UK crackdown on CBD volatile fast-growing market

Efforts to crack down on the sprawling market for CBD oils, tinctures and foodstuffs have put UK regulators on a collision course with cannabis startups, after companies found themselves confused about new rules.

Last month, the Food Standards Agency published a list of 3,500 ingestible products with CBD — a hemp that doesn’t leave users stoned and can be sold without a prescription — and is in the process of getting approval for sale.

The Financial Services Authority said at the time that any products not on the list should be immediately withdrawn from sale in the UK. No new products were allowed to apply if they were launched after February 2020, a deadline set by the regulator.

But the UK’s food watchdog this week was forced to reopen the process after it received a flood of backorders from companies hoping to keep selling their products. The information “should have been given to us much earlier,” she said. The regulator will update the list two more times but will not add any more products after June 30.

The UK is the first country to regulate CBD in food. “The process of moving hundreds of companies and several thousand product lines from the gray market to a legally regulated market has always been complex,” said Steve Moore, founder of the trade group Association for the Cannabinoid Industry.

He added, “There is clearly concern about the emergence of a new deadline, but it is reassuring that the Free Syrian Army insists that this deadline is a ‘hard pause’ and that the requirements for making the list remain unchanged.”

More than 900 applications have been submitted for FSA approval, but only 70 made it to the next stage of analysis, which means thousands of products and brands linked to unsuccessful apps are due to be removed from sale.

The market for CBD, touted as relieving ailments from anxiety to joint pain, has boomed amid consumers’ frenzy for wellness and healthy lifestyles. It is estimated that this year it could exceed 3 billion euros in Europe, according to cannabis consultancy ProPubtion Partners.

Sales of products containing CBD, which unlike the relative psychoactive cannabis that is not classified as an illegal drug, began accelerating a few years ago along with the growth of the legal and recreational cannabis industry.

London-listed Cellular Goods, in which retired footballer David Beckham owns a 5 per cent stake, is among the companies whose products have been deemed incompatible.

After initially telling investors it was able to continue selling its digestible products, the company was forced to make a drastic change days later because it admitted that some of its products were launched after the FSA cut-off date.

On Friday, Cellular Goods, which raised £13m in floating the market in February last year, continued to sell its products online despite the Financial Services Authority’s decision. But in the evening it issued a market update confirming that trading standards had asked it to suspend sales “with immediate effect”.

Anna Chukina, chief executive, said the company was “disappointed by the FSA’s position” and believed its products were safe.

The FSA campaign follows reports that CBD products are not always what they claim to be. A 2019 study by the Medical Cannabis Center found that CBD products sold in the UK were “of a broad range of quality” with some containing less cannabis than claimed, or none at all.

Moore said the unregulated market for CBD, which is used in products from skin care to nutritional supplements, has nurtured “dodgy consultants and dodgy companies.”

“For many years there have been a lot of cowboy products on the market,” said Tony Calamita, CEO of Love Hemp, which sells CBD skincare products, but regulations will now protect consumers.

He described the publication of the list as an “incredibly positive step for the industry” but said the time it took for the FSA to publish it “has prompted a lot of companies to either exit the market or prevent them from launching new products.”

Antonio Costanzo, chief executive of one of Europe’s largest cannabis growers, Curaleaf International, said the FSA’s listing was “the starting point for getting some clarity on how to introduce [new] products to market.

The retailers Boots, Holland & Barrett, told the Financial Times they were taking steps to remove unlisted products, while Amazon and Superdrug said they were still reviewing the list.

However, it is not clear who will ensure compliance with the FSA’s list. The watchdog relies on local authorities, who say they are also responsible for online sales, to enforce its regulations.

The Local Government Association said that due to “significant capacity challenges in local regulatory services in general, councils are likely to target their work on this matter based on intelligence about non-compliance.”

Stephen Murphy, co-founder and CEO of Prohibition Partners, said there was “no clear enforcement” of the new CBD rules and that many companies that did not make the list were likely to review their “risk appetite” and consider trading ahead.