Expansion plans by two major players suggest confidence in the future of the CBD market in the UK, with one anticipating a continuing rise in sales driven by reactions to the COVID-19 pandemic.
UK brand Love Hemp, a subsidiary of World High Life, recently announced that it had started construction on a new production facility that would increase capacity from the current 8,000 units per day to around 43,000. The company added that the expanded facility would also ensure greater safety for employees working in a COVID-19 world.
“This expansion further increases our capabilities…while improving storage and production capabilities, lead times and ensuring the safety of our staff,” said Love Hemp CEO Tony Calamita. “Our strategy is to continue to expand our local footprint, contributing to the future growth of our business, whilst also providing quality CBD products to our consumers throughout the UK and around the world.
“The scale of our new facility will support our customer proposition and enable staff to continue to stay safe at work as volumes increase.” The facility will become operational in stages, with overall completion expected in February 2021.
The announcement comes at the same time as Love Hemp announced an increase in monthly sales, with a 57% rise in sales for July as compared to June. Calamita attributed the increase to strong brand-building as well as increased performance from online sales as offline retail starts to build back up.
Sales ‘well above pre-pandemic levels’
Love Hemp saw 62% of sales come from online channels in July 2020 compared to 40% in the previous month. This was significantly higher than pre-COVID levels, Calamita added.
“As the government takes steps to stimulate the economy and lift consumer sentiment we are seeing a welcome boost for physical store sales. At the same time, our online sales remain well above pre-pandemic levels, cementing the importance of our e-commerce strategy in underpinning brand experience,” he said.
“The wellness industry isn’t showing any signs of slowing down. What we have witnessed is an increased consumption of CBD during the pandemic, and we expect this to continue post-COVID.
“We believe that people who continue to feel anxious or have trouble sleeping are increasingly turning to more natural health and wellness solutions to add to their self-care routines.”
Meanwhile Mile High Labs, an American company with significant UK interests, announced it had secured a deal with the Nisa chain of convenience stores. The chain – part of the Co-operative grocery group – has over 2,500 stores throughout the UK.
“The UK is one of the fastest-growing markets in the world for CBD,” said John Wallace, Mile High Labs’ managing director for the UK and EU.
Forecast of ‘substantial’ growth
These independently owned stores now have the option to start carrying 11 products from the Mile High brand Mellow Greens. This includes eight varieties of CBD oral drops and three CBD e-liquids.
“CBD is an exciting new product proposition which has quickly emerged to become an in-demand category for UK customers and is forecast to grow at substantial rates,” said Ross Dennison, buyer at the Co-operative Group. “With CBD now available through Nisa, our partners are able to make the choice, thus creating an offering to meet this demand and form new shopping dimensions within their stores.”
The products were launched in August 2019 and Mile High is in the process of assembling a novel food application covering all of its bulk CBD isolate ingredients and finished products.
The company said its experience working in “under-regulated markets” played a significant role in the Co-op’s decision to distribute Mellow Greens national through Nisa. The agreement could be expanded further in the future.
“Co-op is well positioned to supply a wide variety of channel partners, and we are proud to offer them the full range of Mellow Greens CBD products,” said Frederik Hendriksen, vice-president of international sales and business development at Mile High Labs.
What This Means: It seems neither viral lockdown nor the country’s exit from the EU will slow the growth of the CBD market in the UK. That, at least, appears to be the case on the evidence presented by these two companies. In reality the future is much greyer.
CBD-Intel’s market forecasts show that the UK is an essential market for CBD – the second-largest globally behind the US. But depending on how optimistic a scenario is used, it could be that the peak of the market has already passed.
An assumption of a static market due to an uncertain regulatory environment, coupled with a lack of science-backed evidence for CBD efficacy which discourages new consumer adoption, would project a market size of nearly £260m ($340m) in 2020 as the high tide mark for CBD in the UK, with a slow decline over the next few years.
Even in a more optimistic scenario, with a clear regulatory structure and scientific evidence for CBD efficacy, CBD-Intel’s projections show a fairly flat market until 2022, with big increases after that.
Of course these projections are for the whole UK market and it could be that by taking steps to expand now Love Hemp and Mile High each end up grabbing a larger slice of the CBD market for themselves while also putting themselves in position to capitalise on any future growth.
– Freddie Dawson CBD-Intel staff
Painting: John Constable
CBD-Intel does not provide legal, strategic or investment advice. Tamarind Media Limited, the publisher of CBD-Intel, does not accept any liability or responsibility for information or views published.