Cashing In On Cannabis – Is CBD The Next Billion Dollar Wellness Industry?

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After decades of prohibition, marijuana has undergone a radical makeover. Emerging from the dorm room to be embraced by the boardroom, cannabidiol – or CBD – has taken centre stage on the global wellness scene and propelled the market at an unprecedented rate. But as one of the most hyped up, invested in and scrutinised wellness trends to emerge in the 21st century, what does the future hold for businesses looking to cash in on cannabis?

This summer in the UK’s Bath, Cirencester and Clifton, three consumer-facing wellness centres under the banner Goodbody & Blunt will open, legally peddling a cornucopia of potions and elixirs derived from the cannabis hemp plant, designed to reduce anxiety and alleviate pain. At the same time, Daye, an innovative British startup using CBD to develop a revolutionary cramp-fighting tampon, has raised millions in funding. Meanwhile, in the US, restaurants offering CBD-infused edibles and beverages are being shut down, fined and run out of town by local law enforcement.

Legislation, regulation and investment on both sides of the Atlantic and around the world is in flux, with CBD under an intense spotlight as it’s touted as the next miracle panacea for everything from epilepsy and anxiety to period cramps and insomnia. Some consumers and companies won’t touch it. Others are lumping their mortgages on its seemingly limitless potential for the wellness and healthcare sectors, with some optimistic forecasters predicting the CBD market to hit $22 billion as soon as 2020. That’s a staggering rise for a market that was valued at $90 million in 2015. To fully comprehend the potential of the industry, first it’s important to understand how we got here.

BELIEVE THE HYPE
Not to be confused with medicinal marijuana – which is a completely different type of complexity – CBD is one of the most well-known naturally-occurring cannabinoids or anti-inflammatory flavonoids of hemp, a member of the cannabis family of plants. Unlike the most well-known cannabinoid, THC (tetrahydrocannabinol), CBD is not thought to be intoxicating or psychoactive and, unlike marijuana in the UK, therefore isn’t controlled under the Misuse of Drugs Act, 1971.

The buzz around CBD is starting to reach a fever pitch, but the science behind the miracle compound is nothing new. “From Queen Victoria using cannabis tinctures for painful periods, to the US government owning a patent on CBD’s neuroprotective and antioxidant properties, to the first cannabis-based tablet sold for dysmenorrhea (menstrual cramps) in the 1840s, we’ve been exploring the compound for a while,” says Daye’s 24-year-old founder Valentina Milanova, who, in securing $5.5 million in funding, is hoping to harness the potency of CBD as an alternative to traditional painkillers.

Beyond femcare, CBD’s potential for good is truly vast. A recent review from the University of Salerno, Italy, suggested CBD could be used to treat degenerative brain conditions such as Alzheimer’s and Parkinson’s, and inflammatory conditions such as rheumatoid arthritis and Crohn’s, as well as pain, psychosis, depression and cancer. Further clinical trials are exploring the use of CBD for improving transplant acceptance, reducing symptoms of schizophrenia and even treating addictions.

From the aforementioned research, CBD may well deserve the hype, but the conversation around its value becomes rather more complicated when trying to untangle the network of local and federal, national and transnational legislative bodies attempting to govern this burgeoning industry.

Image: Daye

A LEGALISED HIGH
“In the US, CBD was legalised by the Hemp Amendment to the Farm Bill in November 2018,” explains Milanova. “It led to an explosion of CBD-infused consumer products hitting the shelves but technically, the FDA [the globally influential US Food and Drug Administration]still holds regulatory authority over the compound, and is yet to deliver a clear stance on the status of CBD.”

In the UK, CBD products for humans (the rules are different for pets) containing less than 0.2% THC are technically legal so long as they are derived from hemp, make no medical claims and are sold as food supplements. As such you can find CBD supplements and snacks stocked everywhere from Holland and Barrett to Planet Organic. However products sold as medicine are subject to much stricter rules and regulations, despite medicinal cannabis becoming legalised and available on prescription in the UK last November.

Then there’s the European Union. In March the European Food Safety Association declared CBD should be classified and regulated as a “novel food”, heavily restricting its distribution – as it did at first for both argan oil and chia seeds, points out Milanova. “The WHO (World Health Organisation) says CBD is safe and there have been 132 independent studies examining its effects,” she says. “Yet, as with every compound that’s being rediscovered by science and reintroduced to society, the importance of further research cannot be ignored.”

At present, the only licensed CBD drug available on prescription is Epidiolex, for the treatment of two rare forms of children’s epilepsy. Significantly, for both CBD’s therapeutic credentials and its value on the stock market, the drug was given the green light by the FDA last June. Then GW Pharmaceuticals, the UK-based company responsible for its manufacturing, announced it would cost patients an eye-watering $32,500 a year.

To make matters even more mystifying, in February the US Department of Health started dishing out CBD embargoes to popular restaurants and bars in New York and Ohio and from July plans to mete out fines of up to $650 for anyone violating the ban.

With all this uncertainty swirling around the industry, it begs the question: is the CBD wellness market here to stay or likely to go up in a puff of smoke?

THE HIGH’S THE LIMIT
“This isn’t a fad,” says Sativa Investments CEO Geremy Thomas, the UK’s first CBD and medicinal cannabis investment company, which also owns the Goodbody & Blunt stores. “It’s a long term trend borne out of markets exposed to these products well before us. In Canada, for example, medicinal cannabis has been available since 2001. In Germany, since 2017. There are 30 states in America that have medicinal cannabis available. That is increasing every year.”

Thomas, who first realised the potential of the market when attending a cannabis conference in Canada two years ago, believes this long term trend is being driven by a shift in public and government opinion towards cannabis.

“It’s all part of a phenomenon around recognising that this plant that has been in traditional medicine for thousands of years, but became public enemy number one and demonised in America under President Richard Nixon, can actually deliver a positive experience for those who use it.

“All the research and benefits that derive from the cannabis plant have been held back, but that prohibition, effectively, has now been lifted.” And Thomas has made sure his company is perfectly placed to capitalise.

Sativa – which owns the UK’s leading CBD supplier George Botanicals and recently acquired PhytoVista Laboratories, allowing it to analyse and report on the content of commercial CBD products – began by servicing the vaping market as an alternative to nicotine.

“That was certainly popular,” Thomas says. “But the wellness market is much broader and has far more potential than simply vaping additives. We only set up two years ago but we’re already selling £100,000 worth of CBD wellness products monthly, and once we’ve opened the three Goodbody & Blunt pilot stores, we intend to roll-out a franchise network that will reinforce our brand across the country.”

Cashing In On Cannabis - Is CBD The Next Billion Dollar Wellness Industry?

Image: Wunder Workshop

POWER TO THE PEOPLE
Thomas’ only concern over the industry’s seemingly limitless potential, is the lack of a clear and obvious regulatory pathway for CBD.

“In the UK there is no regulatory environment which fully endorses and accepts responsibility for CBD products.” That’s what led Sativa to acquire its laboratory business, which recently completed its 1000th test for the commercial CBD market in the UK, holding manufacturers of CBD products accountable to the claims they make on their packaging.

It’s an issue which highlights the greatest threat to the CBD market and everyone looking to capitalise on it. Cannabis might be making a comeback – in a big way – but it’s the wellness consumer rather than the scientific community driving the movement and that makes it volatile and unpredictable.

“We’re at an unusual and unique point in time with CBD,” says Beth McGroarty, VP of Research at the Global Wellness Institute, which closely monitors the industry. “It’s hard to think of a category where CBD isn’t making its way, from beauty and nutrition to spa treatments and medicine. But there hasn’t been much time to do a huge and authoritative body of scientific research on all the benefits companies are touting it for.”

Quality research is happening, she adds, but there is also much “belief” and “imprecision of application” at this stage. “The majority of wellness movements like CBD arise as a supplement to traditional medicine, but this is a consumer-driven movement and market and right now it’s being fuelled as much by mass personal testimony as a big body of evidence.”

Although that makes the market vulnerable to shifting consumer trends, the spike in popularity of CBD does make one thing clear for businesses to seize on, says McGroarty. “The extraordinary interest in and usage of CBD speaks loud and clear to the epidemic of our age: anxiety and stress. People want solutions – and they increasingly want ones that come from nature.”

Cashing In On Cannabis - Is CBD The Next Billion Dollar Wellness Industry?

Image: Tonic, Kush Queen, Recess

NO SMOKE WITHOUT FIRE
Ethically speaking, this puts CBD and companies who peddle it, at a crossroads, says Sarah Greenidge, founder of WellSpoken, an agency focused on holding wellness companies accountable to consumers.

“There’s undoubtedly lots to capitalise on with CBD as an emerging market but because legislation and regulation are still being fine-tuned you need to be accountable,” she says. “As a business, you need to ask yourself what is the cost to the consumer?”

As a stark warning, Greenidge compares CBD’s rise as a consumer-led wellness trend with that of fertility and contraception apps. “The industry popped up before regulation was in place and as it wasn’t tightly monitored lots of people using the apps were involuntarily becoming pregnant.”

The regulators hammered down on these companies, forcing them to radically overhaul their communications and marketing at great cost to their accounts and brand image. Therein lies the risk for CBD companies, with consumers assuming something is safe simply because it’s on the shelves at their local wellness store.

Another concern for Greenidge is where someone might take a CBD product in place of, or at the detriment of their prescribed medication. It might not do you any harm but it could deprive you of the treatment you need.

It requires an industry-wide education piece, she says. “It’s not just about being legal, or how not to fall foul of organisations. You’re not just shifting protein powders. It’s more serious than that. You need to start with a mindset that your CBD product is classified as a medicine. You need to see your consumers not as customers, but as patients.”

THE BILLION DOLLAR QUESTION
With consumers and corporations warming to CBD’s potential as both a wellness panacea and lucrative investment vehicle, should you board the bandwagon or is there a risk of oversaturation that will burst the CBD bubble? Every expert we asked, believes the case for CBD is only going to get stronger.

“Because it’s relatively new, most people are yet to try CBD so the potential market is huge,” says Greenidge. “Products will need to prove their efficacy but if they can, and the science suggests they should, the market will only surge.”

“The genie is out of the bottle,” adds Thomas. “The players, across the Atlantic and in Europe, are in it for the long term. There’s no way CBD sales are going to be stopped because it’s too big. In the UK we’re five or six years behind the curve but as the Canadian market demonstrates, it will become very big. As an investment case in the UK, this is the time to get in. We have the demographics and population to suggest we will be the biggest market in Europe.”

So, can you put a figure on CBD’s market value? It’s almost an entire wellness market in its own right, says McGroarty. “CBD – and THC products, too, where legal – are a huge factor in the spend and growth happening in the ‘complementary medicine’ market, last valued at $360 billion globally, at year end 2017,” she says. “It might even be safe to say they’re the biggest factors of growth rates in that category in the last couple of years, which gives you some idea of CBD’s value.”

A billion dollars? “Absolutely,” insists Milanova. “But that’s not what excites most people about it. Most CBD businesses today were started by people who genuinely believed in the compound’s therapeutic properties and had to face great legal and research hurdles to bring their products to market. They laid the foundation for the economic growth we’re seeing in the hemp industry today and they deserve all the credit!”

5 STEPS TO SAFEGUARD YOURSELF AS A CBD COMPANY

1. Don’t be a lone wolf
Becoming a member of a trade organisation will protect you from any major changes to the way CBD is governed and policed,” says Greenidge of WellSpoken. “Don’t go it alone.”

2. Stay up to date
“In the UK, your first port of call should be to contact the Cannabis Trade Association. Don’t put a penny into investing into a business until you’ve talked to them first.”

3. Keep your finger on the pulse
“Set up Google Alerts for any new legislation involving CBD and cannabidiol. Consult the Medicines & Healthcare products Regulatory Agency (MHRA). And do your homework.”

4. Take a medical mindset
“Treat your customers as patients, not customers, and see CBD as a medicine. That way you’ll work within a much tighter and more robust regulatory framework.”

5. Write accountability into your constitution
“When setting up your company, have the foresight to surround yourself with people and structures that will keep you accountable, honest and accurate.”

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