BDSA Cannabis Insights: The Rise of Intoxicating Hemp Products and Their Impact on the Cannabis Market

The 2018 Farm Bill did more than just legalize hemp—it ignited a transformation in the cannabinoid industry. With the legalization of low-THC hemp, a new wave of intoxicating hemp-derived products hit the market, disrupting the status quo and carving out a lucrative niche that sidesteps many of the challenges faced by the regulated cannabis industry. Unlike their cannabis counterparts, these products—ranging from Delta-8 THC to a variety of other cannabinoids—can be produced, distributed, and sold with minimal legal hurdles, making them a hot commodity across multiple retail channels.

Today, these hemp-derived intoxicating cannabinoids are everywhere—convenience stores, smoke shops, e-commerce sites, and direct-to-consumer platforms. The implications are enormous, presenting both opportunities and challenges that are reshaping the landscape.

Opportunities Abound in the Hemp-Derived Market

The hemp-derived product market is experiencing tremendous growth, offering opportunities for businesses and investors alike. One of the most appealing aspects of this sector is the broad retail access. With fewer restrictions than cannabis, hemp-derived products are readily available in a wide variety of retail settings, from local convenience stores to major online platforms. This flexibility allows companies to reach consumers wherever they shop, both in-store and online.

Additionally, the possibility of interstate commerce gives hemp-derived products a distinct advantage over cannabis. These products can be legally shipped across the country, unlocking expansive markets and allowing brands to scale nationally. This legal advantage also translates to lower costs and higher profit margins, as hemp-derived products avoid the heavy regulations and taxes that burden the cannabis industry.

From an investment perspective, hemp offers a fresh opportunity. As the legal cannabis market faces an ongoing capital crunch, the relatively unregulated hemp space presents strong investment appeal, offering new avenues for brand growth. Coupled with the expanding consumer base—thanks to the federal legality of hemp products—companies can tap into markets in states where cannabis is not yet legally available, drastically widening their reach.

One of the most exciting prospects for brands in the hemp industry is the potential for partnerships. The legal status of hemp opens the door for collaborations with major players in the beverage, alcohol, and consumer packaged goods (CPG) sectors. This invites a wave of product innovation and the possibility of expanding distribution channels.

Navigating the Risks of the Hemp-Derived Market

However, the hemp-derived market is not without its challenges. A key concern is regulatory uncertainty. While hemp is federally legal, state regulations can vary significantly. For instance, 15 states have already restricted or banned Delta-8 THC, creating a patchwork of laws that businesses must navigate carefully.

Another risk stems from the lack of quality control in the hemp industry. Without standardized testing measures, the market is vulnerable to unsafe or substandard products, which could harm consumers and hurt the industry’s reputation. This is compounded by the potential of direct competition with the legal cannabis channel,as hemp-derived products continue to grow in popularity, potentially challenging cannabis brands—especially in sectors like beverages.

Finally, the reputation of the hemp industry itself could be at risk. The low barrier to entry means that subpar producers could flood the market with inferior products, eroding consumer trust and threatening the long-term viability of the industry.

Understanding the Demographics of Intoxicating Hemp Consumers

As the hemp-derived product market continues to expand, it’s essential to understand the consumers who are driving demand for intoxicating hemp products like Delta 8, Delta 9, Delta 10, THCA, and THCV. Analyzing consumer demographics can help brands tailor their marketing strategies, identify growth opportunities, and better connect with their target audience.

A Heavily Male Audience

Intoxicating hemp consumers tend to be predominantly male, with 65% of all U.S. consumers identifying as men. Interestingly, in states without legal medical or adult-use cannabis programs, the gender gap narrows slightly, with 61% of consumers being male.

An Affluent Consumer Base

In terms of income, intoxicating hemp consumers tend to come from wealthier households. They are 8% less likely to fall into the lowest two income brackets compared to the total U.S. population, and they over-index in higher income groups. For example, 10% of intoxicating hemp consumers have an annual household income between $150K-$200K, compared to just 6% of the general population. Similarly, 16% of intoxicating hemp consumers earn between $100K-$150K, compared to 13% of the general population.

Higher Levels of Education

Education levels among intoxicating hemp consumers are comparable to the general population, but there is one notable exception: 22% of these consumers have a Master’s degree or higher, compared to just 15% of the general U.S. population. This significant difference highlights a subset of the market that is highly educated, likely more informed about product choices, and potentially more discerning in their purchasing decisions.

Consumption Trends

The most-consumed categories of intoxicating hemp products have been dominated by candy (chocolates, gummies, etc.), with 61% of consumers claiming past six month consumption of these form factors.

Coming in close behind are inhalables, which include products like vapes, used by 51% of consumers.

Where Consumers Are Buying Intoxicating Hemp Products

When it comes to where consumers are purchasing these products, cannabis dispensaries and retailers are still the top choice, with 51% of consumers buying from these regulated outlets. However, a significant number of consumers are also shopping at vape or smoke shops (32%). These non-dispensary channels play a key role, especially in states where cannabis is either illegal or not easily accessible.

Why Consumers Are Choosing Non-Dispensary Channels

For consumers who aren’t shopping at dispensaries, convenience is the driving factor, with 43% of non-dispensary shoppers citing it as their primary reason.

Additionally, 24% of consumers say they don’t have a medical card, making non-dispensary options more accessible. Notably, 17% of consumers point out that dispensaries aren’t conveniently located, but this figure rises to 26% when looking at states without legal cannabis retail, suggesting a major appeal for these products in states without active cannabis markets.

As the intoxicating hemp market continues to evolve, established cannabis brands are beginning to stake their claim in this emerging sector. Notable players in the edible and beverage space are leading the charge, with major distributors like Breakthru Beverage Group and Best Brands Incorporated already partnering with hemp-derived CBD and THC brands. The future of this industry is uncertain, but one thing is clear: intoxicating hemp products are here to stay, and their impact on the market is only just beginning.

With this rapidly evolving space, the story of intoxicating hemp is one of both opportunity and caution—a tale that is sure to capture the attention of industry watchers, investors, and consumers alike.

Source: BDSA Consumer Insights; Spring 2024 Update

Need more timely insights on what’s new in the legal cannabis space? Check out our recent blog on Top Beverage Insights for 2024. If you want to learn more about BDSA, reach out to request a demo.