WATCH: Investors weigh in on CBD… 'It's either the Wild West or the Gold Rush'

By Elaine Watson contact

- Last updated on GMT

Related tags: FoodBytes, Cbd

Regulatory hurdles notwithstanding, investors and judges at Rabobank’s FoodBytes! event in San Francisco last week were fairly bullish about hemp-derived CBD (cannabidiol), and predicted that while the market has moved ahead of the science, this will not necessarily hold it back.

Speaking to FoodNavigator-USA just before the FDA announced a public hearing​ ​on May 31 "to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds,​" Blueberry Ventures founder Arif Fazal, a judge at the FoodBytes! event, said:

We’re super interested, but it’s super early and there are some key challenges, the most obvious one being the regulatory environment. It’s also still early in relation to scientific evidence over efficacy.

“But it may or may not be the case that CBD needs to prove out the science in order for the consumer to believe in its efficacy​.”

Firms are building CBD supplements brands, but in foods and beverages, ‘it’s more like an ingredient’

He added: “On the supplement side, I think there is an opportunity for brands to be built around pure CBD​ [Charlotte’s Web and PlusCBD Oil from CV Sciences are currently leading the supplements market, for example]. But I think on the food and beverage and nutrition side, to me it’s more like an ingredient, where we’ll seecompanies andbrands that are already doing functional products [develop CBD line extensions].”

Asked about the size of the prize, he said: “Folks say it’s either the Wild West or the Gold Rush so there’s probably a semblance of each… I think there is going to be opportunity here, but ​[many investors] are being cautious about when and where to get involved… I think there could potentially be a shakeout in some of these earlier companies given that it’s currently still in the crosshairs of the FDA.”

Brett Kadesh, senior associate at Touchdown Ventures, added: “This is a perfect example of an ingredient or a market that’s taken off and has a lot of momentum well ahead of the science… should the science eventually check out over time and the FDA get behind it, there could be a really huge market for it. But I think at the current time it’s a wait and see…”

Anne Greven, global co-head of food and ag innovation at Rabobank, added: “A research arm of our bank is really trying to figure this out… but it’s all going to come down to what the consumer says. If the consumer really wants it and they love it and they are fine with the claims [firms] are able to make, then it will become a very big product.”

Cannabis and CBD market researcher Brightfield Group​ has identified several consumer groups, who are interested in CBD for different reasons, managing director Bethany Gomez told FoodNavigator-USA.

  • ‘Stressed-out millennials’​ (aged 26-35) - who are turning to hemp CBD to address anxiety, depression and insomnia.
  • ‘Aging ailers’​ (aged 46 to 79) – who are using hemp CBD to address chronic pain, anxiety, depression and insomnia.
  • 'Glam users' -​ who are using CBD as "part of a wellness lifestyle" ​and to relax, rather than for a specific health condition.

New investments in cannabis/CBD

Vertically integrated cannabis CPG company Vertical​ ​has just raised $58m in a series A round led by Merida Capital Partners and "numerous global business leaders, including significant players in the alcohol distribution and brand space."​ The capital will be used to build out Vertical’s multi-state infrastructure and bring 50+ medical and recreational cannabis brands to market.

RE Botanicals

Organic hemp CBD brand RE Botanicals​ – founded by hemp foods industry pioneer John Roulac - has just closed a $2m funding round led by BIGR Ventures and supported by leading natural and organic products industry veterans.

While it can be difficult for consumers to compare CBD brands, Roulac said RE Botanicals was building a platform around certified organic full-spectrum ‘whole plant’ hemp extracts sourced from hemp grown by American farmers, and full transparency around the processing, in order to create a brand shoppers can trust.

FDA focusing enforcement on CBD products making ‘over the line claims’

Their comments came as outgoing FDA commissioner Dr Scott Gottlieb told a Senate appropriations subcommittee that while CBD is not (yet) a legal ingredient in foods and supplements as it was first investigated as a drug, the agency will only “take enforcement action against CBD products … if manufacturers are making what I consider over-the-line claims​ [such as claiming it can cure cancer or Alzheimer’s].”

Dr Scott Gottlieb at senate hearing April 2018
Dr Scott Gottlieb: FDA will take "enforcement action against CBD products … if manufacturers are making what I consider over-the-line claims..."

Asked about products that don’t make disease claims, Dr Gottlieb added: “There are products on the market right now that, given our enforcement priorities and limited resources, we haven’t taken action against​. [But] that’s not an invitation for people to continue marketing these products—we’re concerned about it—but we heard Congress loud and clear here​.

Even if it wasn’t an approved drug, because it was never previously in the food supply, we don’t have a clear route to allow this to be lawfully marketed short of promulgating new regulations,” ​he said, noting that an FDA working group is developing “potential legislative alternatives​ [to speed things up].

You could, for example, contemplate a scheme where Congress gave FDA authority to contemplate CBD as a food ingredient at certain concentrations and potency and purity and then have it exist separately as a drug product at a different concentration, different potency and purity.”

The FDA and CBD

FSMA-inspection-FDA2

In a statement​ issued Tuesday April 2, outgoing FDA commissioner Dr Scott Gottlieb reiterated that, "It is unlawful to introduce food containing added CBD, or the psychoactive compound THC, into interstate commerce, or to market CBD or THC products as dietary supplements. 

"The only path that the FD&C Act allows for such substances to be added to foods or marketed as dietary supplements is if the FDA first issues a regulation, through notice-and-comment rulemaking, allowing such use."

However, he noted that from an enforcement perspective, the FDA is focusing resources on "companies marketing CBD products with egregious and unfounded claims that are aimed at vulnerable populations.​"

  • CVS ​has started selling CBD creams, sprays and lotions (though not ingestibles) at 800+ stores in eight states.
  • Lucky’s Market ​sells a wide range of CBD products.
  • Fresh Thyme ​sells selected CBD products.
  • Neiman Marcus​ sells a wide range of CBD products.
  • Sephora​ has launched a curated section in its stores dedicated to CBD.
  • Barney’s​ has created a luxury cannabis lifestyle shop.
  • DSW​ has created CBD kiosks in selected stores.
  • Whole Foods​ has not announced any official entrance into the space.

Brightfield stands by bullish CBD forecasts: ‘The potential market growth is staggering’

Speaking to FoodNavigator-USA last week, Bethany Gomez, managing director at CBD/cannabis market researcher Brightfield Group​ – which has raised eyebrows by predicting the CBD market could be worth a jaw-dropping $22bn by 2022 ​[this includes pharma/petcare/topicals etc] – claimed CBD was poised to become the “next healthcare phenomenon,”​ despite the lack of clinical data.

“It’s sits so nicely within so many industry verticals. And with virtually no major investments taking place, extremely limited advertising, and few distribution channels available, hemp CBD drove over $600m in [US] sales last year because consumers have found that it works despite these barriers and the dearth of research to support it.”

Put another way, despite the lack of clinical data and the legal uncertainty - which have prevented brands from launching  big ad campaigns or consumer education platforms about CBD – the market has grown at a meteoric pace pretty much via word of mouth, boosted by the “occasional celebrity shout-outs and the odd doctor recommendation,​” said Gomez.

"However, the larger CPG companies are not yet ready to jump in until there is a tangible pathway from the FDA. The science will also come. Now that it's no longer a controlled substance, we expect to see a lot more clinical trials around CBD."

Satisfaction rates are high among consumers using CBD 

In a recent survey* of 2,400 medical cannabis users, satisfaction rates with CBD topped 80% [users who found CBD to be very or extremely effective for tackling pain, insomnia, depression, and anxiety], added Gomez, who noted that tinctures, topicals, and capsules are the largest part of the market today and are most often consumed to tackle anxiety, depression, and chronic pain.

However, foods and beverages targeting consumers looking for more nebulous ‘relaxation’ or ‘wellness’ benefits are likely to gain much more traction in future, she predicted.

Over half (54.6%) of 3,600+ US hemp CBD consumers quizzed by Brightfield Group in mid-2018 were heavy users, consuming products multiple times per week, while 23.7% of CBD consumers used products daily, she said.

* 2,400 HelloMD.com medical cannabis users were quizzed on behalf of Brightfield Group.

CBD-GettyImages-Dmitry_Tishchenko

"While the availability of CBD products in particular has increased dramatically in recent years... there are unresolved questions regarding the cumulative exposure to CBD if people access it across a broad range of consumer products, as well as questions regarding the intended functionality of CBD in such products."

FDA commissioner Dr Scott Gottlieb

In a recent survey of 2,000 consumers (1,500 of whom currently use CBD), High Yield Insights found that budtenders (individuals who work in a dispensary) outscored all others as the most trusted source of information about CBD products.

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