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Boom or Bust for the CBD Market?

Boom or Bust for the CBD Market?

Thursday, 21 November 2019 01:56 PM Current | Bio | Archive

The United States is grappling with one of its worst-ever drug crises.

Over 900 deaths occur each week from opioid-related overdoses and, millions more suffer from opioid addiction.

Since President Donald Trump declared the opioid epidemic a “public health emergency” in 2017, many people started turning away from big pharma in search of natural and non-addictive pain relief options that don’t present serious side effects.

Products derived from the cannabis plant family, such as hemp, and in particular its derivative cannabidiol (CBD), have captured mainstream interest are quickly becoming the go-to solution for many Americans.

Due to new public interest and regulatory reform, CBD’s domestic market value is estimated between $600 million and $2 billion. Since CBD is the non-psychoactive cousin of the largely controlled THC compound found in cannabis, it enjoys a forgiving regulatory environment and is seldom subjected to restrictions.

In fact, following the Trump administration's passing of the farm bill in 2018, the production and sale of industrial hemp, from which CBD is derived, was made legal in the United States. Because of this, CBD’s market share is predicted to reach $16 billion by 2025.

Consumer demand is particularly strong in the United States where 14% of Americans have already tried CBD products with a surprising 40% saying they would be interested in trying CBD. While federal regulation has helped nurture the hemp and CBD markets, additional and more conclusive scientific studies would likely benefit the industry and create demand in previously unknown spaces.

With many manufacturers, retailers and investors also taking an interest in the space, demand should increase exponentially as distribution is streamlined and consumer demand is greeted by easy accessibility.

For now, CBD products are easily available online but interestingly, are appearing as an over-the-counter product in pharmacies across the country. Given consumer accessibility is key to the industry’s success, an increase of such OTC locations is promising. Seizing this opportunity, CVS Pharmacy began stocking CBD products in over 800 of its stores around the country.

Perry Antelman, CEO of Rhode Island-based Abacus Health Products, the parent company of CBDMedic, is optimistic about his partnership with CVS. “The fact that CBDMEDIC products are now being positioned in-line demonstrates the acceptance of our over-the-counter products within the traditional pain relief and skincare categories” he said.

Indeed, as more companies continue to see market success, their retail partners will also share the upside.

Cost Uncertainty

CBD, like anything on the market, is subject to supply and demand forces.

The product is in huge demand by a large market of people, many of whom have shown no interest in recreational or medical cannabis. This distinction suggests that CBD is not merely an over-hyped product; it does indeed have a genuine mainstream consumer base of all ages and walks of life.

CBD supply, however, is still an unclear issue at least for the time being. With government bureaucrats still cracking down on certain forms of CBD, manufacturers cannot operate with certainty and may limit production as a precautionary measure. Restricted supply here can drive up prices.

Epilepsy treatment Epidiolex, the only FDA approved CBD product currently on the market, costs $32,500 per year - a disappointing harbinger of the CBD industry if supply is restricted and big pharma corners the market. Clearly, a diverse production and retail market is good for manufacturers and retailers and also means consumers have appropriate and affordable access.

Despite risks to stable supply, studies are now being rolled out on anything from CBD as medication for anxious pets to new ways of boosting pain relief. Because of new medical research, shifting public opinion and a loosening regulatory environment, it is likely the FDA will be more lenient on CBD.

For investors, CBD represents a burgeoning industry with few risks and strong consumer demand. Even if the $16 billion valuation estimate is over optimistic and overstated, there is a strong potential to earn a healthy return.

The risk is there, albeit minimal.

The momentum behind the CBD market is already too strong to be reversed. In fact, the federal government is already considering legalizing cannabis.

Reassuringly, there is reason to believe the FDA and other government authorities will broaden their horizons and fully incorporate CBD products into the health supplement market. If that happens, there is no telling how high the market may go.

Raphael Badani is a geopolitical risk consultant and interactive simulation designer in the private sector.

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Products derived from the cannabis plant family, such as hemp, and in particular its derivative cannabidiol (CBD), have captured mainstream interest are quickly becoming the go-to solution for many Americans.
boom, bust, cbd, market
Thursday, 21 November 2019 01:56 PM
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