When the 2018 Farm Bill legalized hemp all across the United States, the competitive market for the sale of CBD Industry products was born. Even so, it looks a lot different today than just a few years ago. There have been many smaller brands that have dropped out of the market, while even more entrepreneurs and startups never quite got things off of the ground. Some others experimented in the way of CBD line extensions, but also did not get very far.
Overall, the entire CBD industry has shrunken down to a couple thousand brands, currently down from its peak of 3,500 in the year 2019. Many CBD industry brands are looking at acquisition targets as well, something that will cause further consolidation of the market. Experts are also expecting more and more acquisition and merger activity to occur in the coming months in CBD markets. Many companies find themselves low on cash and believe now is a good time to “go shopping.”
Overall, 2020 wasn’t good for the American CBD market. The pandemic that struck the globe resulted in the closing of retail storefronts, which had customers buying online instead of going to natural food stores where hemp CBD was once the most popular. Many firms also struggled with getting assets and capital to continue.
During this time, US regulators didn’t bother with rules or guidance for ingestible CBD products, which limited the growth in the sector and also kept some brands stuck on the sidelines. Several public companies show the struggle that the year 2020 brought to the industry in their current sales, dropping from high percentages to low ones in just one year. However, it is forecasted that the CBD market will grow around 15 percent in 2021 to around $5.3 billion, with an even smaller number of brands believed to be in control of the market. This comes as no surprise to many public companies, but especially to the Co-Founder of HempFusion, Jason Mitchell, who has shares in the US and Canada.
Mitchel said he believed that in 2020 consolidation was inevitable, and he told his team and board as much. Once he shared that message with them, Abacus Health Products Inc. agreed in February of 2020 to acquire Harmony Health, a CBD topicals brand. After that, Charlotte’s Web Holdings Inc. announced a plan to acquire Abacus.
HempFusion has been dealing with acquisitions for some time, acquiring Probulin, a company that sells probiotic supplements, showing their desire to diversify outside of cannabis products. Much like it has for everyone else in the industry, 2020 and 2019 have been chaotic and frenzied. For Mitchel and his team especially, their company finished an initial public offering in January and at the same time announced a separate deal to acquire both Sagely Naturals and Apothecanna.
It boils down to this—3,500 brands in the industry are not sustainable. Consolidation and acquisition are just a fact of life in the CBD industry.
