Demand for cannabidiol, known as CBD, a non-psychoactive compound derived from the cannabis plant, is likely to see U.S. sales soar to $24 billion over the next few years, according to industry researcher Brightfield Group. A key driver of the CBD market’s growth will be pet CBD sales, expected to rise up to 5-fold to $400 million during that period. Pet food giant Purina, owned by Nestlé, is now considering making CBD dog food, while small pet CBD brands are expected to be taken over by companies such as Mars Inc., Nestlé, General Mills Inc. (GIS), and J.M. Smucker Co. (SJM) and Canopy Growth Corp. (CGC), as outlined by Bloomberg.
Premium Pet Products Incorporate Cannabis Compound
CBD has been credited with helping treat medical issues such as anxiety, chronic pain, cognition, and disorders like epilepsy. The U.S. federal government has prohibited the use of marijuana use since the 1970s, creating major hurdles for CBD companies. Recently, however, a move to decriminalize industrial hemp in December has given the industry a major break.
Investors seeking to bet on two major trends, a growing demand for both CBD and premium pet products, may be looking at one high growth niche market.
In recent years, pet owners have demonstrated their willingness to pay a premium for quality pet products, such as grain-free foods and organic treats. This has driven the global pet market to reach new heights at an estimated market size of $130 billion. Now, pet product companies are betting that they can market CBD as a premium ingredient.
Nestlé, the No. 2 pet-care company behind Mars, started selling a line of CBD products in April under its Garden of Life brand. The company’s top pet food brand, Purina, is weighing CDB dog food. Meanwhile, Canopy Growth Corp, the world’s biggest marijuana company, recently teamed up with Martha Stewart to launch CBD pet products.
While many of the larger companies that still lead the pet food market are waiting out clearer regulatory conditions, smaller startups are finding their customers online, and successfully getting their products into some brick and mortar stores, per Bloomberg. For instance, Dixie Brands Inc., a Denver based cannabis company, has sold its Therabis brand CBD pet products under since 2017 after partnering with a veterinarian. The pet supplement products are now sold in over 100 stores.
Fast growing brands like Therabis are set to become takeout targets for pet food behemoths.
“Once the Purinas enter the space, they’re going to buy these guys out or take over major retail channels,” said Jamie Schau, a CBD research manager at Brightfield Group.
This trend is likely to accelerate as more research on CBD is published. Despite promising anecdotal evidence, vets are still currently prohibited by law from recommending CBD. That said, regulatory murkiness hasn’t slowed the boom of the CBD pet food market, and few believe that there is much harm in giving pets cannabis.
“The worst thing that can happen? It will get the best nap of its life,” said Gregory Buamel, the founder of BCD dog treat company Crazy Bones. CBD products for pets are slated to account for 7% of the $24 billion in annual sales forecast for CBD goods by 2023.
The surging popularity of CBD pet products reflects the booming overall demand for CBD and marijuana products. The success of these niche companies demonstrates that it’s not just the marijuana producers that are positioned to benefit from the surging popularity of cannabis products, but rather that there is potential for players across industries such as food, beverage, tobacco, pharma, and others to bet on the continued momentum of this nascent industry.
That said, the FDA has yet to rule CBD safe for food and drinks, meaning there are no officially approved products. Regulatory concerns will continue to position themselves as roadblocks for CBD companies, at least in the short term.