Blood, Sweat, and Fears: U.K.’s CBD Marketplace at the Intersection of Brexit, Pandemic, and Bureaucracy
By Noah Tomares, Research Analyst, New Frontier Data
Shoppers have made their way back to the United Kingdom’s high streets of commerce, with thousands rekindling the national passion for queuing as they waited patiently in line to buy previously categorized nonessential items such as clothes, shoes, books, electronics, and furniture.
Yet, many businesses remain shuttered. Hairdressers, nail bars and beauty salons, pubs, clubs, and restaurants will remain closed until at least July due to the heightened relative risk of transmission from extended person-to-person contact.
According to the Organisation for Economic Co-operation and Development (OECD), the U.K. is likely to suffer some of the worst economic damage from the COVID-19 crisis, with its national income projected to end 2020 at 11.5% lower than in 2019. That far outstrips China at -2.6%, Germany at -6.6%, the U.S. at -7.3%, and even Italy at -11.3%. The Boris Johnson administration’s slow response to the pandemic, and chaotic management of the U.K.’s exit from the European Union (EU) are cited as key causes for such acute contraction.
Furthermore, the Tories have officially said that they would not accept a Brexit extension, which all but guarantees a hard Brexit at the end of the year, likely guaranteeing further economic disruption into 2021.
The tide of economic uncertainly makes for challenging waters to navigate by the U.K.’s fledgling CBD industry. With 7.6 million jobs at risk (i.e., 24% of the workforce), and millions more already on furlough, disposable incomes will shrink dramatically and likely remain depressed for an extended period. While the outlook may seem grim, the news is not all bad: The economic downturn coincides with perhaps the largest mental health crisis which the country has experienced in recent memory, providing incentive for many to seek out CBD to treat anxiety and stress caused by the uncertain times.
A recent study from Alphagreen.io supports it. The platform for CBD and alternative healthcare products identified 8.4 million Britons who had either bought CBD products this year or intended to do so. Over £150m was spent on CBD from January to April 2020, putting the market on target to achieve £450m in 2020, which would represent 50% growth over 2019. While those estimates preceded COVID-19’s seismic impact, they indicated a strong trajectory for demand in the market.
Additionally, while general retail stores have been shuttered due to the pandemic, online retail sales have surged, as consumers have shifted to delivery services. According to the Office of National Statistics, online sales grew to 30% of all retail sales in April, a record high.
The strong shift to online sales is noteworthy, because most U.K. CBD consumers were already purchasing from online sources. According to New Frontier Data’s survey of European CBD consumers, more than half (54%) of U.K. CBD purchasers cited online sources (either specialty store or major retailers) as their primary channel for obtaining CBD. Another 27% cite friends and family as their primary source while only 8% principally use a drugstore or pharmacy.
The patterns suggest that the closure of high street outlets will not seismically disrupt access for current purchasers. The acute impact of the pandemic’s disruptions on public health also presents an opportunity for CBD’s use as a wellness enhancement. New Frontier Data’s consumer survey found that U.K. consumers used CBD to manage stress, reduce anxiety, and help improve sleep outcomes. With the pandemic fueling dramatic increases in stress, anxiety, and sleep disorders, including 43% of U.K. adults reporting having trouble falling asleep, CBD could play a timely role as a non-pharmaceutical alternative to alleviate those issues.
Going forward, as shops and distribution channels reopen, CBD sales may be further bolstered. However, online sales of CBD look soon to face significant hurdles. Given the Food Standards Agency’s March 31, 2021, deadline for all CBD products to have a validated novel food designation, many products may not be able to stay legally available on the proverbial shelves.
Until then, brands have a window for growth through online sales, and to build awareness of the therapeutic value of CBD to improve wellness outcomes, even as they prepare for the coming changes in 2021.
For the CBD industry, as for the country at large, Johnson’s plea for caution would be well advised: “Stay alert.”