In recent years, cannabidiol products have created a popular alternative in a market where medical cannabis access is tightly restricted and adult use of cannabis is prohibited altogether. These restrictions combined with the clearest and most liberal CBD policy in the region, as well as a large populace with a healthy amount of disposable income and predisposition toward natural wellness products make the UK CBD market well-positioned to thrive. As such, in recent years it has been a pioneer, both in terms of product diversity and availability, and it is expected that the market will continue to expand quickly as products begin receiving authorization through Novel Food/Food Standards Agency (FSA) regulators and competitors enter (or re-enter) the market unencumbered by previous legal uncertainties.

A variety of companies are preparing or have already submitted Novel Food/FSA applications in order to keep products on shelves beyond the March 2021 deadline, though not all have the resources to go through this complicated, expensive process, thus we expect most smaller players to be replaced or bought out by more competitive larger entities once products are formally authorized. Products' adherence to this regulatory framework and the entry of larger CPG brands into the market will drive consumer confidence as well as widening distribution channels beyond those already established in chain retailers such as Holland & Barret, Superdrug, Boots, Lloyd's Pharmacy and Tesco.

While COVID-19 has driven UK CBD sales down to some extent in 2020 due to the closure of outlets, shifted budgetary priorities, supply chain interruptions, and fears around inhalables and their respiratory consequences, enthusiasm around the sector abounds and growth has nonetheless continued at a rapid clip. As a strong and leading market in Europe with a uniquely well-defined regulatory framework, UK's CBD market is expected to continue on its upward trajectory in the short- and long-terms.

CBD extracts were made legal by the Medicines and Healthcare Products Regulatory Agency in 2016. Prior to the European Commission defining cannabis derivatives – including CBD – as a Novel Food, manufacturers were able to bypass the process of obtaining marketing authorization from the MHRA by ensuring that their products and labels did not advertise medical or therapeutic benefits.

However, the UK Food Standards Agency (FSA)¹ announced in early 2020 that those looking to legally carry ingestible CBD products - e.g. oils, capsules, infused beverages - would have to submit a valid application for Novel Food/FSA authorization in order to keep product on shelves beyond March 2021. Leading up to the Brexit transition (December 31, 2020), Novel Food authorization applications must be sent to the European Commission - and, optionally, the FSA as well - and following that date, must be sent to the FSA itself for processing. While this resolved questions surrounding Brexit and its regulatory impact, and provided much-sought-after legal clarity, it has forced companies through a costly and complicated process to get or keep their ingestible CBD products on the formal market (vapes and cosmetics were specifically excluded).

The authorization process is by all accounts rigorous and expensive (estimated to cost between 300,000 and over one million pounds between administrative and legal fees, testing and compliance) as well as slow, taking anywhere from 16 months to six years. Also factoring in is a July 2020 decision by the European Commission to pause all plant-based CBD applications, citing the UN Single Convention of Narcotic Drugs, which considers “extracts and tinctures of cannabis” (CBD ingestibles) to be narcotics. As the decision was made 18 months after classifying CBD as a Novel Food and beginning to accept applications for authorization, dozens had already submitted costly and labor-intensive applications. Further, the UK FSA elected not to follow the European Commission’s path on labeling CBD products as narcotics, regardless of the UN CND vote in December 2020 as to whether to de-schedule it. Thus, the Novel Foods decision combined with news out of the UK brought a flood of renewed interest to the country, which offered unique stability and a viable path to commercialization.

Companies who aim to market CBD ingestibles in the UK beyond March 2021 have various alternatives in light of the Novel Foods determination:

• They can apply for Novel Food authorization for their products, with the additional drawback that this requires the applicant accept that their product is a Novel Food (giving up any right to challenge that definition in the future).
• They can look to source from white labelers who have successfully had their products authorized. Alternatively, they can stick with their current white label companies that intend to do so.
  • According to UK FSA, "Once a CBD product is authorized, that authorization applies to that product only. This means using the same detailed production methods, for the exact same uses as described within the authorization, and using the same safety evidence base. Whilst the authorization itself is not specific to the applicant and the final product may be branded in different ways, where the applicant requests and is granted confidentiality, then key aspects of production and the research evidence base may not be available to others for five years. Where a business buys CBD products from others, they must ensure these products are correctly authorized, and that they only use them in ways described in the authorization." Thus, authorized white labeled products may be marketed under different brand names and covered formats so long as they strictly adhere to the standards met in the authorization.
  • Since the option exists for the product/research evidence base to be protected during a five-year period, white labelers and other applying companies could be granted exclusive rights to their Novel Food data during that time, meaning a number of product authorizations and their underlying product specs/research would not open up to the wider market until 2026 or later, at which point competition would ramp up and prices would be driven down. Notably, however, industry players are doubtful that confidentiality will be granted as the European Commission may see this as acting against the interest of public health – favoring instead a more open research evidence base. Despite that, Novel Foods authorization is key to getting product onto mass retail shelves – so the expensive process is not without merit, even if the EC decides against granting confidentiality.

Brightfield Group market sizing and projections account only for ingestible products that have gone through formal Novel Foods authorization or whose valid applications have been submitted, in addition to non-ingestible goods that fall outside this regulatory infrastructure.

The FSA also recommended that healthy adults take no more than 70 mg CBD per day and advised against vulnerable groups (those pregnant, breastfeeding or taking any medication) consuming CBD products.

The Novel Food application deadline applies to all CBD businesses based and operating in England, Wales, and Northern Ireland. As Scotland and Republic of Ireland often follow the FSA’s approach, it can be expected that they will take similar actions. Although the FSA seems to be continuing in parallel to the European Union's authorization process, Brexit’s impact is yet to be seen and this may cause delays in application approvals. Delays may also result from COVID-19's impact on testing laboratories and other entities involved in the Novel Foods authorization process.

The CBD market in the UK has grown rapidly, with the number of CBD consumers virtually doubling in 2019 to reach over 7% of the adult population (8% in 2020) and mass retail chains from grocers to pharmacies beginning to pick up CBD products. Virtually all formats have thrived in the UK (e.g. vapes, oils, cosmetics, beverages), thus a large variety of companies across the spectrum have launched or successfully expanded their operations from the country.

However, the Novel Food regulations, and to some extent COVID-19, have impacted the competitive landscape greatly in 2020. A relatively small percentage of the hundreds of CBD companies operating in the space today will continue operations beyond 2021, namely those able to carry the cost of Novel Foods/FSA authorization (or source from an entity that has) and market successfully to a saturated, more economically strained consumer market. These simultaneous phenomena will force the market to consolidate, with many of today's brands either being acquired or forced out.

Below is a sampling of the companies that have surged in the UK and are well-positioned to tackle the brave new world of CBD in 2021 and beyond. This list is not exhaustive; Nearly all companies discussed in Europe's Competitive Landscape have operations or sales in the UK.

Europe-based Companies:

Dragonfly

Dragonfly was founded in the UK in 2016 and offers CBD oils ("narrow spectrum" and broad spectrum) made from certified organic hemp grown on Dragonfly Biosciences land in Bulgaria. Products are available through Boots stores and online in the UK and through the company's website, with shipping across the EU. The brand is one of the only two CBD brands carried in Tesco grocery stores, earning it national recognition and exposure to main stream consumers. Dragonfly seeks to differentiate itself from competition with a strong commitment to research, transparency, and the natural and organic source of its products.

Vitality CBD

Newcomer to the market Vitality CBD launched in 2018 and has quickly become a well-known name in the CBD space. In August 2019, the company finalized a deal with Tesco to carry its CBD products in the retailers 378 pharmacy outlets. The deal came just a few days after it announced a deal with Boots Pharmacies, to stock their products in Boots’ more than 250 pharmacies. These additions pushed Vitality’s count of retailers to over 1,900. In both outlet chains the CBD brand is selling their flagship THC-free CBD Oral Spray and their THC-free CBD Muscle Balm.

Provacan

Provacan was founded in the UK in 2017, with a line of CBD products developed by biotech research company CiiTECH in collaboration with experts at the Hebrew University of Jerusalem. The company prides itself on innovation, research and quality, even offering two Kosher tinctures.

LoveHemp

LoveHemp is a London based company, founded in 2015. It has positioned itself as a high-quality and innovative CBD brand, and its continuous research and development efforts are aimed at consistently delivering the finest and most diverse CBD-rich products available on the market. LoveHemp enjoys a strong reputation in the region, and its products are available online internationally, as well as through brick-and-mortar stores in the UK and Ireland.

Celtic Wind Crops (CWC)

Based in Ireland, Celtic Wind Crops (CWC) manages and controls its whole supply chain, from growing hemp to developing and distributing final products, including CBD. Originally focused on hemp cultivation, in 2016 CWC was able to get funding from AIB and launched their signature CBD oil the same year, which became incredibly popular throughout the country. Today, the company has 2,500 acres dedicated to hemp cultivation for use in its own hemp products, and CWC’s CBD is currently available in 60% of Irish pharmacies, and every health food shop in Ireland. In 2019, CWC signed a distribution deal with Lloyds Pharmacy, a British chain with over 1,500 locations throughout the UK, greatly expanding its CBD market reach and potential. CWC is also planning on opening a manufacturing base in Northern Ireland as a hedge against potential levies and delays of product deliveries in the UK.

Harmony

Harmony, founded in 2014, has become well-known for its e-liquid and vaping products and continues to thrive throughout Europe with its expanded product line, including tinctures and cosmetics. It has maintained an important presence in the UK despite the recent entrance of many newer players onto the local market. As a primarily vape-driven company with a growing focus on cosmetics, it is expected to weather the Novel Food and COVID storms successfully, given that these products fall outside NF regulations, and that vape products have remained accessible under lockdown as tobacco and vape shops have largely been deemed "essential" and allowed to stay open.

International Companies:

Elixinol

Headquartered in Australia, Elixinol is one of the world's top CBD producers and partners with hemp producers in northern Europe and North America to supply international markets. The company’s local presence combined with its global team’s experience navigating international markets position it well to make big gains throughout Europe. The company has a considerable distribution network in the UK, including a partnership with Cambrian Alliance, a buying group for independent pharmacies with a network of 1,200 member stores, as well as listing with Alliance Healthcare UK - part of Walgreens Boots Alliance Group, a leading pharmaceutical wholesaler and distributor in Europe which supplies 115,000+ pharmacies, doctors and health centers around the globe.

EVR

The Tree of Knowledge Intl. Corp focuses on production and sale of products with high concentrations of CBD through its subsidiary, EVR Brands. Their portfolio includes capsules, vape pens, tinctures, and balms. In addition to third-party testing, their product packaging includes a QR code that allows consumers to check the lab results of the product batch and look at the Certificate of Analysis (CoA). Tree of Knowledge (EVR CBD products) has a distribution agreement with CBD & CBN Ltd. with strong sales in Ireland and operations in 27 countries.

CBDfx

The California-based company has gained excellent traction in the British and German markets (as well as offering product in 60+ other countries around the globe), beginning with a popular CBD vape portfolio and broadly diversifying its product offering over the years. The company sees a great deal of online traffic from Europe and has recently launched its proprietary UK-based site in response to high demand in the country.

Beyond the CBD retail boutiques that have popped up around the UK, the distribution of CBD oils and products has gone mainstream. The most prominent distribution channel for CBD products in the UK currently is large retail chains such as Superdrug, Tesco and Lloyd’s Pharmacy, which offer CBD products throughout the country, giving a broad swath of the general UK population access to CBD and helping to normalize it among consumers. Vape products can be found in smoke shops and tobacco shops across the UK as well, and have become a popular alternative to smoking traditional tobacco.

Recent regulatory changes as well as COVID-19 effects will most likely continue to dampen the opening of any more specialized shops, shifting more traffic online and toward “essential” retailers (which include tobacco shops). Growth in the various channels is expected to remain volatile until pandemic-related lockdown orders and limitations are lifted for good (and will receive a boost once ingestible products begin being approved by the European Commission and UK Food Standards Agency). In the meantime, CBD will remain available on shelves of important retailers, such as:

Holland & Barrett

Holland & Barrett, the popular chain supplying much of Britain’s high streets with health foods and supplements, became the first non-cannabis outlet to stock CBD oils in the UK in 2018. The chain began by stocking products from Dutch firm, Jacob Hooy, such as their 10ml tinctures. Despite recent legal challenges, the chain continues to stock products, including their own proprietary line of CBD products and a variety of other brands such as Holistic Herb, LoveHemp, Elixinol's Naturopathica, and Rapid CBD. In addition to online retailing, these CBD products are distributed at Holland & Barret’s brick-and-mortar locations, which number over 700.

Tesco

In August of 2019, behemoth UK supermarket line Tesco partnered with CBD brand Vitality to stock its products in more than 370 pharmacies across the country. This was a critical move for the CBD industry as a whole, as Tesco represents a trust-worthy, nation-wide name brand retailer, where millions on Britons will be exposed to CBD as mainstream, normalized product.

Boots Pharmacies

Similarly, the popular chemist chain, Boots, began stocking CBD products in 2018. The well-known retailer carries nine brands of CBD, including one product of its own – Boots CBD muscle gel. Other brands include Ambience, Dragonfly, Greenstem, Healthspan, Vitality and Love Hemp, which offer a wide variety of products to UK’s consumers including capsules, tinctures, oral sprays, gummy bears, hand cream, bath bombs, and balms.

1. The FSA is the Central Competent Authority (CCA) for food safety that issues guidance to support consistency in approach, which applies to England, Wales and Northern Ireland however it is up to local authorities to abide by these guidelines and enforce them.