EU Cosmetics Rules Set Up CBD for Long-Term Growth

By Trevor Yahn-Grode, Data Analyst, New Frontier Data

EU regulators have updated their position on cannabinoids in cosmetics to allow for the use of plant-derived CBD in certain products. While national regulations can still cause complications for CBD companies, the decision comes on the heels of the European Commission’s landmark decision not to treat CBD as a narcotic, and is being interpreted as part of a broader loosening of anti-cannabis regulations within the continent.

Loosened regulations will allow for cosmetics companies interested in CBD to invest in product development, clearing the way for a new wave of hemp products. Nine of the 10 countries with the highest per-capita spending for cosmetics are found in Europe, and increased consumer acceptance of CBD is setting the substance up for long-term growth as a functional, commonplace ingredient.

Whether the bulk of that growth will be captured by hemp-centric companies or by existing cosmetics manufacturers, however, remains to be seen. Concerns about oversupply (which sent biomass prices plummeting in North America) have reached Europe, and most extractors are finding it increasingly difficult to achieve profitability in the face of declining prices.

It seems clear that the expanded use of CBD as an ingredient will outlive any volatility in pricing, but many of the companies currently producing it will not: The extraction market is based on the processing of a commodity, which lends itself to scale and efficiency. As with nearly all other commodities, a few large processors are likely to dominate CBD production in the long run after outcompeting, acquiring, and eliminating smaller and less efficient firms. For retailers, however, the future looks less grim. Product development initiatives are creating new and innovative avenues for CBD consumption. In most jurisdictions, CBD marketers remain prohibited from making functional claims, though as new research comes out CBD may be expected to shift from general applications to specific, niche products.

Like in the U.S., the existing patchwork of contradictory regulations from various sources of authority thus far have restricted growth and development in the European hemp industry. The decision by EU regulators to open product pathways for plant-derived CBD into the cosmetics market is a positive step towards achieving a uniform regulatory framework on the continent. However, progress remains slow, and the positioning of CBD in the market — though promising — depends heavily on the patronage of regulators.

Top