mean, obviously, this time last year, I don't think any predictions of 2020 came true. So, but we'll play the prediction game as best as we can. What are some of the top storylines Brightfield Group is watching and how may that affect the market moving ahead into the new year?

Connor: Yeah. The biggest thing on most people's minds is, you know, ultimately, guidance from the FDA. We expect the FDA to roll out better guidelines by middle of next year, especially around ingestibles so that will really impact those food and beverage products once that takes place. Expect the attention of the largest CPG companies to move towards the CBD industry, you know, the Pepsis of the world, for example. And we've told our clients for a long time now, use this time wisely to build a strong brand that connects with the right consumer segments so when those big players come in, you are set up to effectively compete or become an acquisition target, which, you know, I'm sure many founders would want to do as well.

So, in addition to that, I do expect to see more brands to look for new ways to increase their growth potential whether that is new products may be outside of the traditional CBD industry or other brand extension. So, the industry is so heavily crowded, and so, as these companies move into more brands and consumer-centric model, they'll really need to meet their consumers' needs in innovative ways to effectively compete. And that may not be through a normal CBD product like we're used to. So, we're seeing more brands launch products with melatonin or L-theanine in it or other functional ingredients. So, that process has already taken place. And in 2021, it will bring us an even greater expansion into the larger function ingredients and consumer wellness space. So, CBD brands should be really looking at what are those other adjacent categories that CBD is playing in.

Joe: Well, Connor, stay warm up there in Chicago. I know at the time of this recording down here in Tampa, where we're based, it's sunny and 78 today. So, I'm not too sure if that's what it is in Chicago today, but...

Connor: It was a balmy 55 yesterday.

Joe: I'd say heatwave.

Connor: This is a heatwave, the sun was out for like the first time in a week, so I'm going to ride that for the rest of the week here.

Joe: There you go. Well, Connor, stay well up there as I mentioned, and our best to you and the entire Brightfield Group for a happy holiday season. Keep up the great work you, guys, do. And we'll certainly keep in touch and look forward to having you back here on the podcast as we get into the new year.

Connor: Absolutely. Thanks so much, Joe. Thanks for having me.

Joe: Connor Skelly, the marketing director of the Brightfield Group, my guest on this episode of the "CBD University Podcast." A reminder, if you have not yet done so, you can subscribe to our podcast on your favorite podcast platform of choice or on any of our YouTube channels. It's the Global Widget YouTube channel or the YouTube channels of our brands, Hemp Bombs and Nature's Script. No matter where you subscribe, you'll get notifications when new episodes are published each week. I'm Joe Agostinelli, the host of the "CBD University Podcast." Have a great holiday season, and thanks for tuning in.

These statements have not been evaluated by the Food and Drug Administration. The CBD products are not intended to treat, cure, or prevent any disease or condition. Always consult your personal physician about CBD and using CBD products. CBD should never be used by anyone under the age of 18. This content is not intended to provide legal advice regarding the legal status of CBD and CBD products.