Health Canada’s proposed cannabis health product category represents a potential growth opportunity in the emerging CBD sports market.

A cannabis health product category could enable the fair and accurate regulation of new markets, including CBD-based consumer packaged goods.

CBD’s reported therapeutic properties along with regulatory changes such as the US Farm Bill and the removal of CBD from the federal Controlled Substance list have provided CBD companies with a foot in the door to the US$4.2 trillion health and wellness market. In 2019, major US retailers such as CVS Pharmacy (NYSE:CVS), Walgreens (NASDAQ:WBA), Rite Aid (NYSE:RAD) and Kroger (NYSE:KR) began carrying CBD topicals including creams, sprays, roll-ons, oils, lotions and salves. Major clothing and beauty retail brands such as Urban Outfitters (NASDAQ:URBN), Ulta Beauty (NASDAQ:ULTA) and Authentic Brands Group (which now owns Sports Illustrated) have also signed agreements with cannabis companies to give shelf space to CBD derived products.

Now that CBD-infused edibles and topicals are legal in Canada, consumers can expect to see new offerings of CBD health and wellness products, including from CBD sports supplements and recovery brands. Cannabis companies such as Sire Bioscience (CSE:SIRE,OTC Pink:BLLXF,FWB:BR1B) are already working to serve this trend. The company holds a Health Canada hemp license and in May announced the acquisition of leading sports supplement company, Fusion Nutrition Inc., which offers brands carried by Canada’s top five sports nutrition retailers. “We see Fusion as a natural fit in the mainstream CBD market across North America,” said Sire Biosciences CEO Brian Polla. “The acquisition provides us with a natural entry into the broader US market, specifically the sports supplement sector.”

Sports supplements represent a major arena for CBD to show its true potential, with a number of high-profile athletes turning to CBD for its remedial benefits. However, before CBD focused companies can further penetrate the Canadian market, Health Canada will need to set out clearly defined regulations regarding what can and cannot be labeled a health product.

CBD companies are hoping Health Canada’s proposed cannabis health product category will open up a new market for CBD products.

Athletes driving adoption of CBD-based supplements

CBD interacts with receptors found throughout the body to encourage the increased production of endocannabinoid molecules, which help the body to regulate various functions including the response to pain and inflammation. These therapeutic properties are well aligned with the sports supplements market. It’s still too early to forecast the potential size of the market for CBD infused sports supplements, however, the global sports nutrition market was valued at US$50.84 billion in 2018 and is expected to reach US$81.5 billion by 2023.

Across the professional sports world, there is a growing interest in CBD sports recovery products. Big names in sports are already entering the CBD space as a testament to its potential. For example, Sports Illustrated recently announced its partnership with a CBD company Sentia Wellness to create a line of Sports Illustrated-branded products including 500 milligram pure CBD recovery creams. Samples of the products made their way into gift baskets at this year’s Sports Illustrated Super Bowl party.

The CBD sports market also has champions in former NHL player Mike Cammalleri, Edmonton Oilers captain Connor McDavid, Pro-Bowl tight end Rob Gronkowski and former NBA player Al Harrington. In fact, the World Anti-Doping Agency removed CBD from its list of prohibited substances in 2018, giving Olympic athletes the green light to use CBD sports recovery products during the Tokyo 2020 summer games.

In October of 2019 cannabis industry giant Canopy Growth (TSX:WEED,NYSE:CGC) made a big play in the CBD sports market by purchasing a majority stake in Toronto-based BioSteel Sports Nutrition, which distributes sports nutrition and hydration products throughout the US, Canada and Europe. BioSteel has a number of partnerships with national sports organizations. The two companies have subsequently launched a line of CBD sports supplements that includes CBD-infused protein powder and CBD isolate sports hydration mixes.

“The use and acceptance of CBD-based products in the professional sports landscape has changed. We have witnessed the negative effects of prescription painkillers and athletes are looking for healthier alternatives,” said Michael Cammalleri, Co-founder and Co-CEO of BioSteel Sports Nutrition.

Safety, efficacy, and the health product category

One of the drawbacks to the rising popularity of CBD products is the rush to put CBD in everything like it’s Frank’s RedHot Sauce. According to a report by Healthline, the financial incentives at play create the potential for abuse. “The wellness industry is going to do what the wellness industry does best: try to make money. And CBD is proving to be a great way to do that. As a result, CBD is unnecessarily ending up in some cosmetic and wellness products.” Some of these unnecessary products include CBD mascara, CBD shampoo and CBD toothpicks. Chew on that for a moment, and you can begin to see why regulatory agencies such as the US FDA and Health Canada might have a few reservations about this new market.

While adding CBD to such products as mascara and toothpicks is most likely benign, throwing a compound like CBD (known to have an impact on regulatory functions in the human body) into topicals and ingestible products without any agency oversight is a public health disaster waiting to happen. Unsurprisingly, the FDA has issued warnings to companies making false advertising claims on CBD products in violation of the Federal Food, Drug and Cosmetic Act.

To the north, Health Canada may have legalized the sale of cannabis-based edibles, beverages, topicals and extracts in October of 2019, but under the Cannabis Act, CBD remains a controlled substance on the prescription drug list and is still not allowed in over-the-counter drugs or natural health products. Companies who want to manufacture and sell any CBD-derived products with health claims are subject to prescription drug pre-market authorization requirements. On top of that, these products can only be sold with a prescription from a health-care practitioner by a provincially or territorially-authorized cannabis retailer or a federally-licensed seller of cannabis for medical purposes.

Despite Health Canada’s strong regulations, black market CBD products continue to make it to consumers, driven by a wide price differential and a supply deficit of legal CBD products on store shelves.

A number of major cannabis companies have recognized the importance of making health and safety a top priority for consumers, with Health Canada expected to play a critical role regulating the sale and marketing of CBD derived products. “The most important consideration in dealing with anything cannabis-related is proof of safety. Health Canada has already been through the rigors of regulation in the nutraceutical space and from that experience we are confident they will allow safe and effective products into the market,” said Polla. “What we are seeing now in the CBD space looks very familiar to the nutraceutical space 15 years ago. Developing consumer trust alongside alignment with pricing is what’s needed to make a dent in the black market.”

The cannabis health product category

Cannabis companies with a focus on CBD-derived health and wellness products may have a faster route to revenue down a potential new legal pathway. Health Canada is now working on developing a regulatory category for health products containing cannabis that would allow for sales without a prescription.

In the summer of 2019, the Canadian government conducted a consultation to seek feedback on the introduction of cannabis health products. This new cannabis product category is expected to be governed by the Food and Drug Act and as well as the Cannabis Act, meaning any health claims and cannabis-based ingredients would need to be supported by scientific evidence. Under the proposed new regulations, provinces and territories would have the power to authorize where cannabis health products could be sold.

“The results of this preliminary consultation will help Health Canada to better understand the potential market for these products and to inform the development of a potential regulatory pathway,” Health Canada spokeswoman Tammy Jarbeau told Hemp Industry Daily in February 2020. The next steps for the proposed cannabis health products category include establishing an external scientific advisory committee that will be tasked with determining the appropriate level of scientific evidence needed to prove safety and efficacy. “Following the publication of the summary report and the establishment of the advisory committee, the department will analyze available findings to determine a path forward,” said Jarbeau.

Sire Biosciences CEO Brian Polla views the potential new product category as a key milestone for the growth of the CBD health and wellness market in Canada. “The creation of this new category is so important to improving the current state of the cannabis market. It will not only allow safe access to those looking for the benefits of CBD but with different format offerings, it will help shift the perception of cannabis in our culture. Only when culture shifts will we see the maturity in this market that investors have been longing for,” said Polla.

Takeaway

A number of the biggest names from the sports world and the cannabis industry have already shown significant interest in CBD-based sports supplements and recovery products. As with most consumer packaged goods, growth in the CBD market is expected to be highly-dependent on the ability of regulatory agencies to ensure consumer safety. Health Canada’s proposed cannabis health product category has the potential to clear the way for new legal CBD-infused health and wellness products.

This INNSpired article is sponsored by Sire Bioscience (CSE:SIRE,OTC Pink:BLLXF,FWB:BR1B). This INNSpired article provides information that was sourced by the Investing News Network (INN) and approved by Sire Bioscience in order to help investors learn more about the company. Sire Bioscience is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.

This INNSpired article was written according to INN editorial standards to educate investors.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Sire Bioscience and seek advice from a qualified investment advisor.