The New Commercial Landscape for CBD
Welcome to The Grocery Insider Podcast. Today we’re going to look at CBD with the announcement from the FSA in mid-February last week. It set the market a tizzy with all the products that are out there on CBD. So, we dive into that with Sian Edmonds from Burges Salmon.
You can listen to the full CBD Grocery Insider Episode.
Sian’s a partner in the dispute resolution team and she looks at food and drink regulation and also the enforcement side, agriculture, agri-culture, agri-business disputes, consumer products, manufacturing, supply chain, product liability, defective products, product recalls and partnership disputes. Sian provides specialist advice to some really big names, so check out the Burges Salmon website to see who they work with. But effectively they’ll look at partnering up with food and drink manufacturers, processors, catering, food service manufacturing in consumer product businesses as well as the distribution and retail areas.
Sian is well networked and certainly the best person to talk to us about CBD.
TAC is Tetra Hydro Cannaboid Oil. This is the psychoactive ingredient and the food standards agency effectively increasingly got interested in this market as it’s expanded and despite the rising sales of CBD, now product has been approved in the UK and there’s been a growing chorus of safety concerns and the market is predicted to grow both 700% in 2020 so it’s the wild West out there and there’s a rise in consumers who I’m calling CBD curious.
Good morning, Sian. Can you give us a quick introduction to how you and the Burgess Salmon food team work?
We provide advice to food and drink businesses right across the food supply chain. So primary producers, right through to manufacturing, processing, distribution, and retail at the other end.
So, what were the rules on CBD products prior to last week’s Food Standards Agency (FSA) announcement? For instance, the January 2019 FSA position, we’ve had the European Commission weighing in designating CBD as oral food.
As you say, in January 2019, the European Food Safety Authority announced that CBD extracts were a novel food and therefore businesses needed to complete an application and authorisation process before they could get their goods on the market in practice. However, that was largely ignored and there are lots of products out in the market. The Food Standards Agency later on in 2019 made a short announcement saying they they accepted the findings of the EFSA for the enforcement of CBD products. But there was some chaos and confusion in the market in practice.
Prior to speaking I counted 22 products in Superdrug with CBD in the title and then Boots had almost around 85 with everything from muscle gel, body butter and a barber face mask, you can find it in so many products. Were people paying attention to these rulings when they came out last year?
Businesses in the know were paying attention and were trying to work out how to deal with the position and find a position that was workable in the longer term. Consumers were largely oblivious to the fact that a lot of these products were out there in the market without the requisite authorisations.
For those of us quite understandably switched off from Brexit, if the EC designated CBD as novel foods, what happens at the end of December? Assuming if, and that’s a big if, we leave on time from the common market, what happens to that novel foods designation? Does it continue or does it not continue? Do we have clarity on that?
We do have some clarity on that. Whilst we are in the 2020 transition period is pretty much business as usual. So, the European Union novel food regime and the list of authorised novel food products applies to the UK as it does to the rest of the EU. Going forward after 2020, we know that the UK will be running its own separate regime.
It will be using the same set of safety criteria for carrying out assessments as the European Union currently does, but it will be running its own assessment processes and will be running its own list of authorised products.
The question mark really is around products where applications were made during 2020, but haven’t yet obtained authorisations by the time we leave the EU. And there’s still a question mark about how the UK is going to treat those kinds of products, after the transition period.
There’s a question mark then over when the shutters come down and it’s a question over where those shutters will land on the European side or the UK side, or perhaps companies will have to resubmit. Is that the thinking?
Yes, the last time I spoke to the FSA about this they were unclear themselves as to where the line was going to fall.
So, in a nutshell, for those who missed the announcement or didn’t dive into the detail, what exactly did the FSA say in mid-February? It was a valentine’s day present to the world.
The FSA announced that it’s giving the CBD industry until 31st March 2021to get its house in order. So, what it’s saying is that businesses must submit a valid novel food application before that deadline, and then only products which have done so and have made that valid novel food application will be able to stay on the market.
Now query what a value novel food application means in practice, that is a little unclear. What they are probably saying is that it has to be a credible one. It has to be one that has some prospects of going through the process and getting authorisation as opposed to simply chucking in a spurious application with minimal detail in order to try and avoid the rules.
So, some sort of quality test or qualitative judgment on the strength of the application, essentially?
I think that is what they are saying, and interestingly, the other comment the FSA included with their announcement in mid-February was they’ve set an advisory level of in take of CBD. So they’re saying that they recommend no more than 70 milligrams a day.
They’ve also specified some catchments of customers and groups of customers that ought to be careful with it?
They’ve said that certain vulnerable groups such as, expected, mothers and breastfeeding mother should avoid taking it altogether.
Just in terms of the width of this announcement, is it effectively food stuff? Or does it also cover nutraceuticals, pharmaceuticals, health and beauty face creams? What’s the sort of remit of what the FSA say?
There were different regimes depending on whether you’re talking about medicinal products, cosmetics or food products and food supplements, health supplements are generally included in the category of food.
The FSA announcement specifically relates to food and supplements that you take and orally ingest. Products which fall outside of that would be things like creams and cosmetics, lotions and potions and so on. They would fall within the cosmetics regime, that is less stringent on rules regarding the use of CBD products, it has a different set of rules.
The medicinal regime has a whole different set of rules and regulations that require products to be licensed as a medicine and they have to go through a whole other set of assessment criteria.
They’ll be those with existing products in the market and then were those with products in the wings, so either running around the market, trying to get a listing or its in the NPD tank can emerge before the deadline. What should these two different groups of producers do at this stage?
There are already a number of businesses working on pulling together the safety data that’s needed for an authorisation to go through the process. For example, the association for the cannabinoid industry are working hard with them members to collectively get some data together.
To that extent, businesses that are already on the market can join forces, to kind of piggyback off the applications that the CBD processors are making will be helpful. It’s probably the most cost effective and sensible way forward. The industry is going to have to do a lot of working together to try and get some of these authorisations off the ground.
A collective intent to prove the efficacy of a particular category of product or subcategory?
I’m not a scientist, but my understanding is that some of this is going to be quite difficult to achieve from a technical perspective because of the variety of ways of extracting, and the extent to which you’re able to purify the product and then what those food product, or supplement products, are at the end of the process.
So, you might have one source of CBD that goes in numerous different supplements, food products and so on. The more businesses further down the manufacturing supply chain can work with the underlying extraction businesses the more helpful it will be for them.
Would it pick up the mechanism of action because with CBT there is big debate that there’s a big debate about how many people feel that sublingual ingestion is the most effective and edibles you don’t end up with a lot of bioavailability of CBD in this system. We’re talking about food and drink products, which classically you do in fact eat, so it goes through the digestive tract. Will it pick up those sorts of nuances?
Yes, I think it’s going to have to. Whether it should have the efficacy of the underlying products and the extent to which it has any benefit at all, is going to be highly dependent on how you consume it and what you consumer it with. In reality, it’s the same for any kind of health supplements. Nutritionists know that if you consume Vitamin B with coffee, it’s likely to counteract any benefit you might get from the tablet.
So, there’s those kinds of issues to take into consideration in terms of whether the products actually work for consumers. But in terms of how they are authorised as novel foods, it’s more around the extent to which you’re using one particular product or method of production, versus another. And how they end up in another product that is consumed by the underlying consumer.
There are some complexities to the efficacy of the product but those are slightly different form the complexities of getting authorisation in the first place.
In the US for instance, there’s lots of debate about the variety of plant that you use to grow the crop effectively, around 200 different varieties and they have different efficacy of CBD. With this in mind, will this affect the claims you can make? CBD has got the longest list of potential applications and benefits that we’ve seen from anything, presumably it will settle down. So, one, two or three claims that can be proved. Is this what you expect to see going forward on the claims front?
That has to be right because if you believe some people, this is the all round miracle cure for everything. The issue around health claims is a separate regime from the novel food application process. There are separate registers or lists that deal with all the authorised claims you can make around health benefits of any food product.
Businesses will need to go through the process of first getting authorisation to get their product out on the market via the novel foods’ regime. Then we will have to look at to what the extent they can actually make any health claims at all about their products. The health claim regime says you can’t just make a general claim that this is an all-round really good product for you. It has to be tied into a specific health claim that is authorised. They will need to be another process gone through by the industry, as a whole, in order to get those health claims authorised.
Taking into account the number of companies piling into this category, the width of claims, the sheer number of products that feature CBD in the title or in the ingredients and the concerns around enforceability of this ruling, do you think the deadline, in Spring 2021, will be as hard as perhaps people think it will be?
That’s a very good question. My understanding is that trading standards are pretty stretch and with Brexit on the horizon the range of activities that the enforcement agencies are going to be required to get stuck into is likely to broaden out and query how high on the agenda spending is going to be for clamping down on enforcing CBD products. Not least, because first of all, you have to go through a process of understanding whether or not the product on the shelves have had an application made.
It’s similar to checking whether or not cars have been taxed or not. There will have to be a process that they go through to establish whether or not an application has been made, whether it was a viable application and then take the steps to enforce. Some local authorities will be more on it than others, they do intend to vary around the country as to where they focus their attention and financial resources, and you may find that no action is taken at all. It’s going to vary from one corner of the country to another.
In this paradigm we’re going to be in post-Brexit, safety concerns are going to be top of the pops. This will probably be the fourth, if not fifth, on the list to policing this that would be my practical view.
What do the FSA think about the market and how the market is evolving, are they sort of feeling what the rest of us are feeling? It’s like the Wild West at the moment, and this effectively put some boundaries about what can go on and is intentionally to take a little bit of air out of this balloon.
It does sort of take the pressure off, that’s right. My view would be that the FSA are sensing that the mood music is a bit softer towards industry generally. There’s a huge swathe of middle England, for instance, who are busy taking these supplements on a regular basis to help with all sorts of things. The idea that they’re going to take a huge step backwards, in terms of enforcement, is probably not palatable.
Of course, it only takes one safety incident for the tabloid press to jump on board with that could change the whole landscape. But for the moment, the FSA is sort of trying to tie themselves in with the mood music, which is a bit more of a slackening of a previously pretty tight regime.
If you dig into the data, and the data that exists, it’s actually predominantly females ages 45 and above who are driving purchases. You might have a mental model that suggests this is fairly edgy, very millennial and young consumers piling in. In fact, it’s sort of what we can infer pain relief and pro-sleep relief for middle-aged consumers, and so they don’t want to disrupt this market.
There’s a lot of cash that has been invested into this sector, so it’s a hot topic along with environmental regimes. What’s the impact and the shakeout going to be for sort of investors, products, competitors, safety standards. Can you gaze into your crystal ball, and see where that goes?
There’s certainly an appetite for investors to get more stuck into this sector. We’ve certainly been having a number of quite interesting and complicated conversations around such as proceeds of crime, advising businesses where the regulatory regime is not clear and making it user friendly. Clarity will be welcomed by investors and big businesses.
There’s a risk, due to the expense of going through the novel foods application and the amount of data that needs to be collated, that is going to push some of the smaller, more entrepreneurial businesses and it will play to the strength to the big businesses who have money to throw at it. We’ll watch this space with interest, but it could potentially be a bit of death for some of the smaller organisations.
There is a sense that if a company does not complete the claims process to the satisfaction of the FSA or the local authority, they could go into a grey area where a product has been through some trials, safety has been established, but it “sits” in research chemicals, where you can produce it and sell it through the internet for people presumably to run their own rodent trials at home. It’s not explicitly for human consumption and as long as you plaster that across your website people can merrily retail it to people for research purposes. What are your thoughts on this?
If this was taking place on a large scale, there would be a clamp down. The safety concerns are too great to sit back and let that happen if they were to become aware of it. What will probably happen is they will be burgeoning internet businesses where they just take a risk on not being sufficiently on the radar for enforcement for enforcement action to be taken.
For instance, Amazon are very clear with the businesses they work with that they have to fit within the regulatory regime. Therefore, certainly other food supplements businesses that I’m aware of have been delisted from Amazon where they fall outside of the relevant novel food regulations or whatever it might be. Or they’re making health claims that cannot be supported.
The bigger businesses will certainly avoid those sorts of scenarios, but there will be smaller traders who will try and get under the radar.
For the brands that remain, who have successfully jumped through the CBD approval and who successfully are able to attach to one or more claims, can we see this unleashing a new wave of innovation in terms of product formats, packaging, delivery mechanisms? Is there an argument that you might see more innovation for those that remain and copy-cats of products?
There’s a sense to suggest that could be the case. There’s almost a limitless way means of which you can deliver this product to the consumer. Adding it to many things providing you get your homogenisation processes and the taste right etc.
There are opportunities for new products to come to the market once the underlying CBD extract has been authorised and get those added to your list of authorised products.
There’s also an opportunity in the UK for there to be a drive on traceability, sustainability with the organic movement and those more niche areas that sit alongside this wellness space. There is certainly opportunities for businesses to focus on those sides of things, to differentiate themselves from other brands.
Thinking about higher dosages and more functional health care applications as the science unpacks itself, where usually effective doses emerge for certain complaints. Could you see an over-the-counter and OTC category developing where potentially in five years you could get this on prescription?
There’s no reason for this not to happen. The businesses that are already in the medicinal space would be happy to see that on the basis that they had the licenses to do it and the requisite financial benefit of providing those kinds of products. There is the chance we could see this happening somewhere down the line a lot more. A lot more analysis, research is going to need to be done.
There are some really good businesses, in places like Israel, who are really working collating data like this. The problem with CBD is you’ve got to ensure you’ve got the right kind of chemical makeup of the product including its consistency. As it is a crop that you grow, we might see an argument for the synthetic side to develop and this might be where certain businesses choose to focus their attention.
That’s an interesting point from a pain relief perspective, if you take ibuprofen/paracetamol/aspirin platform, hitting different receptors to effectively capsulate the receptor and not let the pain messages get out, the Cannabinoid system is a separate system. We don’t understand enough about it, but it might be possible to stack CBD with aspirin per se and develop a much more powerful class of pain relief.
Yes, I think that sort of product would be welcomed onto the market.
Many in the trade feel that this is part of a sort of dialogue working in a number of areas towards a softened attitude towards cannabis. Looking over to the USA and what’s happening in Canada, do you see a point in the not too distant future where we go down that model with cannabis edibles, cannabis creams? Or do you think at the moment there’s no line of sight to that?
There’s a growing movement to try and head towards more of a Canadian style model, but we’re quite a long way from that as a society. There’s certainly been a softening of attitude in the last few years compared to what it might’ve been ten years ago. Although, we are still a long way back from where Canada have got to, but I might be proved wrong.
For food and drink firms listening who have either got CBD ambitions and products in the works or CBD products on the shelves, what’s the one thing that they need to be getting on with now to anticipate the point at which these regulations bit in April 2021?
It’s vital they get together enough data to submit a viable novel food application, and that is being done most effectively by joining forces with other interested parties in the sector. This is going to be a case of working together for the greater good.
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