CPG firms not ready—yet—to plunge into CBD waters

by Josh Long

Consumer packaged goods (CPG) firms may have been eying the market for ingestible CBD in late 2019 and early 2020. However, many of them pulled back in 2020 as the year progressed, according to Kelly Nielsen, vice president of insights and analytics with BDS Analytics, a market intelligence firm.

By and large, established food and beverage companies haven’t ventured into the U.S. CBD market. FDA has asserted CBD cannot be lawfully marketed in dietary supplements or added to food and beverages because, essentially, the compound was first studied as a drug.

The CBD market has “a lot of regulatory gray area, especially when it comes to putting CBD in food,” David Abernathy, principal at Arcview Management Consulting, said in an interview.

FDA devoted many of its resources in 2020 responding to a global pandemic. While it had drafted CBD guidance under the former Trump administration, the document was never published and was eventually withdrawn—consistent with a freeze on regulations and guidance documents issued by the current administration of President Joe Biden.

Addressing the perils facing CPG firms if they entered the CBD market today, Nielsen said in an interview, “Their entire organization could be at risk if the federal government decided to come after them.”

Nielsen predicts CPG firms will dive into the cannabis pool if and when FDA issues rules governing hemp-based CBD or otherwise opens up the market to general retail. BDS Analytics anticipates that will occur by 2022, the same year it forecasts CBD sales—including sales through cannabis dispensaries—will reach a whopping US$10.1 billion.

Assuming FDA eventually allows CBD ingestible products to be marketed, “major CPG manufacturers are likely to get involved in the market,” Nielsen said. She said these companies boast strong distribution networks, marketing budgets and innovation platforms.

The CPG firms, Nielsen added, tend “to be able to innovate very quickly” and have “distribution networks at their fingertips.”

But first, FDA and/or Congress must devise a solution to end the regulatory uncertainty plaguing the CBD industry, analysts and executives agree.

Will the federal government issue a “common sense and workable regulatory framework for the CBD industry,” Abernathy asked? “That … will be a game changer one way or the other.”

The government’s actions, the consultant said, could either “severely hurt” the CBD market or offer “clarity for the industry to start to thrive.”