Direct Selling Cutting Out the Middleman for CBD Products (for Now)
By William Sumner, Hemp Business Journal Contributor
Direct selling is projected to generate approximately $300 million worth of CBD sales in 2018, according to a report released by Direct Selling News (DSN), an industry publication.
Also known as multilevel marketing (MLM), direct selling eliminates a wholesaler or intermediary from a consumer transaction, often through a non-retail environment. Some of the most well-known MLM companies include Mary Kay, Amway, and Cutco. Though MLMs are a commonly overlooked segment of the American economy, the industry employed an estimated 18.6 million people in 2017, while generating roughly $34.9 billion in sales.
Often touted as panaceas for good health, CBD products have become a natural fit for the MLM industry. In 2017, health and wellness products made up the most significant percentage of MLM sales, accounting for a 33.8% share of the market. While any number of CBD-based MLM companies have formed over the last several years, only a handful have emerged as market leaders.
One of those is Kannaway. Owned by Medical Marijuana, Inc. (OTC: MJNA), Kannaway has been hailed as the “Amway of hemp and CBD products” while offering a variety of hemp-based CBD products, from beauty and wellness goods to pet supplements. In the third quarter of 2018, Kannaway generated roughly $16 million in revenue, representing a year-over-year increase of 200%.
Another leader amid the hemp and CBD direct-selling market is Youngevity International, Inc. (NASDAQ: YGYI). Unlike Kannaway, hemp and CBD products make up just a part of Youngevity’s overall product offerings, though the company’s line of hemp-infused products (HempFX) include topicals, supplements, sleep aids, and infused water.
Last quarter, Youngevity suffered a loss of $8.4 million and reported a 12% decrease in revenue, falling to roughly $39.1 million. Feeling the sting, the company now intends to spend the rest of the year positioning itself with an expanded market presence for both CBD and coffee for 2019.
Though in recent years the CBD market has started to take off across all sectors, it is unlikely that the direct selling market for CBD market will reach $300 million. The Hemp Business Journal tried to contact Direct Selling News regarding its projections, but by publication had not received any reply.
Meantime, the Hemp Business Journal estimates 2018 CBD sales through the direct selling market to net approximately $125 million. With overall CBD sales expected to increase throughout the next five years, CBD sales through direct selling channels are projected to peak at $310 million in 2021.
Once hemp and CBD products become available through mass-market channels such as Walmart, sales through direct selling are expected to decline.
As CBD remains an emerging market, a shortage of information exists in regard to MLM activity in the CBD space. Nevertheless, the Hemp Business Journal will continue collecting data about the trends in order to update readers as new information becomes available.
William Sumner is a writer for the hemp and cannabis industry. Hailing from Panama City, Florida, William covers various topics such as hemp legislation, investment, and business. William’s writing has appeared in publications such as Green Market Report, Civilized, and MJINews. You can follow William on Twitter: @W_Sumner.