Stephen Murphy – Managing Director
The first in a series of consumer goods reports, documenting the rise of cannabis consumer goods and the disruption of mainstream markets, Disrupting Beauty analyses the regulatory developments taking place in the blooming CBD beauty market, and presents a number of expert-backed forecasts for the future of the sector. The report also features several interviews with leaders and innovators in the CBD beauty space, which explore what new indie brands are doing to disrupt the mainstream beauty sector.
The regulation of CBD beauty products
Like other cannabis-related industries, the regulations governing the sector depend on geography.
The recent expansion of Canada’s Cannabis Act to legalise more novel cannabis products, such as edibles and cannabis-infused drinks, has allowed for cannabis oils to be infused in topicals and cosmetics for the first time. In the United States, the Food and Drug Administration is looking carefully at the legal hemp-derived CBD product market to assess whether it must create regulations (or a potential ban) for certain CBD-containing products. In both countries, products are required to avoid making any claims regarding the health benefits of CBD on their packaging, or on any promotional materials.
The European Union considers CBD acceptable to use in cosmetics, so long as the CBD extract used in the process was isolated from cannabis seeds or leaves, not cannabis flower. In contrast, there are no restrictions on the use of hemp-derived extracts in these products, as hemp extracts are considered to be universally low in THC and contain only small amounts of CBD.
This distinction between hemp oils and cannabis-derived CBD oils has become a point of controversy within the CBD beauty market, Disrupting Beauty reveals. Some major brands have been called out for ‘Weed Washing’ — where the brand claims CBD as an ingredient in order to capitalise on the hype surrounding cannabis, while actually using very low-CBD hemp seed oil as the main ingredient.
As there are no universally agreed standards for monitoring the quality and strength of CBD-infused beauty products, the companies that take part in this weed washing strategy are currently under no obligation to be transparent and reveal the actual CBD content of their products.
Indie brands are driving the CBD cosmetics sector
At present, mainstream beauty brands are cautious about engaging with CBD cosmetics. Industry giants, including Estée Lauder and L’Oréal, have experimented with hemp seed oil-infused products, but the complex legal situation for CBD products has largely dissuaded multinational beauty companies from releasing CBD-based cosmetic lines.
As a result, smaller indie brands have dominated the CBD beauty sector. Cannabis oil-based topicals for skincare have largely been the foundation of the market, with recent innovations including the development of CBD-infused products for haircare and suncare, soaps and make-up.
Prohibition Partners valued the global CBD skincare market at US$710 million in 2018, based on the content of interviews with top beauty industry experts and extensive in-house data analysis. By 2024, Prohibition Partners predicts that the market will bring in a projected US$959 million in sales. This growth is expected to come from large retailers, such as CVS, Walgreens, and Kroger pharmacies, entering the market and making these products more widely available.
Depending on any future regulatory developments, it is possible that larger mainstream beauty brands may start to become involved in the CBD beauty market through joint ventures or strategic acquisitions. Investors from outside of the beauty industry are already making such agreements, with both Canopy Growth and CannaGlobal recently buying beauty brands with a view to launching new CBD cosmetics.
Regulation and education will be key to the market’s next steps
For brands looking to get involved in the CBD beauty industry, the question of short-term growth is somewhat trivial. What is key is whether the CBD beauty sector will be remembered as a fad in ten years’ time, or if it has the longevity to continue as a robust corner of the global beauty market.
‘[CBD] has now gone totally mainstream from quirky little boutiques and natural-products shops to malls, yoga studios, coffee shops, pharmacies and all the way up luxury retailers like Barneys and Neiman Marcus with their own private-label CBD brands and a dedicated section on the selling floor, just for CBD,’ beauty industry expert Wendy Lewis told Prohibition Partners.
‘My guess is that the hype will fizzle out and only tried and true brands will flourish because consumers will be smarter about what to look for and start reading labels. Reviews are critical today for skincare brands, and if some of these pricey products get 1-star reviews for overhyping what they do, consumers will be more sceptical.’
If CBD beauty brands are to survive, there will need to be a major focus on consumer education from private industry. On the flip side, regulators will need to ensure that the regulations prohibit low-quality speculative brands and encourage product innovation and quality assurance.
To learn more about the current state of the CBD beauty market, and its future potential, download the full free-to-access report, available here.
