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EU raises potential new hurdle for CBD in food [Interview]

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A recent survey on the openness of thousands of people across North America and Europe to CBD-infused beverages shows that, in America, 46% of people have used or would use a CBD product within the next 12 months, while in the UK and Germany, just over 30% of the population have recently used or would use a CBD product in the coming year. Stephen Murphy, Co-Founder and MD of Prohibition Partners, discusses the potential for growth and for disruption in the use of CBD food products.
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What is the market size of CBD products in the world and specifically in Europe? What is the forecast for the future?

“Prohibition Partners estimates the global 2020 CBD OTC health & wellness market to achieve potential demand of US$5.8 billion in 2020 with the potential to grow by 16% over the review period to US$6.79 billion. In Europe the market has the capacity to grow from US$1.6 billion currently to US$1.9 billion by 2024.”

What kind of products dominate on this market?

“Oil and tincture products currently dominate the CBD market. However, innovations in topical products and newer formats are expected to drive much of the premium value over the forecast period. Which products will be able to dominate the market will also depend on how regulations evolve. For example, as of this week Amazon is allowing a certain number of CBD products to be sold in the UK, but is abiding by the current EU regulations, so only products which are exempt from the Novel Foods Act will be able to access this lucrative sales channel.”

What types of beverages do you see emerging with hemp/ CBD extracts in Europe and other markets?

“We are seeing a wide range of beverage companies incorporating CBD into their products. This includes everything from CBD infused tea, alcoholic beverages, and soft drinks to juices and water products. While all of these products are already making it to market, there is no real limit to what beverages CBD can be infused with. CBD is an incredibly flexible and safe product which allows it to be incorporated into a wide variety of products, the anti-inflammatory properties and the lack of intoxicating effects are key to this.”

How innovative is this market?

“It should be borne in mind that CBD products as we know them are a relatively new industry. Of course, people have been using hemp for different reasons for a long, long time; but the idea of CBD being sold in consumer goods is still brand new. Therefore, everything that the industry does currently has an entrepreneurial air to it. On one hand, consumers are still becoming familiarised with new products and product formats. On the other hand, companies are just beginning to learn about their consumers in the sense of which products sell, and which don’t, who their customers are, what they prefer and why. In this context, innovation is essential and we see an enormous amount of it currently, from new methods of application with higher bioavailabilities to new substances such as CBG and THCV becoming of interest.”

 What is consumer acceptance towards CBD infused beverages?

“The acceptance for CBD-infused drinks is growing all the time. We have surveyed the openness of thousands of people across North America and Europe to CBD-infused beverages and we delve into this in our report. We found that the US and Canada, which have a longer standing trend of popularisation of CBD, have a higher openness e.g. in America, 46% of people have used or would use a CBD product within the next 12 months. We see that Europe is slightly behind this level of acceptance, but it is still strong, in the UK and Germany, just over 30% of the population have recently used or would use a CBD product in the coming year.”

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CBD extract itself is quite expensive, are consumers willing to pay the price? 

“It depends on the context. Price points for CBD products vary by format and by region. As an example, in a country like Japan, where CBD is just now taking off, customers are paying higher prices than in Europe where competition has driven the price down. In terms of formats, customers are willing to pay a higher price for cosmetics compared to consumable oils. Again, it comes down to context, customers are used to paying more premium prices in the cosmetics industry.”

What is the current regulatory status of CBD food and drink products in Europe?

“As companies are learning about their consumers, regulators are just now learning how to regulate this new industry. In January 2019, EFSA released highly disruptive and disputed guidance on handling cannabinoid-infused food products declaring them as novel foods. This means that producers who want to put their products on the market generally have to get their product included in the European Commission’s novel foods catalogue. A major issue that this raises for most developers of CBD food and drink products is that the process to apply for inclusion in the catalogue is costly and can take a long time. The European Industrial Hemp Association has estimated that this process can cost US$327,000+ per CBD product which is simply not possible for many small producers.”

“Then, in July of this year, the European Commission paused all Novel Food applications as they are now considering whether to classify CBD as a narcotic, rather than a Novel Food. If the commission goes ahead with this reclassification, it would cause a seismic shift in the industry which would cost a lot of businesses a lot of money. The commission may be further influenced by the upcoming meeting of the United Nations Commission on Narcotic Drugs in December, who will vote on recommendations by the World Health Organisation which include completely de-scheduling CBD products with less than 0.2% THC from international control. If this goes ahead, it would go a long way to ensuring the EC does not classify CBD as a narcotic and furthermore, it would help in persuading nations all around the world to open up access to the CBD.”

What is your prediction for the future of hemp-derived extracts in the food and beverage market?

“One relevant set of factors which will affect the development of the industry in the short to medium term is the consequences of COVID-19 and the lockdown. For example, consumers are now much more likely to be buying their products online both in the EU and in the US. While some disruptions have obviously affected supply lines, the main response we are hearing from producers is that demand is higher than ever.”

“One other key thing to consider is that the ability of the industry to meet the rising demand of patients and consumers depends largely on the support of regulators. A few key developments in the evolution of CBD legislations and regulation will occur over the next 12 months. At stake is the access to a favourite health and wellness product for millions of people, as well as the billions of dollars in potential earning for companies and governments.”

Join Stephen Murphy to discover more about ‘How cannabis is disrupting the global beverage market’ during Fi Europe CONNECT 2020, from 23 November – 4 December.

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