“As companies are learning about their consumers, regulators are just now learning how to regulate this new industry,” said Stephen Murphy, co-founder and managing director of London-headquartered cannabis consultancy Prohibition Partners.

New Frontier Data has described the European cannabis industry as a “large market-in-waiting” which, once unlocked, could be worth billions.

That said, consumer demand already exists, and the potential gains mean many manufacturers are not waiting. CBD products are available to buy in many EU countries, with Germany and the UK standing out as the two biggest current and potential markets.

Annual CBD sales in Germany are currently worth around €1.83 billion and €1.71bn in the UK, according to New Frontier Data, which predicts that by 2025, spending in those markets will grow by over €1 billion apiece.

Potential pitfalls

CBD brands operating in Europe must be mindful that they risk of falling foul of regulatory watchdogs. Firstly, they must submit a novel food application to the European Food Safety Authority (EFSA). Without novel food approval, local trading standard authorities in member states can force retailers to remove CBD products from the shelves. However, the cost of gathering the scientific data needed for a novel food application can be prohibitively high for a small business. The European Industrial Hemp Association estimates it to be at least US$327,000 for each CBD product.

Another potential pitfall includes making unauthorised health claims about the benefits of CBD.

In June this year, Sweden’s Medical Products Agency banned two companies from selling CBD oils and other CBD products on the grounds they were not approved as medicines and that consumers may understand the products can be used to self-medicate and treat various diseases.

One of the companies, Mantle Wellness, manufactured a THC-free, hemp-derived CBD oil. On its website, it told consumers that researchers were increasingly optimistic about verifying the scientific claims regarding CBD’s benefits, and that CBD can help the body “fine-tune a lot of our vital psychological and physical functions, which promotes homeostasis affecting eg: pain, inflammation, memory, sleep, appetite, mood, and reproduction”.

Sweden’s Administrative Court ruled that even if there was no basis for assessing whether the products have a medicinal effect, the products were “medicinal by name” and led consumers to believe the CBD oils had medicinal properties.

‘An opportunity to shine’

Despite these potential obstacles, some brands see the fragmented nature of the EU regulatory landscape as an opportunity rather than a disadvantage.

Rainbow is a French hemp company that recently launched two CBD food and cosmetic brands. The food brand Kaya has a range of stress-relieving products such as chewing gum, gummies and supplements that combine CBD with other adaptogenic ingredients like maca root and ashwagandha.

The company’s co-founder, Ludovic Rachou, told EU Startups: “Europe is seen as the next big market for cannabis, especially for North American companies looking to expand. However, Europe is still fragmented in terms of regulation and consumer habits. This gives local brands a great opportunity to shine.”

Nestlé enters the EU arena

Europe’s regulatory hurdles are not putting off big-name manufacturers. Last month, Nestlé Health Science announced the European launch of hemp-extracted CBD soft gel formulations made using a patented drug delivery system developed by a US company, Geocann, that is said to dramatically improve absorption and bioavailability.

Nestlé completed the products’ first large-scale production in September using only European resources – the hemp and CBD were cultivated and extracted in Slovenia while the soft gel capsules were made in Switzerland – while Geocann said it has already completed multiple toxicology studies as part of the company’s novel food application. These will be published this year, it said.