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GMP certification means little and European CBD producers are being held back by rules limiting varieties that can be grown, according to new analysis from CBD-Intel.
Our wholesale pricing report on CBD products found that having Good Manufacturing Practices (GMP) certification has little impact on the price that can be commanded for bulk CBD products such as distillates, isolates and refined oils.
This may be due to GMP not being a standard for quality between producers. CBD-Intel analysis of the data led to a theory that although GMP leads to quality assurance processes, it can take considerable time and capital to achieve. This means that not all CBD producers – even those that through their own means are achieving high quality products – have been able to afford, or want to afford, the expense in time and capital that GMP certification requires.
“At present, very few producers of CBD wholesale products hold GMP certification. That is not to say that the producers without certification are not compliant – they simply have not undergone the certification process,” author Nate Erskine, CBD-Intel’s head market analyst, said.
Economies of scale
That said, the industry is starting to see the advantages of GMP compliance and certification as the industry matures and engages with more established industries such as the pharmaceutical or food and beverage, he added.
For certain categories, such as distillate and isolate, GMP-certified producers tend to be cheaper. This could be due to the larger companies, with better economies of scale throughout their operations, being among the first in the industry to go through the certification process.
“GMP certification will be a requirement as the industry matures and demand increases from other manufacturing industries. The costs of compliance and certification can be significant, but we are not seeing this being a barrier to maintaining price competitiveness,” Erskine said.
The report also found that producers in the European Union generally suffer in comparison to counterparts in North America and Switzerland, where a wider variety of plants (including ones with higher THC content) can be legally grown.
CBD producers in the EU get less CBD percentage by weight while also producing fewer minor cannabinoids and other beneficial compounds. This means lower margins for production and a potential disadvantage when marketing products as higher quality.
European producers in trouble
“The European market is at somewhat of a disadvantage when it comes to CBD production due to regulations which only allow the use of approved genetics in the growing process – resulting in a crop with a lower total CBD percentage by weight,” the report explains.
“Furthermore, the genetics used in the North American and Swiss markets tend to produce a more diverse profile of minor cannabinoids and other beneficial compounds like terpenes – potentially allowing the final distillate or refined oil to be considered higher quality products than those derived from EU-certified hemp strains.”
This could mean European producers are in trouble. “With large and burgeoning consumer CBD markets across the EU, North American producers are looking to the EU for expansion opportunities,” Erskine added. “Competing with American and Swiss distillate will be a challenge considering the differences in specification.”
One suggestion may be to focus on isolate. CBD-Intel subscribers can read the full report to learn about other potential business solutions, plus seeing analysis of the impact Asian companies may have on entering the market.
Since this article was written, cannabis firms from outside Europe have been moving in on the EU market for CBD. For example, US company Curaleaf secured a foothold in the European market in early 2021 with the acquisition of Emmac Life Sciences and Australian medicinal cannabis firm acquired Dublin-based medicinal and wellness cannabinoid company Satipharm.
– CBD-Intel staff
