The United States Food & Drug Administration has started 2020 as it ended 2019 – with a shot across the bows of the booming CBD industry.
And, the FDA’s on-going irritation with the unregulated, low-THC cannabis market is spooking the blue-chip brands once poised to enter it. Reports have surfaced, since the turn of the year, of many major brands recoiling from CBD as a result of the FDA’s position.
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Enforcement Cash Boost
At the end of last year the Federal Spending Bill provided the FDA with $2 million of firepower to undertake enforcement. This money will allow it to pursue rogue CBD companies making contentious medical claims, as well as an in-depth analysis of CBD product content – both, to be completed by the summer.
However, the FDA’s proclamations have not gone down well in the commercial CBD world. The Wall Street Journal reports on the uncertainty it has caused, saying the likes of PepsiCo, Starbucks, Kellogg and Red Bull have all put CBD plans on hold.
It quotes Mike Luce, co-founder of consultancy High Yield Insights, as saying it has gone from ‘all gas on, one foot from the consumers’ to ‘now there’s a very strong foot on the brakes from the FDA’.
FDA Says CBD ’Not Safe’
The WSJ says it approached Kellogg and was told that it doesn’t have any plans to use CBD in its food ‘because the FDA doesn’t recognize it as safe’.While it also quoted a spokeswoman for Ben & Jerry’s saying the company would work on a CBD ice cream, ‘only if the FDA approved the compound’.
This uncertainty is spreading north of the border, too. In its most recent earnings call in on January 14, Irwin Simon, CEO of Canadian cannabis firm Aphria, said its plans to expand into the the U.S., for now, ‘would not include CBD’.
Fellow Canadian firms Tilray and Canopy Growth have said retailers have been reluctant to sell CBD in the U.S. as they await firmer guidelines from the FDA.
However, a fightback, of sorts, against the FDA’s tin-eared stance is underway . Just last week a cross-party bill was brought before Congress by Republican Collin Peterson, chairman of the House Agriculture Committee. This calls for the Federal Food, Drug and Cosmetic Act to include CBD in its definition of dietary supplements.
In a letter to Congress last month some major trade bodies, including the American Herbal Products Association, Consumer Healthcare Products Association, and United Natural Products Alliance all pressed for intervention.
They called on Senators ‘to pass legislation to clarify that CBD derived from the hemp plant is a lawful dietary ingredient if the dietary supplement containing the CBD meets established product safety and quality criteria’.
2018 Farm Bill
This whole furore over the sale of CBD products follows the passing of the Farm Bill in late 2018. This removed cannabis, with less than 0.3% THC, from Schedule 1 of the 1970 Controlled Substances Act, effectively turbo-charging the U.S. CBD market.
The law change is acknowledged in this month’s FDA announcement, which also goes on to suggest it is exploring alternative routes to market approval for CBD food supplements. This FDA statement says it is committed to encouraging the development of cannabis-related drug products, including CBD.
Then a few paragraphs later – referring to the Farm Bill – it states: “This change in the law may result in a more streamlined process for researchers to study cannabis and its derivatives, including CBD, that fall under the definition of hemp, a result which could speed the development of new drugs containing hemp.”
In a Congress hearing earlier this month Dr. Douglas Throckmorton, deputy director for regulatory programs at the FDA’s Center for Drug Evaluation of Research, said it was currently evaluating research to determine CBD’s safety and efficacy.
And he went on to say it was considering ‘non-drug pathways for compounds derived from federally legal hemp, and creating avenues for new drug development involving cannabis compounds’, reports CNN.
This three-and-half-hour hearing is, in itself is noteworthy, as it is the first time the Health Subcommittee of the US House Committee on Energy and Commerce has delved into cannabis and highlights its growing acceptance in the political sphere.
It is important to mention at this point that the FDA’s deliberations are generally concerned with the addition of CBD to food and drinks, it should have little impact on other CBD-containing products such as oils and topicals.
And, it’s also correct to say consumer-facing businesses want CBD to be treated as a food supplement, and not as a drug.
Over the last year the CBD industry has recorded phenomenal growth in the U.S. as the Farm Bill provided some legal clarity for investors and businesses – something the federally-illegal THC cannabis business lacks.
The CBD industry had an estimated worth of $ 1 billion in 2019, and prior to the FDA warning, some analysts saw CBD market as set to grow to $20 billion in five years. However, analysts are now are now saying the FDA’s warnings could curtail activity.
Nic Balzer, co-founder of Cincinnati-based Queen City Hemp beverages, sees ‘big brands’ hesitation with CBD consumer products as an opening for his start-up to capture more of the nascent market’, reports the Wall Street Journal.
The market in North America is mainly one for the independent start-ups, such as Queen City Hemp, and small and medium-sized companies in the process of building their reputations and profits.
That is certainly not the case for the major brands concerned with reputational longevity and shareholder value. And, it is this corporate caution that is deterring the major brands and Big Box retailers from engaging with the massive opportunities in the U.S. CBD sector.
At least for now, this corporate coyness is a welcome boon for the industry’s ‘little guys’.
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