Interview with Tim Phillips, Founder & Managing Director of CBD-Intel
Could you give our readers a little background on your professional life? What within your previous career experience lead you to set up CBD-Intel and move into the cannabis industry?
I am a lawyer by background, having worked at a London-based international law firm and at the European Commission. After working in the internet sector at AOL (some of you may have not even have heard of AOL, but it was the Google of its day!) I then worked in the government relations team at an online gambling company called Betfair which went through an IPO during my time there, and was a huge UK internet success story.
My job at Betfair included explaining to governments why regulating a very controversial sector, the online gambling sector, was a good idea. The issues we touched on included the addictive nature of gambling, youth access and tax, and these issues really interest me, not necessarily in themselves, but because they are complex and difficult to deal with. The regulation of controversial areas of policy, and the impact this has on the market development, is fascinating. While everyone can usually agree on simpler topics, controversial areas lead to highly political debate, and often badly thought-through legislation which has a huge impact on the way a market develops.
This led me to launching the company behind CBD-Intel: we cover a number of highly controversial topics which are both innovative and disruptive, but also controversial and subject to lots of regulatory controls. As a company, having a team of economists and lawyers to provide tracking of the changes to the CBD market internationally as laws change and new products and markets open up allows our customers to plan their strategies in a fast-moving world. And being independent of any of the companies in the sector allows us to tell people how it really is, an attribute which has meant we have a broad range of customers, from governments, academic institutions to large international manufacturers and retailers.
As providers of market intelligence and regulatory insights, it is key that your info and data is on point. Could you tell us how the team aggregate business insights and the type of organisations and bodies that you’re plugged into?
We have a team of nearly 30 analysts, most of whom are responsible for certain markets and territories, covering both CBD and our other product categories (including vaping). With a high level of multi-lingual skills, over the last 6 years we have built up strong relationships with government and regulatory stakeholders, allowing us to track legal changes across the world. In terms of market data, we carry out regular consumer and industry surveys in key markets and bring together a large amount of desktop research to pull together all the strands of a highly fragmented and opaque market. Our aim is to provide guidance to our customers of market size and growth, brand tracking and pricing, and consumer attitudes and behaviour. We also work with a number of industry bodies and trade media to validate our data and ensure that we have our ears fixed firmly to the ground.
The impact on retail, as a result of the COVID-19 pandemic, is undeniable. With specific focus on the CBD industry, what trends have you been seeing over the past 6 months in Europe? Have there been any surprise growth markets?
We have observed continued indicators of growth in the market over the last 6 months. Obviously, the loss of the offline channel in major markets such as the UK due to the COVID-19 lockdown had a profound impact on sales, but most industry players already had an e-commerce strategy which allowed for a quick pivot and refocusing of resources to push this channel. We still see new brands and products entering the market which is a positive sign. Also, we are seeing large non-cannabis players like Nestle overtly engaging too, which is another promising indicator. We have noticed an increase in promotional marketing activities such as discounted products and BOGOF offers which is an understandable tactic given the situation.
In terms of trends, there is a continuation of diversification in product formulations to include other minor cannabinoids or non-cannabis actives such as melatonin, or vitamins – specifically vitamin D. This is interesting as I believe this to be a defining moment for single cannabinoid products as, without scientifically-backed information regarding dosing and efficacy, the cannabis hype around CBD could lose its steam, which means that it will be folded into the plethora of ingredients that are marketed into the nutraceutical world. We are seeing supporting indicators around this in the form of CBD brands that are putting less emphasis on CBD, and instead pushing a distinct formulation targeted at certain user groups or effects, such as energy boosters, mood enhancers, focus/productivity tools, etc.
Specialist cosmetics have exploded onto the market too, with many leading brands branching out into anti-aging products and repair serums. The consumer uptake in these products is not well understood at this moment in time and I think CBD companies will face hurdles in this sector as they come into direct competition with large, established cosmetic brands.
One interesting potential trend is in inhalers. We have seen a few products hit the market, some from well known US CBD brands. Though, we will have to wait and see consumer reaction as it is a delivery format deeply rooted in medicinal applications and I am sceptical of mass adoption for wellness purposes.
It is still too early to see whether the changes which have happened due to COVID will be permanent, but the obvious impacts are happening in CBD as we have seen in other sectors. Online retail grew in strength, particularly during lockdown as retail stores were restricted or shut due to not being deemed an essential service. Online has remained a strong channel in many markets to date, and is likely to continue to be a very important way for consumers to buy CBD going forwards. The disruption caused by COVID has also had an impact on expected changes in regulation, with many policy and legal developments being delayed or put on hold while legislators deal with other, more pressing matters. Another effect of COVID is the economic impact it will have on most people, in terms of downtrading from premium products to lower-priced products, and the acceleration of the move from a wellness market to a hardcore of regular users.
The news that the European Commission is considering changing its position on CBD – in viewing it as a narcotic – is potentially worrying to a number of Europe-based CBD Health & Wellness companies. If CBD is repositioned as a narcotic and Novel Food applications are shelved, what will be the impact on the industry across Europe?
I think it is highly unlikely that the EC will come out with a blanket statement that CBD is deemed a narcotic any time soon, particularly given the delayed WHO meeting in December on the topic, and the expected ruling in the Kannavape case in the Court of Justice of the European Union which may add some persuasive arguments to the EC’s thinking. However, there is a danger for the sector that the threat of this hangs over the industry for a long period without any clarity from regulatory authorities, as it will make operating in the sector hard.
If the EC does deem CBD to be a narcotic throughout the EU, there will be an immediate growth in the black market for CBD products which are sold without novel food approval as we know that there are plenty of customers who would keep buying. But this would have obvious dangers around illicit product, and the standards offered in the market. Equally there will likely be a growth in CBD product formats which do not require novel food. We think that vaping and topicals may grow in importance in response.
Keeping on this theme, might a change like this create an opportunity for the UK CBD industry? Is it possible that the UK becomes the hub for global CBD brands looking to expand into Europe?
In short, we think the answer is yes. The UK, given the fact it is the largest and most developed CBD market in Europe currently, and the signals coming from the UK’s Food Standards Agency, would suggest that novel food approvals will be issued in the UK before they are issued by the European Commission/European FSA. As a result, we think this will give UK brands a valuable head-start for the opening up of the EU market. Approved products in the UK will likely be given an easier time in obtaining European Novel Food approval, since the UK FSA have said they will largely follow the European novel food approval system. And those UK companies which have been selling regulated products in the UK will have more consumer understanding and marketing know-how compared to their European competitors. It will surely be an advantage for them once the whole EU market opens up.
Since the inception of CBD-Intel, what changes have you seen in uptake and popularity of products across different customer segments? What are the consumer growth markets that ambitious new CBD companies should be targeting?
In the early stages of the CBD market, it was all oils and then the change came in the form of capsules, which consumers started to adopt – most likely due to their common format. This I think paved the way for the crossover to food products like gummies and the rest of the mountain of other things we have found CBD in. Drinks have experienced impressive adoption this year, both in the health and wellness category and the alcohol category. Ocean Spray was a large name to jump in on the health and wellness side, while we have seen a number of gin brands emerge with CBD, and also mixers too. This for me is an interesting phase as CBD is trying to break into another market and I think it’s too early to tell if it will endure or be another fad.
I think ambitious new CBD companies will struggle if they only focus on CBD without any science-backed data to give them an edge. We are seeing the introduction of low-priced CBD, which in most cases are “stripped back” CBD – usually meaning isolate-based formulations. Without science-backed data, I believe this is counter-productive for the industry as it serves to confuse consumers even further – if you’ve been paying a premium for full/broad spectrum products and your brand then launches a cheaper formulation, how do you make an informed decision on what to buy? There are simply too many white-label CBD products out there and the larger players in the market are either providing these in the saturated markets they gained success in, or they are focusing their growth efforts to new geographical markets. A lot of attention is on Asia at the moment, especially for cosmetic products as western brands tend to do well in these markets as premium lifestyle products.
Finally, CBD companies looking for the areas of growth for 2021 and beyond need to keep a very close eye on the developments in the regulatory landscape for CBD, as this will be make or break to the products which succeed and those that become restricted and ultimately fail. As Novel Food regulations are developed in Europe, and other regulations are brought in around the world, the market will change in response. What we can be sure is that this sector will not stay static, which will provide huge opportunities for some!
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