CBD is nearing its mainstream moment. Interest in cannabidoil (CBD for short), the cannabis compound that doesn’t get you high, is soaring. And businesses are responding with a steady stream of new products infused with CBD that claim to ease a variety of ailments.
Over the past year, I have met with clients, partners, prospects and investors in the rapidly evolving CBD space. The unexpected growth of CBD has created a massive market that is short on supply and has driven a litany of brokers to try to secure multiple kilos of product from trusted producers. Quality is always a concern as some products may contain impurities such as pesticides.
Although the market is frothy, a disciplined approach is necessary when evaluating this opportunity and considering how to position your company as a long-term player. Here’s a brief overview of the dynamics in the California market to get you up to speed.
In states like California, where adult recreational use of marijuana is legal, cannabis-based businesses are fine-tuning their strategies and gearing up for more growth—and CBD could become a major part of that if it hasn’t already. Consider: CBD derived from hemp is projected to be a $1 billion market by 2020, according to the Brightfield Group, a cannabis industry market research firm. Others say it’s currently a $200 million industry.
CBD: A rising market
Sales are certainly ticking up: Body creams, gummies and edibles, and even pet snacks made with CBD are increasingly being marketed and consumed under the premise of reducing a range of issues, from sleeplessness, acne and inflammation to addiction, anxiety and seizures. For example, we have recently met with manufacturers of CBD-infused high-energy drinks, athletic recovery products and cosmetics. These products do not include THC, or tetrahydrocannabinol, which is the cannabis psychoactive ingredient that makes people high.
Consumers and manufacturers that are looking for certain health and wellness benefits, but don’t want the associated high, are extremely interested in CBD. Adding to the increase in demand is the fact that even states that haven’t legalized marijuana do allow the sale of CBD products.
That’s one of the many interesting developments happening in the evolving, fast-moving cannabis industry, which will continue to rapidly shift gears depending on how regulations take shape. The effect of regulations shake out in fascinating ways. In Oregon, for instance, where growing and selling marijuana is legal within state lines, marijuana growers have ended up with an over supply of product. They’re now turning to hemp and—you guessed it—CBD as new sources of income.
In the meantime, the U.S. Food and Drug Administration looks like it might make its first approval of a CBD-derived drug sometime soon. In April, an FDA advisory committee recommended the agency approve a CBD drug created to help people with rare and severe epilepsy disorders. The FDA noted that CBD has been shown to be effective for a particular type of seizure and the risks “appear acceptable.”
What the future holds
In spite of the current hype around the CBD market, proceed with caution. The long-term effects are not yet known. Clinical trials of CBD products are few in number and in early stages. It’s the beginning of the marathon. There’s still work to be done to flush out the effects of CBD, how and when it should be used, how it interacts with other ingredients and all the possible side effects. The studies that have occurred to date have involved animals or small groups of people over short periods of time.
But the results have been pretty positive anecdotally to date, which is why CBD continues to be explored for anti-inflammatory and anti-anxiety uses. A Phase 2 clinical trial underway, for example, is looking into whether CBD could help people who are addicted to opioids. It could cut back their craving for the overly addictive drug.
Researchers and companies are lining up to explore CBD’s potential benefits. For businesses on a mission to help humankind—whether it is to improve people’s sleep or to relieve their pains—it’s an exciting time to see if they can get the formula right of both helpful products and sustainable businesses.
Chris Vane is a director at RoseRyan, where he leads business development for this finance and accounting consulting firm’s cannabis, high tech and cleantech practices. Chris and RoseRyan consultant Terry Gibson were recently interviewed by the Cannabis Business Times on the financial fundamentals necessary for cannabis businesses’ success. Chris can be reached at [email protected], or call him at 510.456.3056 x169.
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RoseRyan provides finance and accounting solutions in San Francisco and throughout Silicon Valley so companies can go further, faster.
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