CBD Companies Say Lack of FDA Rules is Hurting Their Businesses

December 3, 2019 09:00:17

The cannabidiol (CBD) industry has seen massive growth in the past few years. Valued at $1.8 billion in 2018, the US CBD market is expected to hit $16.32 billion by 2026, a compound annual growth rate of 27.7%. The genesis can be traced back to the 2018 Hemp Farming Act, legislation that legalized the cultivation of industrial hemp, the plant from which cannabidiol, touted as a miracle drug, is extracted.

Bolstered by this regulation, tons of sellers streamed into the industry, some dealing in hemp farming and others dealing with the CBD end. However, despite the fact that there is obviously an immense market, companies that specialize in CBD-infused products have been having a hard time keeping their profits up. CV Sciences and Charlotte’s Web are among the cannabis companies going through this, and according to them, delayed federal CBD regulations are to blame.

“The absence of an interim or final regulatory framework from the FDA has led to a very low barrier of entry for new companies entering the CBD category, which has led to increased competition especially in the natural product retail channel,” says CV Sciences CEO Joseph Dowling. The company reported a revenue of $12.6 million from the third quarter that ended on September 30, a decrease of more than 7% from the same period last year. He adds that the delay has also made national retailers slow to embrace CBD.

Charlotte’s Web, on the other hand, reported revenue of $25.1 million, a 42% increase from the $17.7 million reported in the same period in 2018. However, analysts had put 2019’s reported revenue at $31 million after the company crossed 9,000 retail outlets. According to Charlotte’s Web’s executives, a lack of regulatory direction from the FDA is slowing down growth in food, drug, and mass sales channels. CEO Deanie Elsner adds that “Full revenue growth potential remains dampened due to a lack of regulatory clarity for ingestible CBD products.”

What’s ironic is that while the USDA has taken steps to further regulate hemp with the issuing of the interim final rule on hemp, it has mostly ignored CBD. As Denver cannabis attorney Frank Robinson poses, one end of the supply chain is experiencing strict rules while the other end remains uncertain. “It’s befuddling to me that we’re keying these THC tests off the flower, but nevertheless all of the products that are made from the flower downstream aren’t being directly and actively regulated by the appropriate federal agency,” he adds.

The FDA has made it public that it will not bow to political pressure to hastily regulate CBD products, saying that more research on the effectiveness and side effects of CBD has to be done before it can move forward with regulation.

Analysts believe that that frustrations expressed by Charlotte’s Web and CV Sciences in the discussion above possibly reflect the think of all industry players, such as Green Growth Brands Inc. (CSE: GGB) (OTCQB: GGBXF) and No Borders Inc. (OTC: NBDR), since they are all affected by the circumstances enumerated by the firms highlighted.

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