How U.S. firms can overcome CBD quality issues: Source from Europe

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Jacek Kramarz is Director of Business Development at CBD maker HemPoland. Under his leadership, HemPoland’s blue-chip CannabiGold brand has quickly worked its way into the leading ranks of the European CBD sector. Kramarz played a key role when HemPoland was acquired by now parent company The Green Organic Dutchman (TGOD) of Canada in 2018. A licensed securities broker, he previously worked in management consulting in Vienna where he coordinated international projects tackling complex changes in company ownership and restructuring. Kramarz recently was elected to the board of directors at the European Industrial Hemp Association.

HempToday: Where would you say the European hemp industry is these days in comparison to the United States. How do you describe the levels of development and current market for each?

Jacek Kramarz: It’s a very interesting and multi-layered question with no clear answer. We have to consider several things. First of all Europe, after World War 2, continued to have a hemp industry, which by then had virtually disappeared in the U.S. Poland alone grew more than 30,000 ha of hemp each year back in the 1960s. Even if the later decades witnessed significant contraction in hemp in Europe, there was still some sort of continuity.

Europe has institutions and companies with decades of uninterrupted experience in cultivating and processing hemp, unlike the U.S., where the development of the industry can be linked to the recent CBD boom and state-by-state cannabis legalization. The hemp industry in Europe is more diverse. European CBD companies were developed as an extension of existing business among fiber and seed processing companies, whereas in the U.S. everything started from CBD and additional verticals are only starting to be developed now.

So EU companies already had a lot of experience in hemp before they ventured into CBD. Thanks to that, we have more established experience with genetics, cultivation, harvesting and processing, and considerably fewer issues with product quality than our U.S. peers, who need to develop their skills in all areas of the business.

But the U.S. has the best entrepreneurs in the world. Product innovation and branding, especially in the CBD space, advances much faster in the U.S., pushing development of the consumer market. We are in an interesting situation where the U.S. is leading the world with innovation, but at the same time struggling to develop a strong supply chain, especially in the states that entered into hemp only after the Farm Bill. In order to maintain growth, U.S. companies are turning to Europe for consistency and reliability.

HT: Have European makers solved those quality problems? What does that look like generally in Europe?

JK: The hemp industry in Europe, as in the U.S., grows very fast. As with every booming industry, quality issues are inevitable. The advantage of Europe is that thanks to its history of continuity, there were fewer problems to solve. Especially in the CBD space, European companies from the beginning could focus on solving only those 2 or 3 areas that were still unknown, whereas U.S. companies in most cases had to start from scratch. As a result, I would have more confidence in EU-made products when establishing the supply chain.

HT: Is the U.S. still a market for EU-made CBD? How has the dynamic changed since the legalization of hemp in the USA last year?

JK: As HemPoland we never had any significant business with the U.S. After the Farm Bill we see a huge growth in the consumer market as national retailers in the U.S. are now stocking CBD products. This presents an opportunity for EU companies who are well suited to supply brands present at those retailers.

Reliability is the keyword here. EU companies can deliver large quantities of compliant product with the same, consistent quality. Of course the supply side in the U.S. is also growing, but we see much more inconsistency in the product there, especially in states who joined the party only recently. For most players it might still take some time to stabilize their operations.. There are just too many issues that companies who start on their journey need to overcome to be able to meet the requirements of large retail chains. Major EU companies can help to close this gap.

HT: There are already a lot of North American players present with their products in EU countries. Is there still space on the European market for more products from the U.S. and Canada?

JK: There are many routes for trans-Atlantic cooperation. EU producers and processors like HemPoland can be platforms for U.S. companies to launch their brands in Europe. All will benefit from U.S. product innovation and education related to brand building. We are in a win-win situation and do not need to compete.

HT: What innovative forms of delivery, what kind of CBD products are on the horizon? What’s exciting in R&D these days? Where do you see product proliferation going?

JK: In Europe as a result of uncertain regulatory environment over CBD in food products, everyone is looking into non-edible forms. We will see growth in cosmetics and vapes (despite recent bad press). HemPoland in December launched in Poland its first CBD skincare product portfolio with 11 SKUs sold under our CannabiGold brand. After great reviews from the launch, we expect to commercialize it on other select EU markets in 2020. In southern Europe smokable CBD flowers are also an interesting trend.

In the U.S. everyone expects beverages to take the market by storm. However, I think the main market share will stay with traditional CBD oils and tinctures. Main-stream retail markets will look for consumer-proven concepts and today CBD oils are still the surest thing.

It will be also interesting to see how CBG and CBN develop. In Europe it is still a niche within a niche, but in the U.S. they already started to gain traction

HT: What are the key challenges Europe has yet to overcome in the CBD sector?

JK: There are two main issues: Novel Food regulation, which creates uncertainty for all CBD-containing ingestible products, and lack of clarity over acceptable levels of THC-residues in hemp-derived products. Both are being addressed by the European Industrial Hemp Association. Removing those two obstacles would open the opportunity for brand owners to invest more into educating consumers and growing the market.

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