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Hemp cosmetics: Disruptive or just an alternative?

Along with the growing cannabis industry, hemp cosmetics is becoming a trend these days as the plant contains properties that are good for the skin.

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The cannabis industry has been tipped to grow massively in the next decade with medicinal marijuana playing a big part. However, while hemp faces various regulatory challenges, it has emerged as one of the main under-the-radar segments of the cannabis market that could drive growth in the coming years.

Specifically, hemp is expected to benefit from the growing interest in the cosmetics market, which has embraced the various uses of the plant. According to reports, the skincare market, which is worth about $12 billion in annual revenues, has emerged as one of the hottest marketplaces for hemp products. The cosmetics industry is dominated by healthcare giants Johnson & Johnson (NYSE:JNJ) and Procter & Gamble (NYSE:PG), alongside a flurry of other notable brands based in the U.S. and western Europe.

As such, disrupting such an industry would seem almost impossible, especially considering the fact that most industrial hemp manufacturers are relatively smaller compared to the industry giants that run the cosmetics industry.

Nonetheless, experts in hemp products argue that hemp additives can now be found in several cosmetics products including soap, hair spray, shampoo, conditioners, lip balm, hand creams, lipstick and deodorants, among others. As such, hemp is not just being used in cosmetics as a stand-alone product, but rather as an additive, which in a way widens its addressable market.

Most of these additives are extracted from hemp seed oil, not to be confused with CBD oil or full spectrum cannabis oil. Hemp seed oil is a multipurpose oil sourced from the industrial hemp plant. It is extracted by cold-pressing hemp seeds that are made of about 30 percent oil.

hemp seed for cosmetics

Hemp seed oil is rich in properties that are good for the skin. (Source)

Hemp seed oil is reputed for being rich in properties that make it an effective moisturizer. Cosmetics experts also suggest that it provides the skin with a barrier to pollutants and can help to soothe muscle aches, which makes it an ideal additive to personal and skincare products.

While some reports suggest that hemp cosmetics could be undeservedly riding on the current trend of the overall cannabis industry—the cannabis market has been one of the breakout industries of the current decade—this may not be the only source of growth for hemp cosmetics.

One major catalyst that many analysts may have overlooked is the growing trend in herbal products. While Herbalife (NYSE:HLF) has arguably been the standout company in the herbal products market, notable companies like Colgate Palmolive (NYSE:CL) and Reckitt Benckiser (LON:RB), the makers of Dettol and several other cosmetic products, have also launched herbal versions of their most popular brands.

The bias toward developing herbal products has opened the window for manufacturers to introduce a variety of additives to their products and this means that additives from hemp seed oil and other hemp extracts now have a wider market to address as more companies embrace the new trend.

On that note, market analysts now see the industrial hemp market growing at a CAGR of 14 percent through 2025 to a value of about $10 billion. In 2017, revenues from the personal care products accounted for about 17.2 percent of total revenues, and if that share is maintained through 2025, it would equate to a market value of about $1.7 billion. This could be huge for industrial hemp, especially when you begin to factor in other applications of hemp seed oil.

Cannabidiol (CBD) oil, which can also be extracted from the hemp plant, is another rich product that some cosmetics experts have argued to possess antioxidant and anti-aging attributes when applied topically to the skin. It is also said to have properties that can protect the skin from environmental damage after an extreme exposure to sunlight. In addition, CBD oil is reputed for being able to promote skin repair and rejuvenation.

However, unlike hemp seed oil, CBD is highly regulated in various countries and customers may be required to check with their regulator to find out which products are legal in their country before purchasing. This applies even when buying from online platforms. Strict regulation has been one of the main bottlenecks that the cannabis industry has faced over the years with the likes of the U.S. yet to federally legalize the use of marijuana in its various forms.

In summary, hemp cosmetics are typically riding on the success of the cannabis industry and emerging trends in the herbal products market. Many manufacturers have adopted the use of hemp seed oil and CBD oil as an additive to their products but not as a standalone product. This provides hemp cosmetics with a strong base to grow as an alternative to customers that have embraced herbal products.

However, while there are interesting benefits to be gained by embracing hemp cosmetics, the general impact on the cosmetics industry may not be enough to warrant the title of a disruptive product.

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.

Nicholas is a financial analyst by profession with extensive experience in investment research and stock market analysis. He runs a growth investing blog CAGRValue.com. Some of his market analyses have been featured on leading investment research sites like Seeking Alpha TalkMarkets, Gurufocus, and of course, Born2Invest. As a private individual investor, he focuses on undervalued plays and growth stocks, but his writing is much broader, covering the stock market, commodities, Forex, real estate, personal finance and disruptive technologies.

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