By Marc Borson MRPharmS (Copyright 2018) EU and UK Cannabis Consultant.
CBD based products are proliferating. The CTA (cannabis trade association) in UK have 700 members. It has been reported that UK sales are £50 million. But Is CBD good business?
There are several fundamental risks that are hard to reconcile with a CBD supply and distribution business model.
Almost all CBD products are at significant risk of simply being illegal and controlled by the UK Misuse of Drugs Regulations. Although CBD and other benign cannabinoids are not controlled by the MDR, THC, THC-V and CBN are. Supply and possession of materials that contain the psychoactive and controlled cannabinoids can be exempt from the MDR if controlled substances are below 1mg per product but not the individual dose. The problems with this is that it only allows 0.01% of say a 10ml bottle to contain controlled cannabinoids. 0.01% is actually a very low amount and it can be difficult to find low THC cannabis materials that contain such a low amount of this natural biproduct. Further still, it effectively limits any product to just 10ml or less. From analysis we can observe good quality products with very low levels of THC values such as 0.008%, but 0.002% is an exceptionally slim margin for error.
Furthermore, if the volume of a 10ml finished product containing 0.08% THC was raised to just 15ml the product would be illegal under the MDR.
Directors are legally responsible for a business, if it breaks the law the directors can be criminally liable. Other members of staff throughout the business could be unintentionally breaking the law by handling material and transacting for the business. Not only is this a problem at home in the UK, but also the USA use such information to prevent applicants from gaining a visa.
Manufacturing possess an even bigger risk as almost all bulk will contain more than 1 mg of THC, In fact it will be several orders higher putting the bulk material firmly in to being a scheduled material that will require a home office license to possess and supply.
The actual cost of the cannabis extracts as a raw material is very high. Not only ,will this have an impact of the overall sales price but also product shrinkage and wastage has a very noticeable impact on profit margins. The cost of the raw material can be as high as 95% of the product even if substance is highly diluted with low cost vehicles.
The high cost of the raw materials not only reduce the products profitability but also creates significant financial risk for the value of the bulk stored goods. Capital will be trapped in stock for many months as it is turned over. The stock contains flammable ingredients and it is also perishable. Poorly stored batches can easily be damaged or pose a serious physical hazard risk.
Currently the majority of mainstream merchant service providers will not provide facilities for CBD or cannabis businesses, this is because the Federal US government considers any cannabis material illegal. Many use paypal in violation of terms and conditions. It is possible banks will also refuse the provision of business banking services if they are aware of the source of the revenue.
There is no-doubt that there is demand for CBD, there are very positive anecdotal reviews on the substance’s effect. But as a business making CBD products will require an individual to accept an exceptionally high legal and financial risk.
by Marc Borson, A pharmacist with special interest in Cannabis products. Marc Borson provides a full spectrum of consultation activities including GMP for the cannabis industrial sector. To engage Marc Borson as a consultant contact firstname.lastname@example.org