One Of These Things Is Not Like The Other: Disillusioned Consumers and Niche Opportunities

Early in the CBD boom, the cannabinoid could be found in anything. Store-bought infused guacamole might have been the most egregious example of stretching the potential of CBD until it breaks. That said, the proliferation of DIY guacamole recipes made with CBD oil suggests there is something at work. But buying a plastic tub of it from the refrigerated section? 

The image of packaged cannabidiol guacamole is admittedly unfair. No one is marketing a line of CBD dips. (To our knowledge.) But the image of a consumer, having branched out to a new form factor of CBD product only to experience disappointment and regret is real and should worry every CBD consumer brand.

Efficacy trumps expense: of former CBD consumers, more point to disappointing results (39%) than expense (31%) as the reason for no longer using CBD products.

Innovative and promising applications of CBD continue to hit the market. The most successful latch onto the tenets of the consumer package goods industry: brand promises, moments of truth, the power of storytelling, all adapted to a category the likes of which has rarely been seen. 

None of this is new news. What is playing out in the market that merits careful attention is a crisis that mainstream brand owners try desperately to avoid. The dissonance a devoted CBD user must feel upon spotting an infused avocado dip is nothing when compared to the feeling of chucking a pricey jar of seemingly worthless CBD product into the trash. The one might give you pause but the other might have you questioning the merits of the entire category. 

Base: 2,230 US adults identified as current users of any CBD topical product, September-October 2020

The so-called “second moment of truth” is another well-worn saw of marketing. As brands rise and fall in the CBD category, everyone is acutely aware of the need for efficacious offerings that pass muster as consumers go to actually use the product. Products failing the test in the second moment cost marketers dearly. All of the investment made to secure a trial purchase is worthless without repeat buyers. 

To highlight the risk, we can look to consumers in the topicals segment of the CBD market for an example. We know from our CBD Consumer Insights study that most (73%) of current topicals users are also current users of CBD ‘Supplements’ (our term) products such as capsules, oils and tinctures, and gummies. The halo effect is real but so too is its ugly cousin, the domino effect. The baseline share of Supplements across all CBD consumers is 63% but among former Topicals users still active in the CBD category overall, only 54% classify as current Supplements users.

Former Procter & Gamble CEO and “Moment of Truth” innovator A.G. Lafley

Not all this drop-off can be explained by dissatisfaction with one form factor impacting overall use but it’s an issue worthy of attention particularly for brands offering – or spinning up – line extensions across formats. As illustrated by the data above, formats within a category as broad as topicals can present risks and opportunities. Color cosmetics, for instance, must deliver on the promised experience – overall, not just the benefits conveyed by cannabinoids – and beauty products arguably have a higher bar to clear from the start to achieve consumer satisfaction as not only must the product look good, cosmetics must also feel good, and adding CBD to the mix must result in some added benefit beyond the look and feel.

Conversely, niche opportunities exist in segments like patches, soap and shower, and facial skincare products where consumers already using another CBD topical express a high degree of interest.

Moving on from A.G. Lafley’s vision of consumer delight, we can turn to the third (or “ultimate”, depending on your preferred source of jargon) moment of truth: customers describing the product experience to friends, family, and utter strangers on any number of platforms. Topicals users track with CBD consumers overall in the top two most trusted sources of information on CBD: friends and family (46%) and online user reviews (39%).

To use another hoary term, building “brand champions” in niches with high potential can create a multiplier effect. A brand that can execute against its promises will not only convert a passionate user but the pool of her friends, family, and followers already engaged with topicals is likely rich with consumers eager to hear about products of interest – provided the product works.