It's no secret that CBD is growing.
The non-psychoactive component of cannabis has appeared in face mask products and lotions for infused cupcakes and lattes. And some CBD brands have reached agreements with traditional pharmacies like CVS and Walgreens to sell CBD products on shelves.
Analysts at Cowen Investment Bank expect the CDB market to grow from about $ 1 billion today to over $ 16 billion by 2025.
There is only one problem: most CBD products actually contain very little CBD, according to a blind analysis conducted by CannaSafe Laboratories, a California cannabis testing company.
See More Information: The FDA is setting up a group of experts to figure out how to handle CBD's $ 1 billion industry.
In addition, many of the products tested – which include vape cartridges, beverages, sweets and creams – contained dangerous gases like ethylene oxide and ethanol, which are especially harmful when heated and inhaled, according to the analysis.
The results of the study were shared exclusively with Business Insider. Of the 20 popular products tested, only three actually corresponded to what the labels claim.
Tests on the CBD products were blindly conducted for accuracy. Manufacturers' names have not been reported.
"The results were a little worse than I expected," Aaron Riley, CEO of CannaSafe, told Business Insider in an interview. "I expected to see 20% to 30% approval, but it was not like a total shock."
Headquartered in Van Nuys, Calif., CannaSafe uses state-of-the-art chromatographs to test cannabis products for things like potency, pesticides, heavy metals and assorted microbes on behalf of what Riley said to be more than 700 customers, cannabis.
Some of the products tested had "insanely high levels" of solvents, Riley said, which are particularly hazardous when vaporized and inhaled.
Only about 1/8 of the California market is in compliance with regulations, according to Riley. Within this subset, however, the failure rate is low, with about 5% or 6% of products failing, Riley said.
Things are constantly improving, though. Riley said that since his company began testing cannabis products in 2017, the failure rate has dropped dramatically, falling by about 70%.
Although the California Department of Cannabis Control has implemented regulations on what is and is not allowed in marijuana products earlier this year – and has determined that products are tested in certified laboratories – the CBD still exists in a gray legal area in the federal level.
"So I would say that the regulations have been very effective in terms of mitigating risks and damages to consumers," Riley said. "I think we're going to see that kind of approach, and probably two or three years from now, it's even smaller than that."
& # 39; They only see dollar signs & # 39;
Problems with these products highlight the challenges of building supply chains to meet the huge appetite for a product that was illegal only a few months ago.
Since California introduced the testing regulations earlier this year, a report from the Leafly industry website found that vapes made in China generally contain lead, which penetrates into cannabis oil and then into the consumer's bloodstream. These products simply were not being rigorously tested before.
And in other states, such as Oregon, audits have shown that laboratory testing standards were often inadequate exposing marijuana, medical and recreational consumers to harmful pesticides, a risk that is compounded when the product is burned and inhaled.
See More Information: Wall Street believes that the $ 1 billion market for CBD could explode to $ 16 billion by 2025
For Riley, the quality of the operators, and therefore the product, boils down to experience. "There are all these people who are rushing toward this industry, they just see dollar signs or anything else," Riley said. "You have a very, very fast growing economy."
The most successful carriers, Riley said, come from "correlated industries," such as farm management, and have experience in growing large quantities of crops safely, rather than just "growing weeds in their garage."
Illicit or "black market" cannabis products still use a lot of pesticides – it's cheaper and easier than growing cannabis safely, and there's no incentive to test illegal products.
CBD entrepreneurs receive more regulation and clarity
Some CBD brands said they would receive more regulatory clarity from the federal government.
Since Congress passed the Farm Bill last year that legalized hemp, many in the industry thought that the CBD-derived hemp would be legal to infuse into products.
This, however, is not yet the case. Some state health departments, including New York, have forced retailers and restaurants to withdraw CBD-containing food from their shelves earlier this year.
Food and Drug Administration outgoing commissioner Scott Gottlieb has formed a working group to "explore potential pathways" for food supplements and CBD-infused food products to be "conventionally marketed."
The FDA is holding a public hearing on the matter in May. The main challenge is whether CBD is a drug and therefore should be regulated and sold as a pharmaceutical, or whether it can be considered an additive or food supplement – and sold on store shelves.
The CBD in a federal gray area "is not good for the industry or for consumers," said Kerrigan Behrens, a former investment banker and co-founder and chief marketing officer for Sagely Naturals in Los Angeles, a CBD .
"We stick to the same standards as any other OTC [over-the-counter] product, "said Behrens. Many brands are not doing this. "
Peter Horvath, CEO of Green Growth Brands, a marijuana company that owns a CBD product line distributed in traditional retailers such as DSW and Simon Property Group, said in a previous interview that more stringent regulation on the part of the FDA would hurt its competitors .
"If the FDA were to collapse, our competitors would be in the stock they could not sell. If I'm being malicious, I hope they come hard," Horvath said.