CBD — Snake Oil or the Next Big Thing?
High Prices & Big Promises
“How much do you think these were ? They're expensive.” My colleague asked.
“£15 max.” I replied, staring down the small box containing 9 jelly sweets.
“Nope, 50 dollars!” he said gleefully.
His glee came from the fact he didn’t have to pay for the treats. His wife was gifted them at a company event. Many of us in office were perplexed at who would pay that amount for the sweets ? And what justified the hefty price tag?
I mean the packaging was nice. £15 nice, hence my suggestion. Even, the most luxurious brands with global recognition would be hard pushed to sell consumers 9 chewy sweets at $50. So, it was a shock to hear the sweets came from an unknown brand called Lord Jones.
Lord Jone’s hope to become a dominant luxury brand in the CBD market, which until recently has remained generally untapped. Lord Jone’s aim to become a globally recognised brandname in the distribution and manufacturing of the finest CBD infused products.
Unfamiliar with CBD, I wondered if it justified the $20–$30 jump in traditional luxury sweet pricing. I wanted to explore the CBD market in more detail.
CBD has been popping up everywhere — in my local Holland & Barrett, health conscious coffee shops and now in my colleagues sweets. Despite CBD’s sudden prominence, no one in the office was able to pinpoint what distinguished a CBD infused product, its advantages or why it is even legal?
Everyone could make the link too cannabis but very few could take the analysis any further. So if no one really knows what CBD is, then why are CBD products flooding the market?
What is CBD?
CBD stands for cannabidiol. CBD is the non psychoactive element found in marijuana and hemp plants. The plants are made up of both CBD and THC. The CBD element of the plant produces no euphoria or intoxication components.
In 2018, Trump passed the Farm Bill which removed hemp from the definition of cannabis in the Controlled Substances Act. Hemp has very low concentrations (no more than 0.3% on a dry weight basis) of THC in comparison to marijuana which has significant amounts of THC. The passing of the bill now makes it possible to legally cultivate hemp for industrial purposes and to produce CBD.
The passing of the bill has given rise to an increase products hoping to be leaders in the CBD and wider cannabis based product market. The cannabis edibles sector is estimated to be valued at $4.1bn in the U.S.A and Canada by 2022. Establishing yourself as a market leader in CBD now will enable companies to establish the right frameworks and tools to handle the expected increase in demand.
Science of CBD
Look at a variety of CBD products and it will become clear that CBD will cure all ailments; Touted as having benefits that reduce anxiety, relieve joint pain, insomnia and opioid addiction, to name a few. However, only a small number of studies have actually examined the benefits of CBD.
The most prominent research study surrounding CBD was related to the treatment of specific childhood Epilepsy syndromes that typically don’t respond well to anti-seizure medication. In the cases, where the medicine containing CBD was used the number of seizures reduced, and in some cases removed seizures completely. Considering this evidence, the FDA approved the only CBD based medical product — Epidiolex.
Many of the health claims found on the products are anecdotal. Very few studies have been completed in addition to the Epilepsy study — they explored the immune system and reducing inflammation but the studies were not even administered on humans. Bloomberg also reported an existing study found that a high dosage of 500mg of CBD had to be administered for it to be effective. Many professionals have voiced concerns about product dosages. Dr Blessing spoke to the New York Times on dosage stating “Most of the products where people are putting CBD in coffee or food, there’s no solid evidence that they contain enough CBD to do anything, A CBD coffee may only have five milligrams in it. In order to treat anxiety, we know you need around 300 milligrams.”
CBD Marketplace
CBD has been infused into almost every product in the marketplace. From CBD coffee and cookies to face creams; From luxe goods to everyday goods. The marketplace is filled with competitors hoping to be the mainstream leaders.
However, experts have raised concerns that many of the products are simply just a placebo. Studies have shown that many products do not actually contain the amount of CBD advertised. The following slides from Bill J. Gurley’s study Content vs Label Claim: A Survey of CBD Content in Available Commercial Content in Commercially Available Products — outlines stark differences between marketing and the product:
In addition to this study, the FDA also did their own testing of CBD products in 2015/16, resulting in them sending out warning letters to companies making false claims.
The combination of marketing and hype could be responsible for the placebo effect. Despite many products containing very little CBD, a consumer survey of 1.018 Americans who took CBD in last 24 months found that 48% felt it was very or extremely effective. However, 46% were also sure that CBD had been tested for safety and efficiency, which unfortunately is incorrect.
One benefit that definitely seems to come from CBD is the positive profit it is generating for the companies touting a high price tag for a product that claims to relieve all ailments.
CBD Regulation
The production of CBD is now legal in the U.S. however the regulatory landscape is still unclear. The FDA do have concerns about the exorbitant claims being made by many companies in the CBD space, and in May 2019 held a public hearing “ to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labelling, and sale of products containing cannabis or cannabis-derived compounds.”
The FDA are still gathering information before making clear cut decisions on regulation, but we can expect that the regulatory landscape will change over time; Expecting to see a specific focus on the marketing and safety of products. The EU is further behind the FDA in CBD based product regulation. They consider CBD products in the novel food category which must gain approval before sale in the EU, it can take up to 3 years gain approval. However, this is not legally binding and the EU member states can make their own decisions on legalisation and regulation of CBD. Although, it has been made clear from the EU that they are interested in looking into the over the line claims made on the products and over time the EU may also take a stricter stance on CBD regulation.
CBD Competitive Landscape
There are just as many investors as there are inventors hoping to make a profit in the CBD space. The Brightfield Group estimate the CBD market is worth $318m in the EU and $590m in the US in 2018. CBD infused foods is named one of the top restaurant trends in 2019 by the National Restaurant Association. Many venture capital firms are focussing on funds that solely invest in CBD and cannabis related products, hoping that some will make it big in the mainstream market.
Some of the top international firms like Hershey’s and Coca Cola also have their eyes on the CBD market. None are really ready to commit to producing CBD products, but many are exploring and monitoring the trend. CBD could be incredibly important for brands like Hershey and Coca Cola who need to diversify their sugary portfolio and appeal to the more health conscious consumer.
The lack of commitment from big players is due to the regulatory environment. However, once clarity from regulators is provided, we could see many large firms leveraging their industrial manufacturing methods and capital to wipe out many of the smaller players.
Future of CBD
CBD is here to stay, at least for the short term. What will determine CBD’s future success is further research studies identifying CBD’s true benefits and the regulatory environments set globally. For now, it is really up to the consumer to be cautious and savvy in researching products to ensure they are actually paying a high price for a product that does contain a reasonable amount of CBD and not just being sold 2019’s snake oil.