CBD: Short-term hurdles such as US FDA regulations won't sidetrack sky-rocketing interest, note experts

09 Sep 2019 --- Despite the growing popularity of products containing cannabidiol (CBD), there is still a gap in scientific knowledge on CBD’s real benefits and interaction with other substances. However, this has not put off a large selection of industry players who have engaged with the ingredient in wide-ranging NPD, as well as significant investment in furthering technologies in the space. Yet this sky-rocketing interest has led to increased calls for regulatory clarification – particularly directed toward the US Food and Drug Administration (FDA).

The initial move in December last year that sparked industry fervor was the signing of the US Farm Bill by President Trump, which legitimized low THC hemp (<0.3 percent Δ9-THC). This motion also stripped hemp of its illegal substance status under federal law as it was removed from the Controlled Substances Act (CSA). The FDA also certified hulled hemp seeds, hemp seed protein and hemp seed oil with Generally Recognized as Safe (GRAS) status.

Dr. Ned Sharpless, acting FDA Commissioner, expressed concern around the ingredient’s safety profile during a long-awaited public consultation on CBD held at the FDA’s headquarters outside Washington on May 31. “While we have seen an explosion of interest in products containing CBD, there is still much that we don’t know.”

At the hearing that will reportedly mark the first of many, Dr. Sharpless reiterated the gaps in FDA knowledge around CBD use, inquiring in his opening remarks, “How much CBD is safe to consume in a day? What if someone applies a topical CBD lotion, consumes a CBD beverage or candy, and also consumes some CBD oil? How much is too much? How will it interact with other drugs the person might be taking?”Despite hemp only being declassified as a scheduled narcotic within the past six months in the US, the exploration of CBD in food and beverages has been swift.

The industry furor over the ingredient led to the public consultation on providing much-needed regulatory clarity for CBD use in food and beverage products; however, no solid conclusion was reached. Now, the industry continues to wait with bated breath for US regulators to provide some robust legal pathways for the inclusion of CBD in food and beverage products. 

Despite hemp only being declassified as a scheduled narcotic within the past six months in the US, the exploration of hemp-derived substances – such as CBD – for use in food and beverage applications has been swift. CBD has sprouted within NPD, ranging from candy to beverages, and its popularity has led the FDA hearing to last nearly ten hours. 

Although the hearing ended without reaching a consensus, one thing was agreed on: action needs to be taken – soon. However, this hearing will likely be just one in a lengthy process, a development that is undoubtedly infuriating for an industry that is ready to capitalize on this compound brimming with potential.

A booming market
The hemp CBD market totaled US$190 million in 2018 – an astounding rate of growth for a category that didn’t even exist five years ago, according to The Hemp Business Journal estimates. By 2022, sales are projected to reach US$22 billion, notes the Brightfield Group, a cannabis and CBD market research firm.

CBD has already added a healthy dose of green to food, beverage and supplement offerings in the US, and such products have continued to densely populate trade-show floors. At Natural Products Expo West in March, for example, CBD-infused food and beverage manufacturer Weller launched its CBD Sparkling Water. The functional water line is infused with 25mg of CBD broad-spectrum hemp extract per can.

The touted health benefits associated with CBD and hemp have boosted the popularity of products infused with the cannabis-derivative, especially as health-conscious consumers seek health-haloed products. 

“Hemp derivatives (such as CBD, CBG and CBN) will prove to be a very profitable addition to ingredient suppliers. We are starting to see large food and beverage companies developing or showing interest in developing CBD food and beverage infusions,” says Taylan Lopez, Business Development at Panacea Life Sciences.

The NPD track
However, where large players may only be signaling their interest at this point, smaller players have moved swiftly into the NPD track. “Unclear regulations and standards are going to put off some big brands from entering this market. However, smaller companies are going to look at this as their opportunity to operate in a semi-protected market, one where they do not have to compete with the big players,” says Mike Luce, Co-Founder of High Yield Insights, a market research firm for the cannabis industry.It seems clear that if an FMCG giant like Mondelēz were to infuse its treats with CBD, the compounds’ entry into the mainstream would be cemented.

Indeed, Mondelēz is reportedly considering CBD as an ingredient to infuse into its snacking portfolio. Meanwhile, Unilever’s Ben & Jerry’s ice cream brand has announced plans to develop a CBD-infused ice cream, and Monster Beverage is also reportedly eyeing the cannabis-infused drinks market. However, all companies highlight that they want to stay well within the lines of legality – meaning a wait for clearer instructions from federal regulators. It seems clear that if an FMCG giant like Mondelēz, or indeed Unilever, were to infuse its treats with CBD, the compounds’ entry into the mainstream would be well and truly cemented.

The ingredient supplier space has also exhibited wariness, prompting the thought that perhaps this is a player that is willing to turn up late to the party, once the legal coast is clear.

However, in a bold move, a new line of CBD ingredients by Guilin Layn Natural Ingredients Corp. (“Layn”), a global producer best known for its plant-based sweeteners, debuted at IFT19 Food Expo in New Orleans, US (June 3 to 5). The company also invested an estimated US$60 million in a new US-based CBD manufacturing facility, expected to be completed in the autumn of 2020.

“We chose to invest in the CBD industry because it is a trending hot topic,” says Elaine Yu, CEO of Layn. “Even though this market seems crowded, not very many of these players come from this industry – many are ‘outsiders’ like farmers or extraction equipment manufacturers. From Layn’s perspective as an ingredients manufacturer, we are utilizing our 20+ years of experience and expertise in extraction, agriculture management, sustainable supply chains, and understanding of food safety requirements.”

So, the CBD space is booming. But as with any under-regulated industry, you have companies who cut corners. Clarity on a regulatory level will serve both companies hoping to enter the space and consumers wishing to purchase from it.

A technology boom
Meanwhile, novel technologies have also infiltrated the space and sustainable ingredients company Amyris Biotechnologies is en-route to commercializing fermented CBD molecules made sans marijuana.

A key player in the sugar-cane fermentation market, Amyris previously launched a World Health Organization (WHO)-recommended first-line treatment for malaria – that claims to have saved thousands of lives. The company’s latest product is a zero-calorie sweetener suitable for those suffering from diabetes and obesity.

“The question we get is can you make CBD molecules using fermentation? Can you make them so that they are highly pure, effective and have a lower manufacturing cost than traditional CBDs and come from a sustainable source? The answer to all of those is ‘yes,’” says John Melo, CEO and President of Amyris.

The company decided to enter the CBD space and partnered with LAVVAN – a newly-formed company backed by players from across the pharmaceutical, cannabis and financial sectors – in February in an agreement valued at nearly US$300 million for this venture. This gave Amyris “the means to produce, competitively priced, highly pure and controlled quality CBD, via fermentation using a sustainable source,” says a company spokesperson.

The potential of pure cannabinoids entering the supply stream could mean big bucks.Upon announcing its plans to develop, license and commercialize a fermented CBD with LAVVAN, Amyris’ stock reportedly went up by 20 percent. The ingredients company reported on its first milestone for its US$300 million collaboration in April, earning its first payment of US$10 million.

“Fermentation-derived CBDs can be manufactured per all relevant FDA requirements and are sustainable, safe and provide both high efficacy, purity and quality,” says Melo.

Beyond wellnes
The potential of pure cannabinoids entering the supply stream means big bucks, and they would serve to infuse food, beverage and supplements in the “wellness” space in a quality-controlled way. However, the potential lies in them being used for medicinal and pharmaceutical purposes too.

CBD’s potential for the pharmaceutical scene was recently further illustrated by news that former Frutarom CEO and shareholder, Ori Yehudai, is moving to join a new venture in the cannabis world. Sade Group is a full-vertical company that covers from seed to cannabis-based pharmaceutical products. After selling Frutarom last year for US$7.1 billion, Yehudai is now investing as a partner and assuming the role of an active chairman, hoping to lead the Sade Group to triumph.

Sade Group is planning to develop unique cannabis strains based on clinical research, and the transition to industrial production will ultimately allow the company to build recognized brands. 

The opportunity also exists where smaller companies can allow themselves to proliferate – positioning themselves for acquisition by more prominent brands following FDA clarity.

Despite the different realities of market entry for professional players, it is clear that there is a true opportunity for CBD. Smaller players at this point may dominate the space, but as further elucidation comes from regulators which could clear up the legal limbo, the big boys are poised to play. 

A full version of this article can be found in The World of Food Ingredients. 

By Laxmi Haigh