At Cannabis Europa a panel of experts explored whether Europe’s CBD market has a bright future.
CBD companies have been popping up at a rapid rate but the industry has limited regulations and standards, with low barriers to entry. So, does this industry have longevity? Or, will CBD brands fall to the wayside as customers choose in favour of larger, already established brands that utilise the ingredient?
“I would argue there is the same low barriers to entry in the medical cannabis world,” commented Clifton Flack, founder and CEO of CiiTech. “Because all you need to do is have a good idea and promise to build a cultivation facility or promise to build the extraction facility and you can raise millions of pounds and you don’t have to worry about making revenue for two or three years. Whereas in the CBD world, there is no licensing, so to speak, required – the revenue is instant.
“Anybody can build a brand, anybody can build a website. It is very easy to build a mock-up and your logo and talk about something that might hopefully sell in the future – it is very, very different to build your brand that sells today. And I think that is the biggest barrier to entry in the entire cannabis industry – I am talking about THC and CBD.”
Flack highlighted the difference in regulation in different countries as a learning curve, raising the barrier to entry.
Stanton McLean of Artemis Growth Partners commented: “When we ask the question boom or bust, I am going to say boom, because for me personally, what it has done for me has been extraordinary. And I say that in terms of weight, anxiety, in terms of sleep – it worked for me. I definitely wanted to get more understanding about what was going on in CBD what was going on in medical cannabis.
“I think that we will continue to see a thriving opportunity for CBD and then for particular brands that invest appropriately in marketing to get their product known and get a good base behind it.”
“You buy CBD because it is giving you some kind of benefits – it is a lower dose health and wellness where you do not feel the effects, but you have got to have a blood test before, and in six months after,” added Flack. “It is absolutely healthcare – why would you buy CBD for fun? You do not get high from it. You think with THC, maybe the patients get medical cannabis for fun. It is healthcare. I think that is a really important way to look at the sector.”
Kingsley Wilson, CEO at Chrystal Capital Partners, commented: “That is an important point, you can look at the whole array of different products on the market, but when we look at it from an investment perspective – which are the segments where we can get the highest margins and the highest growth you know – you can start at the retails CBD brands, there is no differentiation.”
Wilson went on to say: “When you get towards the medical side, people attach a higher value to: this [product] helps me with my anxiety or my sleep and therefore I am willing to pay and once I find a product that works, I will continue to buy it. Therefore, the companies that are spending on marketing win those customers and then you get your long-term lifetime value of that customer and that is ultimately what drives profits which is what drives investor returns.”
Wilson also highlighted the importance of understanding regulation for CBD companies looking to make it in the competitive market.
McLean commented: “My personal view is that the money will continue to come from net worth and family offices for some time until we see some changes in this and it becomes more federally legal. I think seeing the institutional market come is going to take some time for now. I think we are continuing to focus on the high net worth and family office funds.”
“We need to educate institutional compliance departments and get them comfortable and investing and that is when you are going to see the bigger companies come and list in London,” added Wilson.
“In the next couple of years, we will start to see the bigger blue chips investing, and that will put a massive injection of capital into the European markets to enable us to fulfill these numbers that people are expecting.”