The FSA has started to crack down on ingestible CBD products after describing them as Novel Foods

The first quarter of 2021 saw a boom in cannabidiol (‘CBD’) and other cannabis-based companies listing in the UK, following an announcement from the Financial Conduct Authority (‘FCA’) in September of 2020 stating that the guidelines surrounding cannabis-based companies that sought to list on the London Stock Exchange (‘LSE’) were being reviewed and that UK based cannabis companies were able to list on the largest exchange in Europe for the first time in its 320-year history.

The appetite was clearly there with most listings being oversubscribed. Some share prices rose 400% on the first day of dealings with investors flooding into the new market in the hope that it would provide decent returns and exciting new opportunities for portfolio growth. The initial boom, however, was followed by a sharp decrease in share prices, leaving investors thinking more carefully about the companies they are investing in and the opportunities for future growth.

During the cannabis boom of 2021, the Food Standards Authority (‘FSA’) announced that any companies selling ingestible CBD products had to submit novel food dossiers by 31 March 2021 in order for their products to be legally sold. This was the first move in the government’s quest to set a benchmark for CBD products sold across England and Wales.

On 31 March 2022, the FSA released its online directory of CBD products that had made credible novel food applications and were therefore eligible to stay on the market. This list contained 3,500 items, with ‘many thousands’ not being published, according to the FSA. Whilst this list is no guarantee that these items will receive the novel foods validation, it provides clarity to retailers and local authorities of what items should still be sold.

The UK market for consumer CBD products was worth £690 million in 2021, according to estimates by the Association of the Cannabinoid Industry – more than double the level recorded in 2019 – making the UK the world’s second-largest market for consumer CBD after the US. It is expected that this market will go from strength to strength, reaching a £1 billion valuation by 2025.

With UK CBD companies now being held to exacting standards by the government, consumer clarity should start to drive an increase in trust and comfort around the use of CBD products, with more and more research coming out in support of its capabilities with regards to treatment of anxiety, stress, sports injuries and other applications.

Cannabis-based products seem to still be an unknown despite their ancient applications and it is taking the market a while to catch up with consumer interest. As more organisations and institutions start to consider cannabis-based companies as worthwhile investments, interest may increase and stocks might start to see strong growth again when global markets begin to recover.