Impact on Gdp Growth
The rising prevalence of COVID-19 is projected to influence market growth over the forecast period. As the coronavirus outbreak continues, the majority of pharmaceutical companies experienced a significant loss, thereby hampering the CBD market. As a result of the COVID-19 crisis and the subsequent global disruptions to supply and demand, world GDP fell sharply during 2020. According to the World Bank, there was a 4.3% decrease in global GDP in 2020. Moreover, every region was subjected to considerable growth downgrades; the US by 3.6%, Euro region by 3.6%, the Middle East & North Africa by 5.0%, Europe & Central Asia by 2.9%, South Asia will contract by 6.7%, and Latin America and the Caribbean by 6.9%. However, East Asia & the Pacific region was estimated to grow by 0.9%. The COVID-19 has adversely affected the manufacturing, supply chain, and distribution channel due to the decreased demand and supply, delay, and unavailability of laborers. These downturns are expected to reverse back in due course of time.
Impact on Consumer Behaviour
Since the COVID-19 has spread across the globe, the consumption pattern of the customers in all industries has been changed significantly. It has been found that the majority of customers in America and Europe have increased their purchase of CBD products in recent months. Due to COVID-19, people focus on staying healthy and boosting immune systems, which encourages consumers to consume different health-focused products, including CBD.
The healthcare industry has adapted to COVID-19 by progressing out on telemedicine and other online consultation services to develop patient access. Due to the COVID-19 pandemic, there are changes in buying behavior of customers. The convenience of buying through an online portal has led to people preferring buying CBD products online. According to a 2019 Consumer Reports study, it was found that around 40% bought their CBD products dispensary, 34% purchase CBD from a retail store, 27% purchase CBD from an online retailer, and 12% purchase CBD from another source. The impact of the pandemic is anticipated to bring significant changes in the market scenario. As a result of this, the trend for purchasing CBD products has favored online distribution. Few companies have grabbed the opportunity and have strengthened their online distribution channel to compensate for the fall in sales through retail stores.
Impact on Region
The global CBD market is majorly categorized into the North America, Europe, Asia-Pacific, and Rest of the World. The North America is the largest market for cannabidiol products due to the increasing use of cannabidiol for medicinal, nonmedicinal, and food ingredients. According to a survey, consumers who have used CBD products in the recent 12 months show about 50% have stocked up or plan to stock up on cannabidiol products. Moreover, according to Alphargreen Group Limited (UK), one of the leaders for certified CBD products, stated that more than 8 million Britons were keen on purchasing CBD products. According to the same study, it was estimated that more than USD 180 million were spent on the same products in the first four months of 2020. With this pace, the CBD products market in the UK reached USD 550 million at a growth rate of 50% by the end of 2020 than 2019. The popularity of CBD is on the rise along with various other products, including hand sanitizers, creams, lotions, and balms. The demand for CBD products is expected to increase in the coming days as many individuals believe buying natural and organic products that will improve immunity.
However, significant regulatory steps are being taken to control the illegal marketing of CBD products during the pandemic. For instance, on April 23, 2020, the US FDA issued a warning letter to companies such as Homeoro Corp DBA Natures CBD Oil Distributions (US), and Biota Biosciences, LLC (US) for illegally marketing CBD products to treat opioid addiction and other serious medical conditions such as Alzheimer's disease, AIDS, and cancer. In addition, they also issued warning letters to CBD online Store and Nova Botanix for illegally marketing CBD products to treat COVID-19.
Europe is the second-largest and fastest-growing cannabidiol (CBD) market due to the rising awareness about clinical applications of cannabis. CBD is legal in many European countries, but there are certain restrictions associated with its use. In Europe, cannabis laws vary from country to country. In the UK, the Food Standards Agency (FSA) has set a deadline for CBD companies to provide more information about their products and their components by March 31, 2021, and submit valid novel food authorization applications. It was also reported that only products with valid applications would be permitted to remain in the market. Irrespective of the pandemic, the government is supporting the market growth by approving import-export across the countries and providing favorable conditions for the market. For instance, in March 2020, Medical Marijuana, Inc. (US) announced that its subsidiary, Kannaway, received approval to import CBD products legally in Russia. Furthermore, the Asia-Pacific holds the third-largest position in the CBD market. In Asia-Pacific countries, cannabis-based products are restricted in the majority of countries. However, due to the increasing cases of epilepsy, cannabis-based products are prescribed by some physicians.
Impact On Pricing
Pricing is one of the important factors for any product to withstand in the market. Due to the COVID-19 pandemic, different industries are impacted to some extent with respect to demand, import & export, and pricing. Hemp biomass had witnessed a decrease in the previous summer, but the pricing had stabilized in 2020. More than a 5% drop in pricing was witnessed for refined extracted products, whereas hempseed and fiber prices have stabilized this year and observed a very little price movement.
The pandemic has changed the business environment for numerous organizations across the globe. The supply chain is the key to fulfill customer demands. Several countries have implemented certain restrictions on imports and exports because of the pandemic. This has also affected the CBD industry as many countries are dependent on other countries for raw material supply, component supply, system supply, and technology. The lockdown and restrictions due to COVID-19 globally have imposed a significant impact on the supply chain, which led to a fluctuation in the prices of CBD products.
Impact On Industry
Unlike other farming industries, cannabidiol (CBD) production has not dropped due to COVID-19, despite all the retail markets have been shut due to lockdown. There are complications in distributing these products through retail stores. This resulted in the shift for CBD demand from retail to online. The demand for online CBD products is increasing rapidly. For example, a CBD brand Gnome Serum, a US-based company, had seen an increase in online sales of about 175% from February to March 2020. Moreover, Exactus Inc. (US) also witnessed an increase in 12% online sales during the lockdown. Moreover, the average order size has also increased nearly threefold. This increase in sales was majorly driven, as the warning of COVID-19 started to become more evident to the public. Consumers started ordering multiple products in much greater quantities due to panic.
COVID-19 has disrupted the supply chain of various industries, including CBD retail distribution. It is evident that the companies that were not able to switch from retail to online faced negative impacts of the pandemic. On the other hand, various US states had taken proper measures to reopen dispensaries to serve the patients. It is expected that the states could impose emergency regulations and allow home delivery of medical products where they are currently not allowed. Moreover, various states like Maryland, Michigan, and Illinois have allowed curbside pickup, while Massachusetts has extended delivery areas for approved dispensaries and allowed patients to purchase two-week supplies at once. Steadily, retail markets will reopen and ease the distribution of CBD products through retail which will further drive the growth of the CBD market.
