The New York scene represents a fraction of what is happening in the national market, which is dominated by large suppliers based in Colorado and Kentucky and on the West Coast. But local startups see an opportunity in setting themselves apart.
“When we first entered the market, the brands fell into two categories,” Kennedy said. “There were very ‘pharmaceutical’ companies that lacked an emotional connection [to CBD]. And then there were very ‘homegrown’ companies, where it feels like [the products are] coming out of someone’s bathtub. We saw an opportunity to step in as a brand that has an emotional connection, and that communicates transparency and trust and aspiration.”
Plant People emphasizes its use of organically grown hemp and that it plants a tree in an environmentally distressed region for every product it sells. In an industry that has been plagued across the board by reports of impurities in its products and inconsistent labeling, the company makes a show of transparency: A scan of the QR code on its packaging reveals lab results for arsenic, lead and other heavy metals, as well as solvents, herbicides, pesticides and the product’s potency.
In addition, the company’s website, which accounts for half of Plant People’s sales, recounts the founders’ health issues. Kennedy fractured discs in a ski-racing accident when he was a teenager, and Gaines-Ross had a tumor removed from his spine. They both turned to CBD and other plant-based supplements in place of pharmaceuticals to manage pain.
“We’re plant people for a reason,” Gaines-Ross said.
As small as they are, the New York companies have entered a market poised for exponential growth. A recent report from BDS Analytics and Arcview Market Research forecast $20 billion in CBD sales across the U.S. by 2024. That would be up from around $4 billion this year.
More than half of the sales will take place in general retail outlets. The next-largest source will be medical and recreational dispensaries, followed by pharmacies, according to the report. Experts say those numbers assume the use of CBD as an additive in everything from coffee to shaving cream.
Tom Adams, principal analyst at BDS Analytics, sees two factors behind the current market explosion. One was the Food and Drug Administration’s 2018 approval of Epidiolex, a powerful CBD concentrate, for the treatment of two forms of epilepsy in children. That gave credence to health claims for the compound.
The other major development was the passage, also in 2018, of the U.S. Farm Bill, which legalized the production of hemp. Essentially the same plant as cannabis, hemp, which contains scant amounts of the psychoactive ingredient,tetrahydrocannabinol, or THC, had been classified as a Schedule I controlled substance, along with LSD and heroin. The bill also legalized CBD produced from hemp, as long as it had less than 0.03% THC.
The two events have spurred a boom in hemp production—and sent a wave of CBD products into health food stores and bodegas.
Adams sees the current market as wide open to new players.
“In the 20- or 30-year window, big multinational food and health products companies will come to dominate, but that’s one of the exciting things from an investor and entrepreneur point of view about the whole cannabinoid industry,” he said. “There’s an immense opportunity for niche companies to get in before the giants exert their power and they become acquisition targets—or the next giant.”
Despite the compound’s popularity, and the many reports by users of how it has helped them, experts in the field warn that there has been too little research to know just how effective CBD really is, or what proper dosages might be.
“There is a fair amount of hype,” said Igor Grant, a professor of psychiatry and director of the Center for Medicinal Cannabis Research at the University of California at San Diego. “But we can’t dismiss everything. The way we got back into the whole ‘cannabis as a medicine’ field was that there was just a lot of anecdotal evidence. To me, those are always clues worthy of follow-up.”
Grant added that federal restrictions on CBD derived from both cannabis and hemp make research difficult.