High-Potency CBD Demand Grows While Cost, Regulations Remain A Concern To Some

The U.S. CBD market could grow to $16 billion in size by 2025, according to Cowen.

While the market becomes familiar with CBD, an increase in higher potency cultivars has become a subject of interest in the space. More potent CBD is used by many people — namely those seeking a stronger dose of cannabidiol with little to no THC in their treatment.

CBD serves as an introduction to cannabis, said Emily Paxhia, co-founder and managing partner at Poseidon Asset Management.

"I believe that CBD is the way that the broader market tiptoes into engaging with cannabis, and I believe that there are large segments of the population that can benefit from cannabis that do not necessarily desire the effects of high-THC products," she said.

Paxhia pointed out red flags cannabis investors should look for in a company.

"Investors investigating product companies should be sure to understand the product companies' manufacturing practices and think about how this will last through potential FDA involvement, as well as understanding the company's commitment to testing the product for accuracy and pesticides, molds and other concerning elements."

Latin America and South America represent investment opportunities due to the low-cost, high-quality CBD production and cultivation taking place there, Paxhia said.

Cultivating CBD In South America

One such South American cultivator is Avicanna. The Toronto-based biopharmaceutical company has a Colombian cultivation subsidiary that grows high-potency CBD. Its website mentions how the subsidiary strives to become a global leader in "high-quality and low-cost mass production of cannabis extracts and purified cannabinoids."

Sergio Puerta, Avicanna's vice president of horticulture, explained the CBD cultivation process to Benzinga.

One aspect of CBD that the market tends to misunderstand is the difference between hemp-derived CBD versus products derived from low-THC cannabis.

Hemp-derived CBD is generally extracted from genetics traditionally used to produce seed and fiber for the food industry and has "quite low" CBD content of 1-2 percent, Puerta said, adding that the substance was historically a byproduct.

A different product is low-THC cannabis, or as the Colombian government terms it, non-psychoactive cannabis, the Avicanna VP said.

"The THC is less than 1 percent, is meant to produce cannabinoids and can express 10-20-percent CBD. These plants are specifically bred and cultivated for cannabinoids and have much higher quality and expression of cannabinoids, terpenes and flavonoids."

This means the whole plant extracts offer more synergistic ratios of what is sometimes referred to as the "entourage effect," Puerta said.

While some in the space say that high-potency CBD cultivation's cost is what hinders its growth in the market, Puerta sees it differently. He points to its lack of popularity on the market, which led to mostly high THC yields being the focus of cultivators.

Avicanna's high-CBD and high-THC cannabis cultivars in Colombia are efficient, Puerta said.

"The challenge is also to start finding those strains containing rare cannabinoids for specific indications, such as CBG, CBC and THCV, which we believe is the more appropriate route rather than biosynthesis."

More high-potency CBD will reach the market as the industry evolves, Puerta said; to get there, the industry needs to replicate the practices used for improving THC genetics.

“The economies of scale we are starting to face will logically reduce cost as well.”

CBD Cultivation In The US

U.S. premium wellness brand Papa & Barkley make products with a variety of CBD and THC ratios. The company's team of scientists hopes to discover the "Holy Grail of CBD" by producing a CBD-rich concentrate that it believes will push the market into the 21st century.

Papa & Barkley’s Chief Product Officer Guy Rocourt said that while producing high-potency CBD is economically viable, and the company is doing so, others continue to stay clear of CBD at this time — but not because of the cost of production.

"At this time, because the ambiguity of regulations, not all co-packagers and manufacturers are willing to engage in CBD production, thus creating an artificial inflation of price of production," he said. "As regulations and standards of the industry are streamlined, this will promote better competition among manufacturers."

Like Puerta, Rocourt said that low-THC cannabis allows for more options for the company and consumer.

"When you use agricultural hemp, the only product that can be extracted is distillate; but with varietals that have been bred to have low THC, you can still extract high-potency CBD along with all the other cannabinoids and beneficial parts of the plant."

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