Author: Dave Neundorfer
May 10, 2021 – 8 min read
With this Monthly Extracts, we will share perspective on global distribution and synthesize our learning from regional and country-specific dynamics.
The US domestic CBD market is a helpful microcosm of the evolving global landscape. Companies are entering emerging markets on the heels of regulatory change, just as they dove into the US market in early 2019 following the passage of the 2018 Farm Bill.
In 2019, OBX was one of the first companies to ship biomass coast-to-coast from California to North Carolina. Despite having all of the regulatory documents prepared–grower license, harvest approval letters, and pre and post harvest COAs–one of our five trucks was seized by highway patrol who were unfamiliar with the 2018 Farm Bill, let alone the difference between hemp and cannabis.
Despite our rigorous preparation to ensure smooth sailing, Murphy’s law won the day. Our regulatory counsel spent her Saturday speaking with counsel for the Texas state police, walking through the paperwork and specifics of the 2018 Farm Bill to have our truck released.
While our biomass ultimately made it to North Carolina, the shipment took twice as long, cost twice as much, and created a major distraction for our team. And then, the price of CBD compressed by up to 90% over the coming year.
This experience was a good lesson that the earlier companies enter emerging markets, the heavier the water they will carry with inevitable regulatory and supply chain inefficiencies, pricing fluctuations, and the general fits and starts of new market development.
Our current global distribution efforts certainly reinforce this mold, with products held up at French and Hong Kong customs, not to mention freight companies abruptly shifting international shipping policy and the regulatory whiplash resulting from single court rulings.
This process is not for the faint of heart. Some companies have refocused their international efforts while others continue to break new ground. Emboldened by the explosive growth and cross-category potential that market reports project to be $23.6B by 2025 (with other analysts projecting a $165.7B market by 2027!), here are some of the groups that are staying the course:
- Curaleaf Holdings Inc., one of the largest cannabis companies in the US, announced its acquisition of EMMAC Life Sciences in early March and aims to turn Europe into a launchpad for international growth (1).
- British American Tobacco Plc recently purchased 19.9% of Canadian Based Organigram Holdings Inc. (2).
- Two-year-old luxury CBD skin-care brand Saint Jane launched in what was meant to be a limited-time CBD pop-up through luxury department store Joyce in Hong Kong in July 2020. After the products sold out quickly, Joyce added the brand to its permanent lineup. Saint Jane has received inquiries from retailers in Canada, the EU, the U.K., Australia, Mexico, South Africa and the Middle East (3).
- In December of 2020, Charlotte’s Web began distributing in Israel through a partnership with Israel-based medical cannabis firm InterCure Ltd. (4).
- Global Cannabis Applications Corp., a leading medical cannabis chain-of-custody compliance and data platform, signed an agreement to supply Efixii QR Codes on the retail packaging of CBD Agrocasa (“Agrocasa”), Europe’s largest CBD producer, in February (5).
We, too, are staying the global course. OBX has an office in Hong Kong establishing a beachhead in Asia, distribution partners in Europe, the UK, South Africa, and a new, strategic partner in Latin America (more on this to come).
Eyes wide open to the growing pains, we are undeterred and determined to leverage our learning from the first domestic growth cycles to build partnerships and a presence as new markets come online.
With many of Open Book Extracts’ partners and clients inquiring about international expansion, we thought we’d share our overview of the fast-evolving global market.
Europe & Mediterranean
Regulation: The EU made significant strides in 2020 on the regulatory front and the path to novel foods application has become more clear. Following a ruling by the European Union Court of Justice (ECJ) at the turn of the year and a vote by the United Nations’ Commission on Narcotic Drugs (CND) in December 2020 to remove cannabis and its derivatives from its most strictly controlled ‘Schedule IV’ drugs classification, the European Commission no longer views CBD as a narcotic and has noted that CBD “can be qualified as food” as long as the THC content is <0.2%. In February, the EU added hemp-derived CBD to their CosIng database, the European Commission database for information on cosmetic substances and ingredients, and added hemp-derived cannabigerol (CBG) to their database this past week. These clarifications from the EU are encouraging and support the establishment of healthy markets throughout the member states.
Companies looking to Europe must work with the European Commission (EC) to submit novel food authorization applications for CBD products. While this application process requires notable amounts of time, capital, research, and documentation to adhere to all the safety guidelines set forth, this new standard will eliminate bad actors from the market and set the stage for sustainable industry growth in decades to come.
Consumer Demand: According to the latest research from New Frontier Data, consumer surveys indicate that European as well as North American users mostly use CBD to manage pain, anxiety, and stress, having learned about it from a personal connection. As may be expected from the respective regulatory timelines, CBD awareness and usage rates are considerably higher in North America. Among European users, per capita spending on CBD varies widely by country, ranging from €7 to €57 EUR (i.e., an average of 21 euros). Total spending has surpassed common expectations in each Germany (€1.83 billion) and the U.K. (€1.71 billion). Across the EU, CBD sales project to top €6 billion (EUR) before the end of this year, with the market well positioned to grow rapidly in the near term. If the United States serves as a benchmark, annual per capita annual spending may reach $300 (USD).
Countries and markets prepared for growth: In reviewing the European landscape, we feel these are the markets that will lead to cross-category market development, similar to what we’re currently seeing in the US, and inspire global market adoption.
Germany: CBD-only products have thrived both in and outside of typical cannabis channels in Germany. Products are sold in two ways: individuals can get a prescription through the state medical program, or they can buy CBD through mainstream channels such as smoke shops, online, and natural food stores. Germany’s expected market size by the end of 2020 was $2.2B (6).
France: In February, Members of French Parliament published a report to support the development of the CBD sector, particularly in research, production and distribution. Currently, the threshold for THC is 0.0% in all finished products. This report encourages increased THC thresholds to between 0.6% and 1%. Further, the report encourages consumer safety research and a clearer delineation between CBD and marijuanna products. Syndicat Professionnel du Chanvre (SPC), the French hemp union, estimated that the French CBD market today is worth $181-241M, and further positive regulatory changes could lead to a $1.2B market by 2023 (7).
Switzerland: Switzerland’s regulatory landscape is one of the most lenient in Europe. CBD products are sold as consumer products and are currently available in over 1,000 tobacco shops. CBD is also widely available through grocery outlets, cosmetic stores, and CBD specialty stores. A population of just under 7 million created a CBD market with an estimated value of $77M last year (8).
Italy: According to a survey by New Frontier Data, 11% of Italians surveyed had purchased CBD products, contributing to a national market of $944M (9). By 2025, New Frontier believes this market to be worth $1.5B (10).
United Kingdom: In the UK, companies have worked with the Food Standards Agency to submit novel food applications. It is anticipated that the FSA’s approval process might take between 12-18 months. Products will be allowed to remain on the market if they were already on sale at the time of the FSA’s original announcement on February 13, 2020, a novel food application was submitted before March 31, 2021, and that application is eventually validated by the FSA. The Association for the Cannabinoids Industry (ACI) and the Centre for Medicinal Cannabis further released a report that the anticipated UK market size in 2021 will be worth $1B, almost a third higher than what they projected in 2019 (11). According to New Frontier Data, the UK’s CBD market is expected to exceed $3.3B by 2025 (12); one of the largest market opportunities on the planet.
Israel: Israel has been on the cutting edge of medical cannabis research for decades and some of the greatest cannabinoid discoveries and innovations have come from Israel, including the isolation of CBD. While CBD has been available through Israel’s successful medical cannabis program for decades, efforts to legalize recreational cannabis in 2021 are underway, and we expect the consumer products CBD market will benefit from this development.
Latin America
In a 2019 report on the Latin America market, Marijuana Business Daily’s shares, “A closer look at each country shows that one of the few commonalities across the continent is that most countries that legalized medical marijuana still have nonexistent or dysfunctional markets – sometimes even years after their cannabis laws were approved.” While the regulatory challenges in this region are one hurdle that need be addressed, the pace of Latin America’s demand for CBD and cannabinoid-infused products has yet to be fully understood.
We’re optimistic about this region as a whole in the long run, and here are the countries we believe will drive adoption:
Mexico: In March of 2021, Mexico’s Chamber of Deputies legalized production of cannabis for industrial, medical, and recreational purposes. The law now returns to the Mexican Senate which is expected to approve the modifications. Then, Mexico’s President Andrés Manuel López Obrador needs to sign the bill into law. This action would make the entire cannabis plant and its derivatives (both CBD and THC) federally legal. With a population approaching 130 million, Mexico is set to become the largest legal recreational market in the world.
Colombia and Uruguay: The only two countries in South America with well positioned laws supporting CBD products are Colombia and Uruguay. In Columbia, Hemp cultivation is allowed under a government-issued license granted by the Ministry of Justice and licenses for production of CBD and other cannabinoids require licenses from the Ministry of Health. Since 2013, Uruguay has been a cannabis friendly state, with well defined markets where CBD products are used as both medicine and supplements.
Brazil, Argentina, Peru, Chile, and Paraguay have medical CBD programs and some OTC product approval. As consumer demand grows and scientific data is published, these countries will all be great growth markets in the region.
Asia & Pacific
While there is a great deal of market potential in Asia, it remains unclear where the CBD investment center in Asia will emerge. Cosmetic products from western brands tend to do well in Asian markets, and this is a trend we expect to have a major influence on the cannabinoid category.
Hong Kong: CBD products are now easily accessible in Hong Kong, be it online, in stores, or as added ingredients in food and drinks in cafes, restaurants, and bars. In November of 2018, Hong Kong’s Secretary for Security said in an open letter that CBD is not classified as a dangerous drug. CBD products are legal in Hong Kong as long as there are no detectable levels of THC.
Thailand: On January 29, 2021, Thailand began processing applications for licenses to produce, import, export, distribute, and possess hemp. Thai officials have been arguably the most proactive, though much of the regulation signals a protectionist policy by the Thai government to build a strong domestic market.
Japan: Currently, CBD extracts and products made from hemp stems and stalks and containing no THC are legal in Japan. While some of the country’s leading industry advocates have criticized the newly formed cannabis control agency in Japan, fearing regulations that will conflate industrial hemp with marijuana, there haven’t been any recent reports published by a governing agency on plans to expand permissibility of flower-based extract in the market.
Australia: Starting in February 2021, the Therapeutic Goods Administration down-scheduled CBD from a Schedule 4 (prescription medicine) to a Schedule 3 (pharmacist-only medicine), making it legal to purchase products containing low-dose CBD over the counter in pharmacies. While there is a great appetite and desire for CBD from Australian residents and the anticipated market size is expected to exceed $200M in the first year of legalization, CBD products will be treated as medicine in Australia and some experts believe it will be another six to twelve months before CBD products are available at pharmacies.
Concluding Thought:
We’ve all witnessed the rapid growth of the cannabinoid industry in the United States in the last 24 months. The acceleration of ingredient production technology coupled with innovations in product development and manufacturing cleared the path for cannabinoid infused brands and products to break into every health and wellness category.
As cannabinoid companies expand internationally, brands require products that are customized for the target regulatory environment, be it production method, input requirements or THC potency and testing requirements. To be successful, it is imperative to maintain a constant watch and thorough understanding of international guidelines.
In the coming years, it is clear that the demand for cannabinoid-enabled health and wellness products will surge all over the world. The team at Open Book Extracts stands ready to serve the distinct needs of each individual international market, and together deliver high-quality and efficacious products across the globe.
Author: Dave Neundorfer
May 10, 2021 – 8 min read
With this Monthly Extracts, we will share perspective on global distribution and synthesize our learning from regional and country-specific dynamics.
The US domestic CBD market is a helpful microcosm of the evolving global landscape. Companies are entering emerging markets on the heels of regulatory change, just as they dove into the US market in early 2019 following the passage of the 2018 Farm Bill.
In 2019, OBX was one of the first companies to ship biomass coast-to-coast from California to North Carolina. Despite having all of the regulatory documents prepared–grower license, harvest approval letters, and pre and post harvest COAs–one of our five trucks was seized by highway patrol who were unfamiliar with the 2018 Farm Bill, let alone the difference between hemp and cannabis.
Despite our rigorous preparation to ensure smooth sailing, Murphy’s law won the day. Our regulatory counsel spent her Saturday speaking with counsel for the Texas state police, walking through the paperwork and specifics of the 2018 Farm Bill to have our truck released.
While our biomass ultimately made it to North Carolina, the shipment took twice as long, cost twice as much, and created a major distraction for our team. And then, the price of CBD compressed by up to 90% over the coming year.
This experience was a good lesson that the earlier companies enter emerging markets, the heavier the water they will carry with inevitable regulatory and supply chain inefficiencies, pricing fluctuations, and the general fits and starts of new market development.
Our current global distribution efforts certainly reinforce this mold, with products held up at French and Hong Kong customs, not to mention freight companies abruptly shifting international shipping policy and the regulatory whiplash resulting from single court rulings.
This process is not for the faint of heart. Some companies have refocused their international efforts while others continue to break new ground. Emboldened by the explosive growth and cross-category potential that market reports project to be $23.6B by 2025 (with other analysts projecting a $165.7B market by 2027!), here are some of the groups that are staying the course:
- Curaleaf Holdings Inc., one of the largest cannabis companies in the US, announced its acquisition of EMMAC Life Sciences in early March and aims to turn Europe into a launchpad for international growth (1).
- British American Tobacco Plc recently purchased 19.9% of Canadian Based Organigram Holdings Inc. (2).
- Two-year-old luxury CBD skin-care brand Saint Jane launched in what was meant to be a limited-time CBD pop-up through luxury department store Joyce in Hong Kong in July 2020. After the products sold out quickly, Joyce added the brand to its permanent lineup. Saint Jane has received inquiries from retailers in Canada, the EU, the U.K., Australia, Mexico, South Africa and the Middle East (3).
- In December of 2020, Charlotte’s Web began distributing in Israel through a partnership with Israel-based medical cannabis firm InterCure Ltd. (4).
- Global Cannabis Applications Corp., a leading medical cannabis chain-of-custody compliance and data platform, signed an agreement to supply Efixii QR Codes on the retail packaging of CBD Agrocasa (“Agrocasa”), Europe’s largest CBD producer, in February (5).
We, too, are staying the global course. OBX has an office in Hong Kong establishing a beachhead in Asia, distribution partners in Europe, the UK, South Africa, and a new, strategic partner in Latin America (more on this to come).
Eyes wide open to the growing pains, we are undeterred and determined to leverage our learning from the first domestic growth cycles to build partnerships and a presence as new markets come online.
With many of Open Book Extracts’ partners and clients inquiring about international expansion, we thought we’d share our overview of the fast-evolving global market.
Europe & Mediterranean
Regulation: The EU made significant strides in 2020 on the regulatory front and the path to novel foods application has become more clear. Following a ruling by the European Union Court of Justice (ECJ) at the turn of the year and a vote by the United Nations’ Commission on Narcotic Drugs (CND) in December 2020 to remove cannabis and its derivatives from its most strictly controlled ‘Schedule IV’ drugs classification, the European Commission no longer views CBD as a narcotic and has noted that CBD “can be qualified as food” as long as the THC content is <0.2%. In February, the EU added hemp-derived CBD to their CosIng database, the European Commission database for information on cosmetic substances and ingredients, and added hemp-derived cannabigerol (CBG) to their database this past week. These clarifications from the EU are encouraging and support the establishment of healthy markets throughout the member states.
Companies looking to Europe must work with the European Commission (EC) to submit novel food authorization applications for CBD products. While this application process requires notable amounts of time, capital, research, and documentation to adhere to all the safety guidelines set forth, this new standard will eliminate bad actors from the market and set the stage for sustainable industry growth in decades to come.
Consumer Demand: According to the latest research from New Frontier Data, consumer surveys indicate that European as well as North American users mostly use CBD to manage pain, anxiety, and stress, having learned about it from a personal connection. As may be expected from the respective regulatory timelines, CBD awareness and usage rates are considerably higher in North America. Among European users, per capita spending on CBD varies widely by country, ranging from €7 to €57 EUR (i.e., an average of 21 euros). Total spending has surpassed common expectations in each Germany (€1.83 billion) and the U.K. (€1.71 billion). Across the EU, CBD sales project to top €6 billion (EUR) before the end of this year, with the market well positioned to grow rapidly in the near term. If the United States serves as a benchmark, annual per capita annual spending may reach $300 (USD).
Countries and markets prepared for growth: In reviewing the European landscape, we feel these are the markets that will lead to cross-category market development, similar to what we’re currently seeing in the US, and inspire global market adoption.
Germany: CBD-only products have thrived both in and outside of typical cannabis channels in Germany. Products are sold in two ways: individuals can get a prescription through the state medical program, or they can buy CBD through mainstream channels such as smoke shops, online, and natural food stores. Germany’s expected market size by the end of 2020 was $2.2B (6).
France: In February, Members of French Parliament published a report to support the development of the CBD sector, particularly in research, production and distribution. Currently, the threshold for THC is 0.0% in all finished products. This report encourages increased THC thresholds to between 0.6% and 1%. Further, the report encourages consumer safety research and a clearer delineation between CBD and marijuanna products. Syndicat Professionnel du Chanvre (SPC), the French hemp union, estimated that the French CBD market today is worth $181-241M, and further positive regulatory changes could lead to a $1.2B market by 2023 (7).
Switzerland: Switzerland’s regulatory landscape is one of the most lenient in Europe. CBD products are sold as consumer products and are currently available in over 1,000 tobacco shops. CBD is also widely available through grocery outlets, cosmetic stores, and CBD specialty stores. A population of just under 7 million created a CBD market with an estimated value of $77M last year (8).
Italy: According to a survey by New Frontier Data, 11% of Italians surveyed had purchased CBD products, contributing to a national market of $944M (9). By 2025, New Frontier believes this market to be worth $1.5B (10).
United Kingdom: In the UK, companies have worked with the Food Standards Agency to submit novel food applications. It is anticipated that the FSA’s approval process might take between 12-18 months. Products will be allowed to remain on the market if they were already on sale at the time of the FSA’s original announcement on February 13, 2020, a novel food application was submitted before March 31, 2021, and that application is eventually validated by the FSA. The Association for the Cannabinoids Industry (ACI) and the Centre for Medicinal Cannabis further released a report that the anticipated UK market size in 2021 will be worth $1B, almost a third higher than what they projected in 2019 (11). According to New Frontier Data, the UK’s CBD market is expected to exceed $3.3B by 2025 (12); one of the largest market opportunities on the planet.
Israel: Israel has been on the cutting edge of medical cannabis research for decades and some of the greatest cannabinoid discoveries and innovations have come from Israel, including the isolation of CBD. While CBD has been available through Israel’s successful medical cannabis program for decades, efforts to legalize recreational cannabis in 2021 are underway, and we expect the consumer products CBD market will benefit from this development.
Latin America
In a 2019 report on the Latin America market, Marijuana Business Daily’s shares, “A closer look at each country shows that one of the few commonalities across the continent is that most countries that legalized medical marijuana still have nonexistent or dysfunctional markets – sometimes even years after their cannabis laws were approved.” While the regulatory challenges in this region are one hurdle that need be addressed, the pace of Latin America’s demand for CBD and cannabinoid-infused products has yet to be fully understood.
We’re optimistic about this region as a whole in the long run, and here are the countries we believe will drive adoption:
Mexico: In March of 2021, Mexico’s Chamber of Deputies legalized production of cannabis for industrial, medical, and recreational purposes. The law now returns to the Mexican Senate which is expected to approve the modifications. Then, Mexico’s President Andrés Manuel López Obrador needs to sign the bill into law. This action would make the entire cannabis plant and its derivatives (both CBD and THC) federally legal. With a population approaching 130 million, Mexico is set to become the largest legal recreational market in the world.
Colombia and Uruguay: The only two countries in South America with well positioned laws supporting CBD products are Colombia and Uruguay. In Columbia, Hemp cultivation is allowed under a government-issued license granted by the Ministry of Justice and licenses for production of CBD and other cannabinoids require licenses from the Ministry of Health. Since 2013, Uruguay has been a cannabis friendly state, with well defined markets where CBD products are used as both medicine and supplements.
Brazil, Argentina, Peru, Chile, and Paraguay have medical CBD programs and some OTC product approval. As consumer demand grows and scientific data is published, these countries will all be great growth markets in the region.
Asia & Pacific
While there is a great deal of market potential in Asia, it remains unclear where the CBD investment center in Asia will emerge. Cosmetic products from western brands tend to do well in Asian markets, and this is a trend we expect to have a major influence on the cannabinoid category.
Hong Kong: CBD products are now easily accessible in Hong Kong, be it online, in stores, or as added ingredients in food and drinks in cafes, restaurants, and bars. In November of 2018, Hong Kong’s Secretary for Security said in an open letter that CBD is not classified as a dangerous drug. CBD products are legal in Hong Kong as long as there are no detectable levels of THC.
Thailand: On January 29, 2021, Thailand began processing applications for licenses to produce, import, export, distribute, and possess hemp. Thai officials have been arguably the most proactive, though much of the regulation signals a protectionist policy by the Thai government to build a strong domestic market.
Japan: Currently, CBD extracts and products made from hemp stems and stalks and containing no THC are legal in Japan. While some of the country’s leading industry advocates have criticized the newly formed cannabis control agency in Japan, fearing regulations that will conflate industrial hemp with marijuana, there haven’t been any recent reports published by a governing agency on plans to expand permissibility of flower-based extract in the market.
Australia: Starting in February 2021, the Therapeutic Goods Administration down-scheduled CBD from a Schedule 4 (prescription medicine) to a Schedule 3 (pharmacist-only medicine), making it legal to purchase products containing low-dose CBD over the counter in pharmacies. While there is a great appetite and desire for CBD from Australian residents and the anticipated market size is expected to exceed $200M in the first year of legalization, CBD products will be treated as medicine in Australia and some experts believe it will be another six to twelve months before CBD products are available at pharmacies.
Concluding Thought:
We’ve all witnessed the rapid growth of the cannabinoid industry in the United States in the last 24 months. The acceleration of ingredient production technology coupled with innovations in product development and manufacturing cleared the path for cannabinoid infused brands and products to break into every health and wellness category.
As cannabinoid companies expand internationally, brands require products that are customized for the target regulatory environment, be it production method, input requirements or THC potency and testing requirements. To be successful, it is imperative to maintain a constant watch and thorough understanding of international guidelines.
In the coming years, it is clear that the demand for cannabinoid-enabled health and wellness products will surge all over the world. The team at Open Book Extracts stands ready to serve the distinct needs of each individual international market, and together deliver high-quality and efficacious products across the globe.
