Cannabidiol (CBD) – a non-psychoactive compound in the cannabis plant that supposedly has therapeutic benefits – surged in popularity earlier this year, but has it held people’s interest? It’s nearly impossible to walk by a health store that doesn’t advertise it after the 2018 Farm Bill legalized the production of hemp and most hemp-derived products like CBD in December 2018. Especially since CBD is supposed to help treat everything from pain/migraines, depression and seizures to anxiety/stress, insomnia and inflammation.
A new analysis by researchers from the University of California, San Diego, Johns Hopkins University and the University of York measured US Google searches that mentioned “CBD” or “cannabidiol” from 2004 through April 2019. Here’s what they found:
- Google searches for “CBD” were steady from 2004 through 2014 and then took off higher from there.
- Search volumes rose 125.9% during 2017 versus 2016.
- It increased again by 160.4% during 2018 compared to 2017.
- The study expects searches to advance by 118% during 2019 versus last year.
- There were 6.4 million “CBD” searches on Google during April 2019, the last month of gathered data by the authors.
- “Searches for CBD during April 2019 eclipsed those for acupuncture by a factor of 7.49, apple cider vinegar by 5.17, meditation by 3.38, vaccination by 1.63, exercise by 1.59, marijuana by 1.13, and veganism by 1.12”.
- “Searches for CBD are now rivaling searches for yoga and electronic cigarettes, with 0.96 and 0.85 of their respective search volumes, and are searched for more than half as much as dieting (0.51).”
Interest by US State:
- “The increase in CBD searches encompassed all states, ranging from a 211.2% increase (2014-2018 to 2019) in Oklahoma to a 605.0% increase in Alabama”.
- This year from January through April, the most searches came from Vermont, Wisconsin, Tennessee, Colorado, New Hampshire and Oregon.
- “Searches were higher during 2019 in states that had legalized recreational marijuana than in states with medicinal marijuana or marijuana prohibitions”.
Key takeaway from the authors: “Interest in CBD across the United States has increased considerably and is accelerating. While our study is limited in that Google searches may reflect interest in CBD rather than interest in use, search trends are associated with many health-related behaviors, including the rise of electronic cigarettes, years ahead of traditional data.”
Although this study came out late last month, the data only went through April and a trip to Google Trends shows recent searches for “CBD” are now falling. Here is the chart:
Here’s what we see in the data:
- CBD searches peaked during early May 2019, shortly after the last month the study captured (April 2019).
- Since early May, searches for CBD are down 36%.
- Current search interest is back to levels at the end of last year when CBD derived from hemp and contains no more than 0.3% dry weight THC was legalized.
As for our investment takeaways, three points:
#1: That the study found more Google searches for CBD in states where recreational marijuana is legal during the first few months of this year comes as no surprise. Current search interest is similar with half of the top ten states searching for CBD having already legalized retail use: Vermont, Colorado, Oregon, Nevada and Maine.
These results get at the crux of the issue: just like public marijuana stocks have suffered this year from a lack of further recreational cannabis legalization in the US, so has the CBD market. The only state to legalize retail pot use this year was Illinois, despite other major states’ efforts, such as New York and New Jersey which failed.
#2: Even though the 2018 Farm Bill legalized hemp and hemp-derived products like CBD at the end of last year, the regulatory structure is still a work in progress. The Food and Drug Administration bans companies from including CBD in food and beverages or from marketing it as a dietary supplement, for example. That’s why big companies like Mondelez who have expressed interest in selling CBD products haven’t done so yet. As of now, a top FDA official at a conference last week said despite political pressure, the agency still does not have enough data to decide whether CBD is safe to ingest.
Consequently, major CBD public company Charlotte’s Web recently blamed weak sales on “a lack of regulatory direction” from the FDA. The company’s CEO said this on their latest earnings call: “Full revenue growth potential… remains dampened due to a lack of regulatory clarity for ingestible CBD products.”
#3: Moreover, reigniting interest in CBD will require better consumer education and a regulatory framework so that people understand what they are ingesting, if it is safe, and how much they should take. Because CBD was illegal prior to this year, there’s not much research to back up claims that it has therapeutic benefits. The best form of approval it has received thus far was when the FDA approved GW Pharmaceuticals’ CBD medication Epidiolex last year, which treats two rare forms of childhood epilepsy.
Bottom line: search interest from earlier this year shows millions of Americans were somewhat interested in CBD, even more than other popular alternative health topics at that time. That said, the hype has since worn off. Even still, should CBD have the therapeutic benefits that people claim, the compound could have an even bigger total addressable market than marijuana given that it is non-psychoactive. It could also have a meaningful substitution effect on everything from medicine to beverages.
The caveat: just like we reiterate 2020 is an important year to revitalize public marijuana stocks with greater recreational pot legalization, the same goes for the CBD market.