By far the largest and most impressive line-up of speakers and participants. Below is a summary of the key discussion points during the two-day event on the 22nd and 23rd of June 2020:
State of the industry
A recurring theme in the cannabis industry relates to differences in regulations between different countries which has meant some markets are more developed than others. In addition, there is also a chasm in recreational, pharmaceutical/medical cannabis where they are on different wavelengths in the industry.
The impact of Covid-19 has actually been quite positive as demand is increasing month-on-month and patients are still needing their medicine during this time. As covered by Forbes, this was also a finding in Alphagreen’s recent research in March which found that 8 million Britton’s were buying CBD products, a 50% increase since 2019. Roei Zerahia also highlighted how the resistance of the industry to the current pandemic has led to the recognition of it as being essential and ‘here to stay’.
There is still a lot of education that needs to be done about the industry and cannabinoid medicine for consumers as well as doctors.
There are arguments with regards to what exactly constitutes Cannabis 3.0. Zack Grossman (Vice President of Marketing for North America at FIGR Inc) from Canada and Robert Galarza (CEO of TruTrace Technologies, Inc) from LA could argue that they are already in Cannabis 4.0 or 5.0 due to the speed of the industry. Whereas Roie Zerahia (an Israeli veteran in the cannabis space) is still operating in Cannabis 2.0. There was an agreement that the ‘current phase’ is very much dependent on territory and hence will vary between countries, thanks to the differing regulations and tempo of legalisation between countries.
With the future of the products, there will be constant innovation in bioavailable novel formats. Zack added that currently in Canada, inhalants are widely used for recreational purposes and the ratio of consumption between inhalants and ingestibles is 85:15. Ingestibles in Canada are still in the early stages of the product life cycle which may have skewed those figures but suggests a potential for future development in that market.
It was also highlighted that synthetic compounds produced by pharmaceuticals (although they have been around for 25 years) are not in demand. Zack highlighted that this was ‘aggressive’ as the knowledge on cannabis compounds is still fairly unripe. Roei added that the pharmaceutical industry has neglected the entourage effect with these synthetic drugs and unless addressed, full-spectrum plant extracts will largely be driving demand.
Blockchain and AI will pose great benefits for the industry by helping us better understand the effect on patients and their medical conditions of variations between compound proportions in plants. Robert emphasized that blockchain and AI will be about, “better information and access to information for all stakeholders… and will play a role in boosting consumer confidence”.
Roei added that AI and blockchain would also make it possible for patients to choose their own treatments or formulate treatments that work well for specific conditions and for the patients specifically. Therefore the implications of blockchain and AI technology for the future of medical cannabis may be hyper-personalised medication.
The future of the cannabis industry boils down to two simple factors: standardisation and collaboration. Once standardisation has been achieved in terms of universal laws and regulations as well as quality, consistency and composition, then that will allow for large-scale collaboration within the industry which will grow the industry to a larger size than it was in 2019.
Investment sentiment and what investors are looking at
Investor sentiment is changing from short term focused investors to long term focused players
Many more European investors now than in 2017 and 2018 which is also in line with more and more strong European companies popping up. With Europe being home to a market of 700 million people global investors are starting to look at this space
In Europe, Germany is a very valued market and is often picked by many Canadian firms when choosing to expand because of their highly successful medical and pharmaceutical market.
The UK seems to be the undervalued part of the European Cannabis industry and can be a missed opportunity
Since Asia is early in the market, it is an interesting place for strategic investment or for investors that have an operational component in their business. Brian Sheng (American businessman, an investor, founder and CEO of Asia Horizon) said, “There are addressable consumers
and revenues to be made for investors who have a strategic angle there (Asia)”.
Investors will be more willing to invest once the regulations surrounding cannabis are clearer in the industry. UK regulation is holding back investment and is also making it difficult for companies to raise capital and hence potentially raising barriers to entry.
Regulation (Pharma, UN Deadlock)
Differing regulations between different states/countries means a pharmaceutical product manufactured with the same molecules cannot be distributed between four different countries. Big Pharmaceuticals are undertaking clinical trials to develop synthetic cannabinoids for consistency to help get around this problem which is a positive move.
Governments are aware of previous bad players in the market and therefore stringent with these regulations to protect consumers from them. As the industry evolves and matures, more companies that are implementing GMP standards globally and are following European Pharmacopoeia/stricter testing will subsequently not find these regulations to be an obstacle.
Understanding of pharmaceutical trials will allow for standardisation, positive signalling and therefore aid destigmatisation.
If regulations were to be standardised by governments, substantial margins would be available for companies but it would also lead to an inevitable increase in prices of THC.
In between medical and pharmaceutical cannabis, medical cannabis will come first as has happened in the UK, Germany and even Colombia; there is a gap in the demand from patients that is pushing the government to allow medical access.
In the EU, cannabis consumption is getting to a level where it can no longer be ignored by governments and an additional wave of regulation should be expected in the next 12–24 months.
The Single Convention on Narcotic Drugs (1961) of the UN treaty affects certain countries disproportionately. For example, smaller countries like Jamaica are under harsher scrutiny in comparison to the US.
Overcoming the UN deadlock will mainly be down to countries to issue guidelines and improve legislation. However, the lack of sympathy towards reform worldwide is an obstacle to achieving that.
In February this year, the EFSA took a different approach, compared to Europe. They went for a pragmatic approach and tried to solve the issues that there are in the UK market, which is oversaturation- in part due to a long history of botanicals in the UK and Ireland. Which leads to a quality and price issue that the EFSA is trying to deal with by saying anything up to 70mg of CBD is safe and can be marketed in the UK, but companies must undergo a Novel Food application. Once the UK has its own regulations on CBD products (which may be down the line but is bound to come), companies may not instantly get access to Europe. The issue with the Novel Food catalogue is that the regulators made only some parts (flower, leaves, and extract) of the cannabis plant ‘novel.’ EIHA is considering to invoke Article Four and is working on CBD and THC studies on toxicology. One could argue that CBD isolate will be obsolete down the line, “No leaves, no flower: no industry.” Using the whole plant is essential to build up the industry.
Building successful brands
The question that all brands in the industry are facing: how can we market a product that we cannot speak about?
A popular sentiment throughout the conference has been about brands and companies coming together and creating a community in order to put up a united front against something that’s bigger than the race to get to the top — because there will never be a proverbial finish line or peak if there’s no change in regulations and no shift in consumer perception and understanding of Cannabis as a whole, and this will cause the industry as a whole to fail or at the very least, not reach its full potential.
Brands need to get behind consumers and stay with the Zeitgeist without straying from what they do. It’s easy to jump on the bandwagon, such as with Black Lives Matter, to post a sentiment on social media or make a donation, but consumers are wary of these brands and quick to point out the hypocrisy of brands who are “woke-washing.” If a brand or company supports a cause, it’s important to fully understand what they’re supporting and to really do more than just throw money at it under the pretext of caring.
Brands are essential to consumers, regardless of industry. Now more than ever, consumers are seeking brands to trust and rely on for quality. You have to achieve loyalty in order to keep consumers, and in order to achieve a trickle effect.
As established in the panels earlier, the CBD trend is relatively nascent, especially in the cosmetics industry.
Europe has strict regulations around CBD cosmetics to the extent that they are almost a light version of pharmaceuticals where formulated products need to go through many tests to prove efficacy, proper formulations and that it has been tested before it can go on the market. Whereas in the US, tests can be carried out after the product has been released in the market. This means that it may be easier to enter into the US market and the lack of testing also saves time meaning product development is agile. However, this lack of stringent testing also has a downside in terms of exposing consumers to risks.
There are also regulations around marketing where CBD cosmetics cannot claim any health benefits such “this will help you with acne or eczema” especially if there is a lack of clinical evidence. This is the case both in Canada as well as in Europe. Cosmetic claims are very limited to beauty, skin or stress benefits.
There is also a need to educate consumers on cannabis. Global research carried out recently found that 48% believed that cannabis had a negative impact on the body and 39% didn’t know what CBD was.
Perceptions of CBD vary geographically. For example, in France CBD has a very negative perception and is seen as an ‘electric joint’ given the association with CBD and vaping. Whereas in the UK, there is a much more positive attitude which is also backed-up by widespread consumption and intent to consume as found by Alphagreen in our recent research. The UK is currently leading with CBD cosmetics in Europe.
For the beauty industry as a whole, the biggest markets in Europe are France, Germany, the UK and Spain.
As with cannabis and CBD in general, there is a lack of knowledge of what CBD means especially in beauty and cosmetics and therefore there is a clear need to educate the customer. However, educating the customer is limited by the restrictions on marketing and regulations which ultimately hinders the growth of this sector.
There is a real lack of evidence on CBD in cosmetics and beauty products and there is mistrust among consumers which is in relation to THC rather than CBD. At the same time, there are some perceptions of CBD that suggest it is completely safe but that may not necessarily be true as there is some contradicting research that has shown negative impacts of CBD in pregnant women as well as contributing to developmental disorders. The uncertainty and the fact that the industry is still unripe suggests the need to ‘tread carefully’.
There needs to be further innovation in terms of the delivery method as it is quite a challenge to get hydrophobic compounds to work across a skin barrier and current methods are not as effective. This is increasingly relevant currently because of the huge movement of researching skin microbiome that is about absorption and topical formulation.
There are many existing products in the market but not all of them have been tested. There have been some cases where the CBD in the cream has degraded therefore there need to be more robust product formulations. There are also products with full-spectrum oils and compounds such as terpenes that can be poisonous if overused. Therefore research needs to focus on isolated CBD/hemp molecules to study the impact of individual molecules.
CBD is reaching a tipping point as it is picking up remarkably especially within the beauty industry. This will not be a fad because it is an active ingredient in cosmetics that provides specific functionality which is ultimately what customers are looking for. Although the functionality will only be able to be truly communicated when regulations surrounding marketing settles down.
Because CBD is an active ingredient, it will be a part of the cosmetics industry rather than being a separate entity/industry.
CBD could potentially be incorporated into niche beauty categories such as dermatological personalised creams and medical creams for specific conditions like eczema. These cosmetics products once properly formulated and shown to work will help destigmatise their use.
There is incredible potential for the compounds to have beneficial effects and increase the quality of people’s lives.
Food & Drink
Consumer safety is a key priority in the food and drink industry. There is strict regulation in the CBD food and drink industry which means companies need to ensure they meet compliance and safety standards through testing. Companies play with regulations rather than go against them. Although this increases the barriers to entry as the testing is expensive, it is necessary to have it in place to ensure consumer safety especially as there have been bad players in the past. Ensuring product safety would also mean there is a greater opportunity to build trust with consumers.
There is a challenge with stability and consistency is to do with the CBD isolates which are diluted in oil and don’t emulsify with water as well, therefore, it is difficult to maintain stability- this is also something that has been found in cosmetics. Therefore the two biggest challenges are ensuring that the CBD in the products (for example a drink) are properly dispersed and therefore bioavailable. Secondly, it needs to be ensured that over time there is a very delicate plant ingredient that doesn’t degrade over time.
Just adding CBD into food and drink in its oil form is not good enough and can be detrimental to consumer trust in the sector. The credible players in the drinks market are looking at technologies to provide better solubility and bioavailability in their product.
The pandemic has changed things and consumers will be more focussed on holistic health. It has also had a positive impact on the industry in terms of boosting sales which is supported by Alphagreen’s research.
Given mismanagement and extremely high debt levels of some of the biggest Canadian and US players in the industry, European players have a chance to catch up and even overtake some of the existing giants.
Currently, there are no strong/recognised brands or dominant players in the CBD market so it is still very fragmented. However, in the next 2–3 years, there will be a much greater focus on creating loved brands and brands will be used to unlock value. In Europe, the next generation of CBD products will be brand-driven rather than product-driven.
In the future, we can also expect to see sustainable packaging and sustainable business practices linked to CBD consumer products and CBD supply chains.
CBD in Europe
From the industry point of view, there are demands being made to provide legal certainty on regulations in the EU. It is important for the companies to have a defined legal status for their products which would also contribute to providing them with some security.
Companies in the industry are finding themselves in a grey area which is very uncomfortable and uncertain as they do not have clarity about which extracts do not fall under the regulation or about the application. A clarity on regulatory status would not only help companies but also help build consumer trust.
The regulations in the EU are also adding to the complexity of the supply chain. For example, companies have found that they cannot import raw materials or products from America as they have different cultures, pesticides composition etc. which don’t meet the EU standards.
Although these regulations create complexities in the market, rigorous testing is important to ensure the safety of the products for consumers.
The UK seems to have an issue as it is flooded with products that do not satisfy the European standards and these standards need to be ensured somehow after Brexit.
There have been a number of Novel food applications but none of them has been approved by the EU. This, of course, raises concerns and has led to speculation of political elements coming into play that may be preventing these applications from going through.
Clinical research has shown that full-spectrum extracts work the best in comparison to isolates. This is largely due to the entourage effect. However, delays caused by the Novel Food Act means it will be difficult to get these to consumers.
With the evolution of the cannabis market in Europe, there are concerns regarding big players entering where they will undercut small-medium sized companies as they may be able to better afford the rigorous testing and certification that is required in the EU. In this case, entrepreneurs would have to adapt and will be able to survive by offering innovative cannabis products that are also more localised.
Legalising medical cannabis was important because people were seeking treatments for these illegally in the black market. This was not ideal as it is an unregulated sector and meant that patients were not necessarily receiving good quality products.
Although medical cannabis was legalised in the UK in 2018, it is still not being used widely. The UK will be approaching its two-year anniversary since the legalisation and yet medical cannabis was only prescribed to two people under the NHS.
One reason for the bottlenecks in prescribing medical cannabis to patients has been due to government restrictions which meant prescriptions were only allowed by Specialist doctors. Exposure of patients to specialist doctors in the NHS is quite rare and can take months. Added to this is another guideline where medical cannabis should only be prescribed where other medicines do not work which further limits prescriptions.
Many doctors actually don’t have much understanding of medical cannabis especially as it was vilified in the past. Therefore, doctors themselves need to be educated about the benefits of cannabis and about prescribing it to help improve access to patients.
The decision-making about medical cannabis is mainly political- in the big politician sense with different parties and in the small political sense where doctors are reluctant to prescribe ‘non-traditional’ medicine and test the impact on patients.
Drug science is currently carrying out a study that is measuring the direct impact of medical cannabis on 7 specific conditions- Anxiety disorders, Chronic pain, Epilepsy, Multiple Sclerosis, PTSD, Substance-use disorders and Tourette’s syndrome. Hopefully, the results of their research will encourage doctors to prescribe medical cannabis.
Cannabis Outside Europe
The Danish medicinal cannabis development scheme has been largely based on a Pharma-type approach and thereby differs from the approaches of many other European countries. This scheme aimed to introduce a framework and build up an industry that would allow patients to quickly, safely, and inexpensively, access medical cannabis. The ecosystem in Denmark is developing and now consists of cultivators, has processing and testing capacities including product development for different product applications, and is continuing to adapt and expand.
There are still some key areas where progress is needed, specifically in bridging the gaps between the different groups of people involved in the process, between Doctors prescribing medicinal cannabis, producers, those involved in regulation and quality control, and so forth. The process of building up this pilot program has been difficult, expensive and time-consuming but has generated unique and extensive knowledge of the cannabis flower, through, for example, the work done by the Centre of Excellence for Cannabis.
Nick Milne from Octarine Bio, obtained funding from the Danish government to carry out research into the use of synthetic biology to produce cannabinoids and psychedelics. They have done a great amount of research into developing systems of yeast fermentation for the production of cannabinoids, which has proven to be incredibly cost-effective, sustainable and allows many problems associated with the production and extraction of cannabinoids from the cannabis plant to be overcome.
Prof. Anne Ladegaard spoke about her research into the development of cannabis patches. These silicone patches provide a variety of benefits over existing formats of medicinal cannabis such as oil or flowers, namely by allowing precise and constant dosing over a sustained period of time.
We then heard from Jens Hau from the Horsted Clinic, which has been working to provide medicinal cannabis to pain patients and has built up an extensive database with rigorously organised and structured data systems. In this way, they are able to evaluate the efficacy of long-term medicinal cannabis use in pain patients over time.
Medical cannabis was recently approved in Brazil in 2019 but access may be limited by a lack of reimbursements from public health insurance. There are some projects of law from congressmen asking the public health system to include CBD and medical cannabis products but these changes will not be seen immediately.
In Latin America, Colombia is the country leading with imports and exports of raw materials/biomass. Colombia lacks a pharmaceutical industry which means it will take a while to develop competitive pharmaceutical cannabis products. Colombia has a lot to offer from the supply side however there are debates about whether they should continue selling raw materials or add value to exports by creating finished products. It is recognised however that the later value-creating industry will take time.
An overlying theme highlighted in most panels is the lack of education with customers as well as doctors and educating them will pave the way for the cannabis industry to bloom, this would, of course, have to be supported by governments who will play a major role in legalisation and implementing clearer guidelines. Therefore, more research, more education and clearer regulations will make up the recipe for success for the cannabis industry.