Business ideas for 2020: CBD
The CBD boom is expected to go from strength to strength in 2020, here's what you need to know.
By now, you’ve probably heard of CBD. It’s everywhere, in oils, face cream, ice-cream, tea, chocolate, rum, and almost any food/beauty product you could think of. An army of acolytes discuss how it’s helped everything from aching joints to insomnia, and sales are booming. Despite this, confusion reigns regarding what it actually is and how it might act on the body, as well as the relationship to cannabis, and its legal status.
Let’s start with the facts. CBD is not weed and will not get you high. The letters stand for cannabidiol, and it’s one of the chemical compounds found in cannabis plants. The stuff that gets people stoned is THC (tetrahydrocannabinol) and it’s this that makes smoking cannabis illegal. CBD products produced in the UK however only use the CBD part of cannabis, and often use CBD extracted from hemp – cannabis plants bred to have fewer flowers and a THC content of under 0.3%. Essentially, the virtual absence of THC is what makes CBD products legal.
As for how it works, there’s still a lot of debate about what CBD actually does to the body, and even whether it does anything at all. The most credible medical trial on humans was conducted by Great Ormond Street Hospital, and found CBD significantly reduced seizures for children with a severe, drug-resistant form of epilepsy known as Dravet syndrome. A 2011 study in Brazil also suggested that CBD helped to reduce anxiety levels. However, medical trials use much higher doses CBD than what is generally commercially available and so this doesn’t prove that high-street CBD products have any effect at all.
The internet, though, abounds with anecdote after anecdote discussing how CBD has eased the pain of aching joints, cured insomnia, or even lessened the pain of cancer treatment. If this isn’t simply a global placebo effect, experts think CBD stimulates the production of endocannabinoids, which help to reduce physical pain and mental stress.
However, these claims are not proven and CBD cannot therefore be medically marketed, it can only be sold as a generic supplement, with any beneficial impact on specific conditions hinted at rather than stated. Ashley Rossiter, Managing Director of MirrorMe PR, has experience promoting premium CBD brands and offers the following advice: “You’ll find a lot of medical claims surrounding the virtues of CBD from a brief search on the net but, as a brand, you can’t use or link to these claims in any way. The CBD industry is currently under-regulated and this poses a problem for both the consumer and the industry as a whole.” Ashley notes you also need to be careful with your online promotion: “CBD is currently an unapproved pharmaceutical and supplement with Google Ads, and you’ll find the same ad policy with social media platforms like Twitter, Facebook and Instagram.”
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Why CBD is a good business idea
Away from the claims and counterclaims regarding the effectiveness of CBD, one thing is undisputed – the market is huge and is only going to get bigger. According to research commissioned by the Centre for Medicinal Cannabis (CMC), 1.3 million users are spending £300m per year on CBD (larger than the combined size of the UK Vitamin C and D markets). By 2025, the market is expected to be worth just short of £1bn, larger than the entire UK herbal supplement market in 2016. Moreover, sales of CBD are not just being driven by trendy millennials looking for the next big thing but cutting across demographics. The elderly are using it to treat chronic pain associated with various conditions, while younger consumers are more likely to be buying CBD to reduce anxiety and combat insomnia.
The report also stated that while CBD products are being sold on UK high streets, the majority of UK consumers prefer to purchase online. It also noted that “UK consumers are currently paying high prices for CBD products”, indicating compelling market opportunities for companies that effectively meet the needs and desires of the target market.
CBD business opportunities
It seems likely that the real future of the UK CBD industry is in dedicated CBD oils and capsules rather than CBD being added to food products (commonly known as CBD edibles). Paul McCourt, founder and CEO of CBD producer Celtic Wind Crops, points out that “CBD in its oil form compared to an edible form is at least 50% more absorbent, as CBD edibles have to go through the digestive system.” He also notes that CBD gummy bears are particularly problematic as they are marketed and appeal to children, and advocates “a daily limit when it comes to the serving of CBD edibles”. Others in the industry take a more moderate view, with Brett Horth, CEO of Green Stem CBD and Canna Creations stating that CBD edibles “are a valid method of consuming CBD and a popular one with consumers”. However, the CMC’s report into the UK market found that: “Over 70% of UK consumers are purchasing tinctures/oils or capsules, suggesting a desire to use products systematically and at higher ‘therapeutic’ doses for CBD.” This therefore seems like the sensible option for a long-term business model rather than attempting to cash in on the current craze for CBD edibles, which bears all the hallmarks of a fad.
In terms of how to enter the industry, the primary routes are to either become a CBD producer, importing CBD and manufacturing oils and other products, or to become a CBD retailer and act as a marketplace for CBD products. Those with existing CBD knowledge may also be able to offer consultative services to companies operating in the CBD space.
Anyone wanting to enter the UK CBD market really needs to be aware of the regulations that affect CBD and how these might change in 2020. Currently, CBD is an under-regulated sector and research from the Centre for Medicinal Cannabis (CMC) indicates that this is already having some concerning impacts. The CMC analysed 30 CBD oil products available in the UK and found that 38% had less than 50% of the advertised CBD content, and one product contained no CBD whatsoever. George Glaisher, co-founder of premium CBD brand Aver, therefore echoes the views of many when he notes that “it is quite clear that the CBD market is in need of regulation to both standardise quality and ensure safety for consumers”. Fixing this is difficult though – CBD is currently controlled by the UK Food Standards Agency (FSA) but experts argue that the FSA lacks the resources to patrol the CBD market effectively and will need to work with industry bodies like the Association for the Cannabinoid Industry (ACI), a CMC initiative that aims to enforce minimum standards for the nascent CBD industry.
This stance is controversial however. Some producers, including Aver, believe that the FSA should work with the ACI to produce a standards framework but some question the CMC’s authority and promote an alternative approach. Dylan Mortimer, the founder and CEO of CBD producer Karma Coast for example, argues that “self-regulatory bodies like CannaPro are setting industry standards and protecting companies with legal aid and guidance”, while the CMC “seems set on taking the industry for ‘Big Pharma’ by introducing impossibly expensive licensing laws”.
Therefore, while the industry at large agrees that ensuring the quality and credibility of CBD products is paramount, there’s not yet agreement on how to go about this. Many producers are already acting unilaterally, conducting lab tests and publishing the results to reassure anxious consumers. This arguably reflects the direction in which the industry is heading and should be carefully considered by new entrants.
Given the amount of confusion and hyperbole surrounding CBD, it’s not surprising that existing businesses operating in the space stress the need for producers and retailers to be knowledgeable and credible. George Glaisher, co-founder of premium CBD brand Aver, states: “The most important thing for any CBD retailer is being reputable and transparent. The CBD industry has a murky history, and therefore partnering with the right suppliers and manufacturers is absolutely integral to ensure that the customer has trust in you as a brand.” Echoing this, Dylan Mortimer, founder and CEO of Karma Coast, advises those looking to enter the UK CBD market to: “Be genuine, be passionate, be in it for the right reasons, only purvey the best quality, don’t cut corners, consistently update your knowledge base, educate yourself and your clients, and be innovative.”
Looking further ahead, Ben Little, founder and director at Fearlessly Frank, a marketing and innovation consultancy currently working with a CBD brand about to enter the market, believes social and influencers will be key to brand success: “The war for customers will be fought on social media, branded content, and celebrity endorsement.” He’s also bullish on the overall prospects for the UK CBD market, arguing that: “We are just scratching the surface of the potential of cannabidiol and the faster someone can get past the naive and narrow minded legal debate and understand and manage the negative issues linked to addiction and abuse – the sooner we will find the real value of CBD as a potential solution to issues such as climate change, sustainable packaging, anxiety, depression, and obesity.”