On December 16, 2020, Aphria Inc. (TSX: APHA and Nasdaq: APHA) announced a merger with Tilray, Inc. (Nasdaq: TLRY), creating the world’s largest cannabis company. The two Canadian companies combined have an equity value of $3.9 billion.
Following the news of the merger, Tilray’s stock rose more than 21% the same day. Once the reverse-merger is finalized, Aphria shareholders will own 62% of the outstanding Tilray shares. That is a premium of 23% based on share price at market close on the 15th. Based on the past twelve months of reports, the two companies’ revenue totals more than $685 million.
Both of the companies have had international expansion strategies in place well beyond the Canadian market, with an eye focused on the European and United States markets. In Germany, Aphria already has a well-established footprint for distribution and Tilray owns a production facility in Portugal.
About two weeks ago, Aphria closed on their $300 million acquisition of Sweetwater Brewing Company, one of the largest independent craft brewers in the United States. Sweetwater is well known for their 420 Extra Pale Ale, their cannabis-curious lifestyle brands and their music festivals.
Once the Aphria/Tilray merger is finalized, the company will have offices in New York, Seattle, Toronto, Leamington, Vancouver Island, Portugal and in Germany. The new combined company will do business under the Tilray name with shares trading on NASDAQ under ticker symbol “TLRY”.
Aphria’s current chairman and CEO, Irwin Simon, will be the chairman and CEO of the combined company, Tilray. “We are bringing together two world-class companies that share a culture of innovation, brand development and cultivation to enhance our Canadian, U.S., and international scale as we pursue opportunities for accelerated growth with the strength and flexibility of our balance sheet and access to capital,” says Simon. “Our highly complementary businesses create a combined company with a leading branded product portfolio, including the most comprehensive Cannabis 2.0 product offerings for patients and consumers, along with significant synergies across our operations in Canada, Europe and the United States. Our business combination with Tilray aligns with our strategic focus and emphasis on our highest return priorities as we strive to generate value for all stakeholders.”
As a strange year heads to a final, painful finish, there have been some major (and some less so) changes afoot in the global world of cannabis regulation. These developments have also undoubtedly been influenced by recent events, such as the recent elections in the United States, state votes for adult use reform in the U.S. and the overall global temperature towards reform. And while all are broadly positive, they have not actually accomplished very much altogether.
Here is a brief overview of the same.
The UN Vote On Cannabis Despite a wide celebration in the cannabis press, along with proclamations of an unprecedented victory by large Canadian companies who are more interested in keeping their stock prices high than anything else, the December 2 vote on cannabis was actually fairly indecisive.
Following the WHO recommendations to reschedule cannabis, the UN voted in favor of the symbolic move. Despite removing cannabinoids from Schedule IV globally, a regulatory label designed for highly addictive, prescription drugs (like Valium), the actual results on the ground for the average company and patient will be inconclusive.
The first issue is that the UN did not remove cannabinoids themselves, or the plant, from Schedule I designation. This essentially means that countries and regions will be on the front lines to create more local, sovereign policies. This is not likely to change for at least the next several years (more likely decade) as the globe comes to terms with not just a reality post-COVID-19, but one which is very much pro-cannabis.
In the meantime, however, the ruling will make it easier for research to be conducted, for patient access (for the long term), and more difficult for insurers to turn down in jurisdictions where the supposed “danger” of cannabis has been used as an excuse to deny coverage. See Germany as a perfect example of the same.
It is also a boon for the CBD business, no matter where it is. Between this decision and the recent victory in Europe about whether CBD is a narcotic or not (see below), this is another nail in the coffin for those who want to use semantic excuses to restrain the obvious global desire for cannabinoids, with or without THC.
That said, the vote is significant in that it is a test of the current trends and views towards big issues within the overall discussion, beginning with decriminalization and a reform of current criminal and social justice issues inherent in the same. The Biden Administration, while plagued with a multitude of issues, beginning with the pandemic and its immediate aftershocks, will not be able to push both off the radar. Given the intersection of minority rights’ issues, the growing legality of the drug and acceptance thereof, as well as the growing non-partisan position on cannabis use of both the medical and adult use kind, and the economy, expect issues like banking to also have a hope of reform in the next several years.
Cannabis may be taking a back seat to COVID, in other words, but as the legalization of the industry is bound up, inextricably, in economic issues now front and center for every economy, it will be in the headlines a great deal. This makes it an unavoidable issue for the majority of the next four years and on a federal level.
Prognosis in other words? It’s a good next federal step that is safe, but far from enough.
The European Commission (EC) Has Finally Seen The Light On CBD
This combined with the UN rescheduling, will actually be the huge boost the CBD industry has been waiting for here, with one big and still major overhanging caveat – namely whether the plant is a “novel” one or not. It is unlikely as the situation continues to cook, that Cannabis Sativa L, when it hits a court of law, will ever be actually found as such. It has inhabited the region and been used by its residents for thousands of years.
However, beyond this, important regulatory guidance will need to fall somewhere on the matter of processing and extraction. It is in fact in the processing and extraction part of the debate that this discussion about Novel Food actually means something, beyond the political jockeying and hay made so far.
Beyond this of course, the marketing of CBD now allowed by this decision, will absolutely move the topic of cannabinoids front and center in the overall public sphere. That linked with sovereign experiments on adult use markets of the THC kind (see Holland, Luxembourg and Denmark as well as Portugal and Spain right after that), is far from a null sum game.
Legal Challenges Of Note
Against this changing regulatory schemata, court cases and legal decisions remain very important as they also add flavor to how regulations are interpreted and followed. The most important court case in Europe right now is the one now waiting to be decided in the Court of Human Rights at Strasbourg regarding the human rights implications of accessing the plant.
Beyond that, in Germany, recent case law at a regional social benefits court (LSG) has begun to establish that the cannabis discussion is ultimately between doctors and their patients. While this still does not solve the problem of doctor reluctance to prescribe the drug, barriers are indeed coming down thanks to legal challenges.
Bottom line, the industry has been handed a nice whiff of confidence, but there is a still high and thorny bramble remaining to get through – and it will not happen overnight, or indeed even over the next several years.
The United Nations Commission for Narcotic Drugs, based in Vienna, Austria, voted to remove cannabis for medical use from its Schedule IV status, the strictest drug classification where dangerous drugs like heroin are listed.
Dirk Heitepriem, vice president at Canopy Growth, told the New York Times the vote is a huge step forward. “We hope this will empower more countries to create frameworks which allow patients in need to get access to treatment,” says Heitepriem.
The much-delayed vote was close, with 27 in favor and 25 against, and Ukraine abstaining, but support from the United States was pivotal in getting it passed. Still though, the vote is largely symbolic – it doesn’t necessarily clear the way for countries to start legalizing cannabis and governments can still classify cannabis how they see fit.
The vote does, however, provide an important foot-in-the-door moment for cannabis advocates and businesses around the world. The commission’s decision to remove cannabis from Schedule IV means that the UN recognizes cannabis as an effective medicine, opening the door to future progress on the international level and possibly opening research opportunities along the way.
There is an ineffable logic to the pace of reform these days. Nowhere is that clearer in both the success of voter reform measures in the United States (along with timelines for implementation baked into the language of the same) and developments internationally. No matter that New Zealand decided to take a recent punt on the issue, there are other forces moving elsewhere that have the potential to be far more consequential – and in the short term.
Israel Announced Its Intent To Create A Recreational Market in 2021
There is little news anywhere as consequential as that of the oldest medical market finally succumbing to the inevitable. Namely, Israel has announced that it will allow an adult use market to begin operations probably by the third quarter of 2021. That said, don’t hold anyone to a deadline in the days of COVID-19, which will just as surely have not passed by then.
However, this development means that the entire conversation has moved up a notch – because the Israelis have so much research on the plant at this point.
For this reason, the tiny country is likely to have an outsized impact on the entire discussion – along with conveniently timed medical exports to the world.
Luxembourg Will Initiate Its Recreational Market Shortly Thereafter
It is likely not insignificant that the Israelis announced their intent to begin an adult use market just ahead of the long-announced Luxembourg flip – now on the agenda of the Green Party domestically for several years.
The strategic location of Luxembourg in both the European market as well as the much larger financial one now interested in the vertical cannot be understated. Indeed, the country has already played an outsized role in the development of the medical market here due to the contretemps over the clearing of stock trades in the German market as of 2018.
The double whammy of good news from both markets will also create a buzz internationally that is sure to drive other conversations forward – even if it is to study how both countries approach the issue. And, more to a point, how they differ from Canada, including regulation of their equity markets.
Combined with a more regulated market in Holland and presumably continued “experimentation” in Denmark, and by the end of next year, adult use reform will have hit the continent and in no small way.
Does This Mean The Sudden Potential of Adult Use Everywhere?
As 2020 has shown, in spades, just about anything can and frequently does happen. However, do not expect many more countries to move into the recreational column for the next several years.
Whatever the UN does or does not do about cannabis at the next meeting of the WHO, cannabis the plant remains a Schedule I drug internationally. This means that, for example, import and export of the same across borders, even in Europe, is likely to be problematic and for some time to come – let alone its international travel across say, the Atlantic.
Further from the law enforcement and financial security (namely money laundering) perspective, there are big issues that have to be dealt with finally, internationally, that so far have not – and under the guise of “medical reform.”
For that reason, in other words, do not expect Germany, much less France or even the UK to suddenly switch gears. And remember that both Luxembourg and Israel are small countries.
Bottom line? Adult use reform is here to stay, and will increasingly show up on the map. But the more “blanket” reform, still driving the entire discussion, is broadly, and globally, medical.
I have heard everything from “No one in their right mind would spend the energy in Europe when the U.S. has the most developed infrastructure in the world and $13 billion in sales” to “Is it even legal there?”. And yes, when you come from the West Coast cannabis world, it’s hard to imagine anywhere else but the West Coast of the U.S.A.
Europe has taken an infrastructural leap forward by starting off the pharmaceutical, medical and GMP supplements path. As an American-European from the West Coast cannabis world, remembering how the U.S. started/progressed, remaining patient and stretching the grey matter crossing the thresholds of pharmaceutical manufacturing, is serious.
Costs to Do Business
Which country you choose to begin operations in decides if cannabis is more or less expensive cap-x and opp-x to the U.S. And don’t forget the Euro conversion. Clearly, working near main cities like Berlin and Geneva will be expensive both for land and competition for talented staff. I chose Portugal, which greatly reminds me in terms of geography to a mini-California on the coast of Europe. Portugal also boasts the most progressive cannabis rules and is home to large cannabis producers like Tilray and Clever Leaves paving the way in the EU market. Greece is also one of our top locations, due to being cannabis friendly and another coastal country with great talent and reasonable costs to live and operate.
All of Europe is buzzing with cannabis. Somai Pharmaceuticals tracks over 387 star-ups in cannabis around Europe, South America, Australia and Asia. The excitement when Colorado first announced cannabis legalization in 2014 is the same feeling in Europe now. Most groups are collaborative yet guarded at the same time with the uncertainty of how EU cannabis plays out. Patient demand exists, and similar government wills are at play, but all in the direct backyard of big pharma.
Right now you see huge companies that will always exist and small companies that will always be a part of competition. It’s likely that Europe will shake out to be 30% large to medium company mix and 70% medium to small companies. So, the feeling of room for everyone exists there. This is not surprising considering the legal market in the world is $17B in sales while the illegal market is estimated at ten times that market. And new demographics from around the world are opening up to cannabis for pain relief, sleep and other ailments for new age groups.
Brand New Infrastructure
Conforming to standard guidelines like pharmaceutical manufacturing, GMP supplement manufacturing and GACP farming is just plain normal. U.S. state-by-state expansions really missed the boat on this, and state rules without federal guidelines aren’t good for businesses left guessing or consumers. Eventually, with federal legalization, some infrastructure rebuilding will be needed to conform to standard procedures. I am unsure if the systems are even capable of handling tens of thousands of operating facilities with or without regulation, but starting off at the highest level of pharmaceutical grade is a good way to build consumer and regulator confidence. Learning pharmaceutical and supplement GMP manufacturing is a precise and studied endeavor coming from the U.S. cannabis market. The US hemp industry is embracing this on a supplement level. I now curl up to online courses and formulation books.
In time, all of Europe’s 741 million population will have access to cannabis related products. With standardized processes, new infrastructures and good-old fashioned entrepreneur energy Europe will be a massive market. Sure, the early adopters will need to struggle through regulations and rule creation, but the lifestyle in Southern Europe is the envy of West Coast USA, where laid-back lifestyle and organic food is the minimum standard.
Cannabis reform is proceeding globally right now in some interesting places, and in an oddly syncopated schedule yet again.
Namely, in the last few weeks, change has been moving forward not only in the U.S., but Europe too. That this effort in the EU came literally weeks before the American presidential election where as of now, no matter who will occupy the White House, even more states move into the adult use camp is also surely no accident. Particularly given the results.
In South Dakota’s case, voters agreed to legalize both a medical and recreational market in a single election. In New Jersey, the referendum that passed authorized a market that is moving quickly to get implemented. This is equally intriguing. Namely that to the average person right now, no matter where they are, the continued delays and gridlock to get going, no matter the problems along the way, are increasingly unpopular politically. That too, is showing up at the ballot box.
Indeed, cannabis reform is now absolutely one of the most pressing and yet unaddressed issues in several countries at present. See New Zealand (where the voter mandate for adult use reform failed during their Presidential election last week).
Europe Seems To Be Following New Zealand’s Caution As Germany Delays Further Reform But…
Last week, a proposal on adult use cannabis reform failed in the German Bundestag (Parliament). With the exception of the far right Alternativ für Deutschland (AfD), every other political party agrees that there needs to be forward motion on the topic, but nobody seems to want to fully address it. This is no surprise. Indeed, the recent appointment of a former German minister last month to a Swiss cannabis company seems, certainly in retrospect, to presage the same. As well as the many protest votes on the topic emanating from Berlin, one way or the other.
However, in the aftermath of what is expected to be a widely influential medical case here (namely the regional approvers may not interfere with a doctor’s right to prescribe to qualified patients), it may be that the government wants more time to grow its medical program while Denmark, Holland and Luxembourg (if not Spain) figure out the logistics on the ground.
Given that France has finally committed to a national medical trial to begin no later than the second quarter of next year, and further one where it punts the majority of the cost onto the industry itself, this would create a solid “medical cannabis” bloc in Europe’s most affluent states. Not to mention the first real, nationally authorized patient trial in Europe that is not commercial.
But even this is not the whole story. While dickering about the certifications and scheduling of the plant go on now at the highest international levels, let alone federal ones domestically, hemp products are clearly entering the consumer market here – from upscale CBD stores in city centers to hemp seed oil and hemp-infused mayonnaise appearing on the shelves of German mainstream grocery stores. Not to mention hemp infused alcohol of at least the vodka, gin and rum varieties.
And then of course there is Italy.
The Italian Market May Be The Dark Horse In Europe Everyone Has Been Waiting For
Within literally the month of October, all in public view, the Italian government circled on the topic of legalizing the CBD/hemp market. As of last week, the Ministry of Health finally decided that cannabidiol sourced from hemp is not a narcotic.
Given the fact that home grow now is not illegal, and medical cannabis is technically available, it would seem that Italy is positioning its hemp market to survive if not thrive at least domestically and further thread the needle of industry continuity against fluid and further rapidly changing European and international regulation right now.
In the meantime, like Germany, however, the country is clearly angling to create an industry infrastructure – and further beyond the pharmaceutical vertical – via “other” channels before taking the final plunge. Cannabis Lite fits that bill perfectly.
What Does This Mean For 2021 And Beyond?
No matter the official denials, it is very clear that recreational cannabis reform at the American and Canadian ballot box is moving the conversation forward globally, even if at a different pace.
With the WHO now poised to weigh in on the issue, more American states signing up, an expanding medical market across the world and adult use upstarts everywhere, 2021 is absolutely sure to be a meaningful year just about everywhere on the cannabis front.
The COVID-19 pandemic has certainly impacted the cannabis industry, no matter where you are. However, the impact of a global virus outbreak and subsequent economic recession has had a mixed impact overall on the industry, and further against a backdrop where the entire conversation of reform is also now an international one.
While the big international decisions were slowed down deliberately, as a result of the pandemic, there is a clear indication almost everywhere that this might also have been taken to allow countries to catch up to the inevitable.
Even in the world of cannabis there is a level of diplomacy. The good news of course is that as a result, the topic of reform is now on official agendas, and those are now moving forward with an air of authority.
As a result, here is a look at some of the most significant events that will impact the discussion long after this fall.
The WHO Vote In December Is A Massive Global Benchmark
There is little indication that the global health organization will punt on their reclassification discussion in December. This starts with the fact that Germany, ever cognizant of things like health management leadership is moving ahead with its medical program, full steam ahead.
Further, there are indications all across Europe that the individual countries where cannabis reform has clearly landed are having an impact on their neighbors, if not a more global discussion. European countries like France are quietly announcing medical trials to begin before the end of the first quarter of next year. And Italy just added hemp to its official list of medical plants. Bureaucracies do not move unless they have to, and in this case, they are clearly in transit on the cannabis conversation well beyond the interdiction only phase.
The New Zealand Recreational Vote Is Also Highly Important
Whether the Kiwis actually take this ground-breaking recreational decision across the finish line is almost immaterial at this point. The ballot measure is being decided during a national election within a week and further set against another one (the U.S.) where it is clearly not on the agenda in the immediate future.
That said, of course if the measure does pass, and there is late breaking evidence to suggest that it might, the bar, beyond whatever the UN decides, will have clearly been set.
With recreational reform, New Zealand will also join the ranks of Canada and Uruguay when it comes to this issue. If not, Luxembourg will most likely take this spot at the end of next year if plans continue to unfold as so far promised in country.
Without it, the country will join the many who are implementing plans to integrate the drug into formal medical infrastructure, which is far from a “loss,” at any level. That said it is a sign that individual countries, rather than regional or international bodies, will lead on the issue of reform and will continue to, no matter what the WHO does.
Regional Reform Is Shaping Up In Europe
Beyond this, of course, there are also signs that the issue of cannabis access, no matter what bucket it is being lumped into, is headed for a showdown in Europe on a regional level that has never been seen before.
The state of the Spanish industry now has a date with the European Court of Human Rights at Strasbourg over basic access issues. If that is decided for the plaintiffs, it will mean that not only will Spain be forced to formalize its own cannabis laws, but so will countries across Europe.
What that will mean for nascent recreational reform is also unclear, but at minimum, it spells good news for those who want to participate in the industry in a new way, and with a non-profit model so far not given much official traction across Europe so far.
Dr. Philipp Rösler, the former federal Minister of Economics and Technology and Vice Chancellor of Germany from 2011-2013 has just joined the board of Swiss cannabis company Pure Holding AG.
The move is interesting for a number of reasons, not the least of which is that it signals how political currents are moving in Germany, if not Europe beyond that.
To American eyes, Pure Holding looks like a very organized, corporate farm and cannabis manufacturer, organized to produce and test high quality cannabis, extracts and white label products for the coming storm of interest – no matter where European regulatory winds may temporarily go on hemp extracts.
Geopolitics At Play The fact that the farm is on the Swiss side of the border is also a signal that many Germans (at least) expect the EU to drag its feet on what kind of animal even low-THC and THC-free cannabinoids are while consumers vote with their pocket books across the continent and buy online imports.
The fact that Rösler is politically associated with the Free Democratic Party (FDP) of which he was also chair, is another indication that Germans in general are deeply upset about the slow movement of the CDU party (the Christian Democratic Union) on this issue (just like many others).
The FDP, like all other parties (except the extreme right wing Alternativ für Deutschland or Afd) has been much more forward about cannabis reform. That said, the party currently at the helm of the ruling coalition (CDU) has also been repeatedly accused of dragging its feet on the issue – no matter that medical cannabis was approved here as a therapy mandated for coverage by public health insurers.
The difficulties however that most patients have had to go through is not over. Reform has come here, but still for most, in name only.
The fact that Rössler was also a cardiothoracic surgeon before his stint in national politics is also a sign that the medical community is taking notice of the health effects of cannabis. That he was also federal minister of health of Germany (between 2009 and 2011 in Angela Merkel’s second cabinet) is also a clear indication that the topic of more cannabis reform is on the agenda at home in Germany, including Europe beyond that.
Even if, right now, certainly compared to what is developing in the UK, on a much slower boat to at least commercially accessible, low THC reform.
The Current Debacle Over Hemp In The EU
It is unclear what the fate of hemp is in the EU at present. With the region’s administrators coming to a legally non-binding and decidedly non-scientific holding pattern on “CBD,” (namely that it is a narcotic) it could very well be that the Swiss, English and importers from the rest of the world bring in flower, extracts and products that the region cannot keep out, but is not quite copacetic about embracing, just yet.
That said, with major health food producers now stocking hemp seed extract on the stores of major German grocery stores, it is clear that the worm is turning, one former politician and now board member at a time.
Why The Fuss Over Hemp At All?
The bigger debate is actually a scientific one. It boils down to parsing cannabinoids from the same plant correctly, while also understanding the role that they play together.
That this is now happening, roughly twenty years after the discovery of the human endocannabinoid system – and the recognition that the human body itself creates cannabinoids that are mimicked by external phyto (or plant sourced) cannabinoids, is a victory, even if a late one.
It also signals that at a high level, the debate about cannabis as a drug if not a tool for maintaining overall body wellness, is not abating, but indeed proceeding even as the debate stymies politically at a country-by-country if not regional level.
What Will Reform In The EU Look Like?
While the analogy is not exactly the same, and for a variety of reasons starting with the fact that European countries are sovereign and independent states of Europe and not part of a single federal country, it appears that cannabis reform will look very similar to the progress of the same as it has unfolded so far in the United States.
It is official. BfArM, the German version of the Food and Drug Administration and the federal agency with oversight of the national cannabis program, has approved Spanish medical cannabis imports into the country. Indeed, three German companies are now finalizing their paperwork to allow the transfer to be completed.
As Cannabis Industry Journal has learned, at least one of the companies on the Spanish side of the equation is the ever-interesting Alcaliber (Linneo Health). So far, the privately funded company has made smart, strategic business moves through a challenging transition period. With one of the few EU GMP-recognized licenses in Spain, it is a logical choice for German distributors in search of foreign-produced, but up-to-snuff product.
This is a positive and widely predicted turn of events as Germany begins to institutionalize its cannabis program at the next level. As of this fall, three producers will begin to distribute domestically grown cannabis in Germany. However, there is a clear need for a vibrant import market here and there will be for a long time to come.
Domestically grown cannabis, by design at least so far, was never intended to serve the entire base of medical cannabis patients in Germany. And Spain has been, from the beginning of the discussion, along with Portugal, Greece, Poland, Eastern Europe and of course Italy, an attractive market to produce high quality cannabis for export to (at minimum) Germany.
The European Ex Im Market Is Opening
While the Canadians still have an outsize impact on this market, that is clearly a period of time that is coming to an end. Indeed, Canadian produced cannabis is being turned down at the German border for quality issues linked to certification.
This is not a new issue. It has haunted the German market since 2017 and the beginning of the discussion about the German cultivation bid. But now it is official. Beyond Holland, and even Canada, in other words, lower cost cannabis is now entering the German market and from other European countries.
While Portugal and Denmark beat Spain to the punch, however, this is likely to be an impactful development for not only patients, but the entire price discussion. Distributors are clearly on the front lines of not only obtaining high quality cannabis (from somewhere), but meeting a price that is increasingly on the downward slide, just from the pressures of domestic production and the price structure created around the same by the German government.
Producers have been feeling the pinch, no matter where they are based, for at least the last 12 months.
The Impact On The Spanish Cannabis Discussion
It is unlikely that this development will not be duplicated by other Spanish companies vying for entry into the European and German markets. Spain has a thriving grey market cannabis economy in the form of Cannabis Clubs. It also, like Holland, has allowed a semi legitimate market as well as a distribution network to spring up around the same.
However, the times are also clearly changing. Holland is in the midst of regulating even its coffee shop cultivation economy as it becomes one of the most important exporters of medical cannabis to Germany. Expect the same trend in Spain, especially as Europe increasingly comes to the same conclusion as everywhere else. The regulated medical cannabis industry is great for economic development, especially for countries like Spain, with great weather and perhaps an overreliance on the tourism industry.
The Other European Producers Now In View Beyond Spain, Portugal and Denmark have the right to import medical cannabis to Germany. This list is expected to continue to expand as patient numbers grow. Because of the price restraints now placed on the entire market by the German government, however, entering the country with an attractively priced product that will pass muster, not only with regulators but doctors and insurers, is now absolutely the name of the game.
And that is of course, before the recreational and CBD topic even enters the discussion – and both are clearly on the agenda now, across Europe.
Reports estimate that up to 8 million people in the UK use CBD for its variety of wellness benefits. The market is currently worth £300 million, a figure which is expected to more than triple in the next five years.
Sales of CBD already outstrip those of Vitamin C at £301 million vs £119 million and given that almost 90 percent of users in the UK purchase CBD online, new investments into omnichannel and e-commerce capabilities are likely to lead to even more growth.
Yet, for all this excitement, the truth is the UK’s CBD industry is facing a bit of a roadblock.
Until this year, CBD has been in a period of regulatory uncertainty and the industry faced understandable criticism when high profile cannabis probes found that over half of the most popular CBD oils did not contain the amount of CBD promised on the label. On February 13, 2020, the Food Standards Agency (FSA) unveiled new plans to better regulate the industry and announced a deadline of March 31, 2021 for the submission of a valid application for novel food licence for businesses selling food and food supplements containing CBD in the UK. Contained in the announcement was a warning to all CBD companies that failure to comply may result in products being taken off the shelves.
Consumers are also advised by the FSA to “think carefully” about taking CBD, and not to consume more than 70mg a day, making the UK the first country in the world to set recommended limits for CBD consumption, despite no scientific basis for the 70mg recommended limit.
Whilst it is undeniable that the CBD market requires some form of regulation and standards need to be raised for CBD products, to ensure consumers are receiving safe, legal and quality products, this will be a complex and costly process. CBD companies, particularly smaller CBD brands, will need to ensure they have the necessary infrastructure, expertise and resources to meet this deadline.
The deadline is fast approaching, and no extension has been granted despite of the difficulties caused by COVID-19. This will put all businesses under pressure, as the process for applying for Novel Food status requires supplying a large amount of data from rigorous testing. For larger players, this will likely be nothing more than a costly inconvenience, but for smaller, nascent businesses, these costs may put their longevity at risk. There are hundreds of CBD start-ups which have done great work to future-proof their businesses and create safe, high-quality products. Now, instead of preserving costs to try and stay afloat during the pandemic, these businesses must put a significant amount of precious resource and funds into finalising their applications in time.
Improving end user confidence in CBD products and understanding the process from seed to shelf is crucially important in this developing industry, however, I firmly believe these regulations are suffocating the market. I fear that on April 1, 2021, many smaller firms who haven’t managed to achieve Novel Food status yet have a superior product, will suddenly find themselves unable to legally trade.
On the other hand, there is the argument that the FSA ruling may increase the importation of CBD products from firms based outside of Europe. So far, the large cannabis firms in North America, which have the budget and expertise to meet FSA standards, have held back on importing CBD products to the UK. This may well have to do with the slightly dubious legal status CBD has so far had in the UK, so it will be interesting to see whether this changes in April next year and which players will enter the market. The CBD market will continue to grow and diversify but it will be essential that this leads to increasing consumer choice rather than confusion.
In my opinion, the only way the UK will be able to fully harness the potential of CBD is to create an independent, self-sufficient industry that not only helps consumers but contributes to the wider economy through jobs, skills and investment. The pandemic has done well to put a spotlight on the huge access issues cannabis patients face in the UK, bolstering the case to ‘onshore’ the industry.
Whilst this would require a streamlining and simplification of the licensing laws around growing cannabis, the development of a UK-based industry would have endless benefits. Not only would medical cannabis patients see improved access to their medication, CBD firms would no longer have to ship oil in from the dominating wholesale nations such as Poland, Czechia and Italy, this in turn having huge economic benefits. The development of a UK industry should involve the creation of a new regulatory system specifically designed for cannabis products and preferably for a new regulatory body, similar to the Office of Medicinal Cannabis in the Netherlands, to oversee all cannabis regulation, licensing, importation and approvals. This would mean a move away from the current solution of forcing CBD products into the Novel Food category and subjecting them to inappropriate regulations which will soon begin to smother the market with unnecessary red tape.
People are increasingly turning to more natural health and wellness solutions, so as Britons become better informed about CBD products and as the market matures, demand will certainly increase. Yet with both Brexit and standardisation of cannabinoid regulations occurring in parallel, the future and scale of the CBD market is still to be determined. A huge UK market could potentially help push it in a positive direction, facilitating processes for CBD producers.
The cannabis industry is resilient and until this point, has managed to grow at an exponential rate despite regulatory uncertainty. As acceptance and demand continues to increase, so the case for an independent UK industry will strengthen and regulatory roadblocks finally overcome.
Strictly Necessary Cookies
Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.
We use tracking pixels that set your arrival time at our website, this is used as part of our anti-spam and security measures. Disabling this tracking pixel would disable some of our security measures, and is therefore considered necessary for the safe operation of the website. This tracking pixel is cleared from your system when you delete files in your history.
If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.