Pet owners in the U.S. are becoming more attentive to pet CBD products as intrigue turns into interest and interest turns into demand. Stretching beyond the generic buzz of hemp-based CBD, veritable opportunities in pet CBD are beginning to emerge within mainstream consumer channels. According to the 2020 Pet Industry Green Paper by Nielsen and Headset, hemp-based CBD pet products will represent 3-5 percent of all hemp CBD sales within the U.S by 2025. In fact, joint projections show that the pet sector may yield one of the highest conversion rates within the CPG industry (37 percent).
While relatively premature, the "green rush" sweeping through the U.S. pet landscape is one that is filled with both risk and reward. The regulatory roadmap remains ambiguous, with many signs showing that the next decade for the hemp-based CBD market has the potential to be a game-changer for the pet retail industry. In fact, the latest Nielsen projections show that within the next year, the U.S. hemp-based CBD market may be a $2.25 billion to $2.75 billion industry. It should be noted that these projection accounts for U.S. Food and Drug Administration (FDA) rulings and other possible issues.
Understanding The Status of CBD
For the pet CBD market, the iron is warming and priming for a moment for brands to strike. So, what now?
For many, now is the time to assess the risks and rewards and then act accordingly. For the early adopters, leaning into the risks may net big rewards of getting in early and solidifying a leg up on laggers who may struggle in the future with being a few steps behind. Conversely, those who wait to act once the opportunities are clearly labeled and defined will have an open path to follow versus one that is currently undefined, uncharted and unpredictable.
Regardless of where you stand, being well informed on the latest news and numbers will help foster data-driven decision making. Here are a few factors to know:
According to the FDA, Hemp-CBD is not approved as a feed ingredient for humans or animals. In November 2019, the FDA sent out 15 warning letters to companies that produce CBD products, including 13 companies with CBD pet product offerings. The FDA noted that the violations committed by these companies, "include marketing unapproved new human and animal drugs, selling CBD products as dietary supplements and adding CBD to human, animal foods."
While only targeted at a subset of brands, this announcement casted a cloud of reservation over the industry. Some retailers have shifted their focus away from ingestible CBD to non-ingestible CBD offerings, online sales for some CBD products have moved to phone orders and some brands are removing the mention of pet CBD products—specifically ingestibles—completely from their site. As some might have been scared straight, others have elected to maintain business as usual by not making any adjustments to their existing practices. We suspect that these dynamic changes will continue for the foreseeable future until all governing stakeholders are aligned with a clear and actionable stance.
Despite legislative opinion, CBD hemp products are still available for purchase in the marketplace.
Nielsen’s read into the U.S. cannabis and Hemp-CBD market shows tremendous growth for pet CBD products, led primarily by a set of brands. Within the last year, especially since the 2018 Farm Bill, there has been an uptick in the number of brands and retailers participating in the Hemp-CBD market. Over the past year, pet CBD products, in particular, have seen sales increase by 72 percent compared to the prior year. Pet specialty stores account for the majority of dollar sales with an 80 percent share of the category, with the remaining 20 percent split between drug stores (15 percent) and food/grocery stores (5 percent). Distribution for pet CBD products has more than doubled over the past year: +322 percent in food, +710 percent in drug and +131 percent in pet specialty. Note that as the Hemp-CBD category develops, we suspect that convenience stores will soon start to expand their offerings to include pet.
How is CBD being used for pets?
New Nielsen data shows that CBD users are more likely to own pets than the average American household. In fact, the numbers show that 74 percent of CBD buyers have pets, which is higher than the national average. Building on this, 24 percent of pet owners use Hemp-CBD for themselves, their pet(s) or both.
In the battle of dogs versus cats, Nielsen data shows that dog owners are more likely to consume Hemp-CBD products either for themselves, their pet(s) or both, compared to cat owners. However, despite the difference in adoption, Nielsen data shows that both dog and cat owners who use Hemp-CBD for their pet overwhelmingly use a pet-formulated product over a human-formulated product, about 80 percent versus 17 percent, respectively.
Currently, the majority of pet CBD products on the market fall within treats, tinctures or powders. Nearly 80 percent of the products we researched fell within this group. Other product types include topicals, gels, shampoos, speads, bars and sprays. Dog CBD products are spread across the various product types, but cat CBD products, on the other hand, only span tinctures, treats, powders and gels.
The active ingredient listed on pet CBD products ranges from hemp seed to full spectrum hemp oil. Pet foods and treats formulated with hemp seed have been on the market well before the CBD craze. For reference, hemp seed is the actual seed of the hemp plant. It is completely devoid of CBD, THC and any other plant ingredients, like terpenes. Hemp seed is touted to be a great source of lean protein and contains high amounts of fatty acids, like omega-3 and -6, and other key nutrients, like fiber and iron, to name a few.
CBD isolate formulas deliver the purest form of CBD without any additional components from the hemp plant. In a two-step process, CBD is extracted from the hemp plant and then purified of all other plant matter.
Full spectrum hemp sits on the opposite end of the scale from the isolate. It contains CBD, plus all naturally-occurring compounds such as terpenes, essential oils and other cannabinoids including THC. This full spectrum of hemp-derived ingredients is believed to heighten the benefits experienced from an isolate through what is called the "entourage effect."
Broad spectrum hemp falls in between isolates and full spectrum hemp. Unlike an isolate, it contains additional compounds from the hemp plant so that pets can have elevated benefits through the "entourage effect." However, it does not contain any THC whatsoever, like what can be found in its full spectrum counterpart.
Clearly, there’s a lot going on but there’s still a lot to be determined in the pet CBD space. The risks in entering the game early are fairly high, but so are the rewards. For those who are contemplating entering the market, having a firm understanding of the landscape can help with the decision making process. The key is to start somewhere—whether it’s with data or learning the lingo, start by figuring out who the core target consumer group would be and what the potential opportunity would look like. Starting somewhere puts you one step closer to where you need to be.
Natasha Davis is the Client Manager, Pet & Cannabis Verticals at Nielsen Global Connect.