CBD companies face ongoing market and legislative challenges, expand portfolios
Market research firm SPINS reports CBD dollar sales across supplement categories declined by 24% in the 52 weeks ending July 14, 2024, and the ongoing legislative limbo continues to cause confusion across consumers, retailers and state governance.
The market downturn and regulatory uncertainty were reflected in Q2 2024 earnings: Revenue for CBD companies cbdMD and Charlotte’s Web dropped while CV Sciences’ revenue remained flat compared to this time last year.
cbdMD’s second quarter gross sales totaled approximately $4.8 million, down from nearly $6.6 million in Q2 2023, according to its most recent SEC quarterly report filing. The filing also states cbdMD received notification from the New York Stock Exchange that it is no longer in compliance with the NYSE’s continued listing standards, which requires a company maintain minimum distribution levels, financial requirements and price.
cbdMD did not return a request for comment by publication time.
According to a statement accompanying its earnings report, the company’s CEO and CFO, Ronan Kennedy, said, “Transformation is not always linear, and while our second fiscal quarter 2024 results fell short of our ambitions, we believe the operational changes we've enacted are set to propel us forward.”
For Charlotte’s Web, consolidated net revenue was $12.3 million for the quarter, as compared to $16 million in Q2 2023. The company has reduced expenses, condensing and streamlining operations to create a leaner organization with more simplified product, channel and customer focus, Bill Morachnick, Charlotte’s Web CEO, told NutraIngredients-USA.
These actions are expected to lower cash burn and enable a return to positive cash flow at lower revenue levels, in addition to reducing total 2024 operating expenses by 30%.
“The growth challenges for CBD nearly all stem from the lack of a clear federal regulatory framework,” he said. “This has resulted in inconsistent brands, content, labeling and effects. Lack of oversight has also enabled the proliferation of intoxicating hemp products using synthetic delta-8 THC.”
As for CV Sciences, it generated revenue of $4 million for Q2 2024, as it had for Q2 2023 and Q1 2024.
"We are pleased with our second quarter 2024 results,” said Joseph Dowling, CEO of CV Sciences in the company's earnings report. “Revenues for our core business remained stable at $4 million in the second quarter 2024 despite a challenging environment. With our recently completed acquisitions and new product innovations, we are planning to grow our revenue in the second half of 2024.”
Despite falling and flat revenue, SPINS data showed some areas of growth within CBD subcategories. For calmative and mood support supplements, there was approximately a 715% increase in dollar sales while those for sleep supplements rose by over 73% from a year ago. In contrast, CBD and other therapeutic oils, proportionately the largest of 13 subcategories, saw sales decline by about 25%.
The R&D horizon
The three companies are not waiting for legislation to change financial circumstances. Charlotte’s Web said its latest wellness offerings—a topical made from a CBD isolate and sleep aid gummies CBN Stay Asleep—are not impacted by regulatory headwinds. The company also has pending botanical wellness products beyond CBD.
Meanwhile, Charlotte’s Web is awaiting Phase 1 trial data for DeFloria, which utilizes patented hemp genetics from the company to support mental health and neurological disorders. It is progressing through the U.S. Food and Drug Administration’s investigative new drug (IND) pathway.
“Our ‘botanical drug’ is a whole-plant full-spectrum extract derived from our patented hemp cultivar,” Morachnick said. “It addresses new markets and channels for Charlotte’s Web. This is not paramount to our success but could become a material revenue component of the business if successful over time.”
In May, cbdMD expanded its business with functional mushrooms, launching its ATRx Labs Premium Mushroom Line at GNC nationwide.
"[It] not only broadens our market presence but also validates our expansion into functional mushrooms," Kennedy said.
To expand access to its CBD products, the company has ventured overseas to markets more hospitable to hemp-derived CBD.
“We’re actively selling in a number of Latin American countries, and we’re working on the final steps towards approval in UK FSA... I think there’s relief internationally for now,” Sibyl Swift, cbdMD’s chief scientific officer and VP of regulatory affairs, told NutraIngredients-USA in July.
To broaden its portfolio, CV Sciences acquired Colorado-based Elevated Softgels, a manufacturer of encapsulated softgels and tinctures for the hemp supplement and nutrition industry.
Bellwether California
CBD has faced several legislative hurdles in recent years, including lack of federal oversight in an environment of fragmented and inconsistent state rules regarding the substance’s use.
Proposed legislation may change that. The goal of the Hemp Derived Consumer Protection and Market Stabilization Act of 2023 (H.R. 1629) and the Hemp Access and Consumer Safety Act (S. 2451) include regulating hemp extract products under the FDA's existing dietary supplement regulatory framework.
Progress by legislators, lobbyists and citizens, at least at the state level, could be stifled, however, by what is unfolding in California, where some advocates want to ban cannabis oil.
Assembly bill AB 2223 would also make specialized medical hemp products much more difficult to acquire, or even illegal in some cases. As of this week, the legislation appears temporary stalled.
“Although we agree with the intention of California bill AB 2223 to eliminate intoxicating, unsafe products like Delta 8, the bill is flawed as written,” Morachnick said. “By lumping in natural hemp CBD wellness products backed by science, certifications and testing with cheap ‘gas station’ and intoxicating products, the bill completely misses the mark.”
Charlotte’s Web is working with legislators, partners and organizations to amend the bill.
