Hemp and CBD in China: Good regulatory control key to driving open market for consumer food products - expert panel
The panel convened at the recent Future Food Asia 2020 virtual event, and comprised of Brian Sheng (CEO of China-focused hemp and cannabinoid producer Asia Horizon), Apple Zeng (CEO of the CBDG Cannabis Fund in China), Dr Viroj Sumyai (President of the Thai Cannabis Corporation), and Jahan Peston Jamas (Co-Founder of the Bombay Hemp Company).
According to Sheng, the way China has designed its policies and regulations to govern the local hemp and CBD industry at source has emerged as the ‘most well done and practical’ out of all the countries trying to push the industry forward worldwide.
“This tight upstream control not only makes it easier for regulators to manage, but also helps them to prevent oversaturation in the market, such as has been seen in markets like the United States. But then when moving down the supply chain, on the consumer side, the market is much more open and any manufacturer can use the produced CBD to make products such as food or beverages.
“This highly controlled start to the chain that becomes less-regulated and more normalised at the consumer end is a good example of how governments can design policies to maintain control.”
As a result of the market dynamics these regulations have formed, Zeng also revealed that China has started to open up for production of consumer end-products containing CBD.
“The Yunnan provincial government specifically has just fully opened up the legal production of all CBD-related consumer products including foods and drinks – this means that we can now not only do cultivation and extraction, but also produce end-consumer goods,” she said.
“The production costs are actually very low, as taxation is low and there are also government subsidies, making this even more attractive as a sector. This is an important milestone for the Chinese hemp industry and proof of how much the government is supporting cannabinoids.”
China is the biggest producer of cannabis worldwide, but previously had no specific rules and regulations regarding the legality of producing end-consumer goods containing CBD.
Don’t treat cannabis differently
In order for the cannabis industry to grow and flourish, Sheng urged policymakers and investors to not treat cannabis as a special category, but instead see it as similar to any other ingredient to be used in CPG or pharmaceutical products.
“The way consumer end products are appearing on the market in Asian countries such as Japan or China makes it increasingly apparent that there is a CPG industry growing whether it be in food or cosmetics or other areas that is skipping over many of the earlier stages that the North American market went through initially on its journey from medical to recreational usage,” he said.
“So the number one thing to keep in mind is that while cannabis and CBD is a new topic of discussion here, it’s very much analogous to other current categories such as CPG food, and needs to be acknowledged as such [for the industry to move forward].”
Jamas concurred and stressed that most crops that the Asian market is familiar with today have not always been thought of as ‘traditional’, and that cannabis has the potential to be the same.
“The key is to understand that most natural fibre crops or edible seed crops that have penetrated Asian markets, as well as botanicals and nutritionals that have emerged, are not part of the traditional paradigm,” he said.
Asia currently has highest number of cannabis users worldwide at 86 million, even more than North America (65 million) and Europe (48 million).
Don’t just be about CBD
The panel also advised all entrepreneurs looking to break into the industry and produce food products with hemp and CBD to look beyond the novelty factor, and make sure to focus on the actual product benefits.
“Basically, do not make CBD or hemp the only thing that is special about your product,” said Sheng.
“What CBD or hemp allows for is as something that peaks consumer interest and catches their eye, but at the core it still comes down to your product – Is it a good product? Does the branding resonate with consumers? Does it solve a need for consumers?”
“It’s exactly the same as when starting a consumer brand in any sector [and] whether you’re using CBD or hemp seed oil as an ingredient, there are always benefits to be highlighted.
The global legal cannabis market is projected to be worth US$12.5bn by 2024.
