With the rising global demand for natural wellness products, CBD has become a lucrative business opportunity. Yes, there are some challenges due to changing regulations and the societal stigma of cannabis, but things are rapidly evolving in a positive direction.
Whether you plan to open CBD wholesale stores or a unique online product line, there’s ample opportunity and space for growth in the industry. With how chaotic things have become on a global scale after COVID, it’s only natural that everyone has become more stressed and anxious than usual.
CBD plays a crucial role in improving your sleep, anxiety, stress, and pain-related issues without any risk of dependency or side effects. Let’s take a deep dive and try to understand how and why CBD is a good business to get into in 2025.
What is CBD?
CBD stands for cannabidiol. It’s a plant compound with innate therapeutic and healing properties. CBD is found in cannabis plants; it’s completely nonpsychoactive and doesn’t create a euphoric high.
You can buy it in the form of edibles (gummies, soft gels, capsules), sublingual (oils, tinctures), topicals (creams, sprays, gels), and inhalants (vapes, flowers), and even beverages and snacks (CBD-infused juices, cookies, brownies). It interacts with ECS (endocannabinoid system), which is present in all mammals. That’s why you’ll notice that CBD is now available for dogs and cats too.
Regardless, the ECS is a complex cell signaling network that keeps a balance in our body by modulating our stress, anxiety, sleep rhythm, appetite, immunity, memory, mood, pain, and various other crucial body functions.
CBD affects the receptors of this ECS system and improves its overall working efficiency. As a result, we feel more calm, relaxed, focused, and in better control of our bodies and emotions.
What’s the current market landscape for CBD products?
The current CBD landscape is bustling with global demand picking up and country after country making it legal gradually. Hemp-derived CBD products with no more than 0.3% of intoxicating cannabinoid THC (tetrahydrocannabinol) are legal now in the US, Canada, most European countries, some South American nations, India, Japan, and many Southeast Asian nations.
In 2023, the global CBD market was valued at USD 22.8 billion, and it is expected to reach USD 108 billion in size by 2032, growing at a CAGR of almost 18%. In the USA alone, there are more than 2000+ CBD brands now, with new lineups popping up every other day. From celebs and athletes to your neighbor influencers, everyone is coming up with a CBD brand.
Category Wise Growth
- The fastest-growing category is Oils and Tinctures, with a 30-35% market share. The effects kick in quickly, allowing the user to feel calm within 15-20 minutes of consumption. This is quite popular among working adults who need something to wind down after a long and hectic workday.
- Then we have topicals, which include CBD-infused creams, sprays, soaps, and gels. The market share is around 25%. This category is popular among all age groups who need natural products for their skin health.
Plus, it’s quite popular among athletes and physically active people who need targeted relief. Elderly people with chronic pain are also a major target audience.
- Next we have edibles, which is around 20-25% of market share. It’s quickly growing, though, and may soon overtake oils. This includes CBD chocolates, capsules, gummies, softgels, etc.
It’s quite popular among those who want to experience a slow and sustained release, plus many use edibles for gifting purposes during festivals.
- Rest, we have beverages, pet CBD products, and lots of miscellaneous products. Just a few years back, the pet CBD category was valued at around 250 million dollars, and it’s expected to grow with a CAGR of almost 33% in the next 5 years. CBD-infused chews, treats, and balms can help your pets with mobility, separation anxiety, and pain.
Target Audience & Margins
See, CBD is getting in all age groups. However, the fastest-growing segment is millennials, who form around 40% of the user base, followed by Gen-Z at 25-30 odd percent. These are the people who prefer natural wellness solutions and try to avoid traditional medications for day-to-day anxiety, stress, and sleep troubles.
The biggest concern, though, is price erosion due to more and more brands entering the market. A recent survey found that average prices for CBD products dropped 30% since 2020 due to oversupply.
The margins are usually around 15-20%, which is quite good considering how competitive this industry is. Premium products in niches like cosmetics or pet treats can give even better margins at 40-50%, but then your target audience size reduces drastically. Geographically, North America dominates (70% of sales), but Europe and Asia-Pacific are catching up.
Potential concerns
The lack of a proper regulatory framework by health bodies and sudden administration changes are the biggest concerns in this industry for now. For example, in the US it’s legal in almost all 50 states, but the new farm bill is expected to come soon, which may shake up the industry.
Or take a look at an example: earlier, hemp-derived CBD was legal with no more than 0.3% THC, but now the government is pushing to bring this down to 0.001% or something. So yeah, uncertainty in government and quick policy change is quite concerning, and you also need too many clearances before entering this space.
Our Final Thoughts
To sum it up, Yes, CBD is a good business to get into with lots of demand and geographies opening up in the last few years. However, the lack of a proper regulatory framework and margin erosion due to oversupply remain a concern.
You can opt for wholesale, B2C, DTC, or even B2B models. Gen-Z and Millennials are the biggest target audiences, so try to match the aesthetics and quality as per the latest trends. Take a look at how Colorado Botanicals became one of the fastest-growing CBD brands in the USA to understand the development process of high-quality brands.
To penetrate the market faster, go with third-party manufacturers instead of setting up your own production facility. If you are willing to take the risk, it can be quite a challenging and rewarding business vertical.
