China is a huge market with a population of more than a billion. The opportunities for internationally minded CBD brands are tantalising, although the hurdles for entry can seem daunting. As the CBD market grows in the UK, US and Europe, could China be the next burgeoning CBD destination?
CBD has moved into the mainstream in the US and UK. In Europe, the market is slowly catching up. The proof is in the figures. In 2019, the London-based Centre for Medicinal Cannabis estimated that, in the UK, 6 million people had tried CBD. Many expect the UK market to be worth £1 billion by 2025 and the global industry to exceed $5.3 billion.
An historic hemp-growing market
For centuries, cannabis has played a significant role in Chinese culture and hemp has been grown as a crop since the Neolithic Age (5000BC) for clothing, rope, paper and medicine. Restrictive regulations only arrived much more recently. In 1985, China banned cannabis and signed the United Nations’ Convention on Psychotopic Substances.
Although cannabis remains illegal, in 2010, the Chinese government legalised hemp cultivation in the provinces of Yunnan, Heilongjiang, and Jilin. The country now produces over a billion of dollars of hemp each year. However, the CBD market itself is still immature and CBD usage limited by a patchwork of laws and regulations.
Reform or restriction?
Is reform in the air as global CBD market growth skyrockets? In 2015, it looked like the government was heading towards looser restrictions by allowing topical hemp-based CBD to be used in skincare products. Yet, in September 2021, according to an announcement posted on the website of the National Institutes for Food and Drug Control (NIFDC), the Chinese government proposed new legislation to prohibit the use of cannabis and cannabis extracts in cosmetics, including Cannabis sativa kernel fruit, Cannabis sativa seed oil, Cannabis sativa leaf, as well as cannabidiol (CBD).
Between January and August 2020, Chinese e-commerce sites Tmall and Taobao saw 1000% average growth for CBD beauty care. Chinese consumers, particularly women, were opting for topical CBD to target skin problems like redness and acne marks, as well as repairing and soothing makeup. Will the government close the door to this enormous economic opportunity or gradually move towards the looser restrictions we are now seeing in the US and Europe?
Given the fast pace and high pressure in many of China’s cities, CBD has the potential to help millions of Chinese people with anxiety and sleep. What’s more, the more holistic approach to wellbeing seems perfectly aligned with a natural, plant-based compound like cannabidiol. Ambitious CBD brands have every reason to be ready on the start line to the enter Chinese market— the largest in the world whose e-commerce market alone was worth $1.94 trillion in 2019.
Joining forces & expertise
And this is exactly why mellow decided to team up with e-commerce and distribution specialist eCargo to create a joint venture to distribute, market and sell mellow’s partner CBD brands in Asia.
Lawrence Lun, eCargo Holdings Limited CEO commented on the partnership, saying: “We’re excited to partner with mellow and leverage our extensive Asia distribution and trading capabilities to sell products from their strong portfolio of brand partners in the region. The alliance forged allows both companies to take advantage of the explosive growth expected in the Asian CBD and Hemp market in the coming years and develop mellow asia into the continent’s leading distributor of these goods.”
Given shifting legislation and entry hurdles—for CBD skincare, these included strict and expensive launch perquisites including a production license or OEM contract, compulsory testing and fees, and brands only being able to sell through a flagship store or with special permission—the support of two industry experts will give international CBD brands an undeniable and invaluable boost. It’s early days and this joint venture is just beginning. But the ambitions are high and the untapped potential staggering.
In our next article, we’ll look beyond China at the status of CBD in other parts of Asia.
If you’re interested in finding out more, don’t hesitate to contact us.