British Startup Wants to Make CBD Part of Your Grocery Shopping

(Bloomberg) -- Shelved behind a pharmacy counter at Europe’s biggest retailer, Dragonfly Biosciences Ltd.’s pot-derived oil is a lonely trailblazer.

Dragonfly is the only brand of cannabidiol, or CBD, stocked in Tesco Plc’s U.K. grocery stores. While that’s prime placement among the thousands of CBD products that proponents say can ameliorate insomnia, pain and inflammation, the company is also trying to stand out from the crowd in an industry that regulators say needs greater scrutiny.

A derivative of cannabis that doesn’t get users high, CBD is legal in more than 40 countries. Europe’s market—expected to grow six-fold to $1.7 billion by 2023—is booming, and Prime Minister Boris Johnson’s appointment of a pot advocate as a policy adviser suggests that the U.K. may be a beachhead in the advancing normalization of weed-based wares. That puts Dragonfly—also carried by J Sainsbury Plc, Boots pharmacies and the iconic Harrods department store—at the center of a battle for CBD’s legitimacy.

British Startup Wants to Make CBD Part of Your Grocery Shopping

“Within the cannabis industry, if you make a mistake, you’re on the black list,” Dragonfly Chief Executive Officer and Co-founder Chris Wronski said in his North London mansion that serves as the offices for 12 of the company’s employees. “We’re trying to make as few mistakes as possible and become the most reliable partner to everyone.”

Merchants are infusing CBD into products ranging from popcorn to toothpaste and dog biscuits. Yet most of them fail to comply with current requirements for quality and labeling, according to the U.K.’s Food Standards Agency, which regulates dietary supplements.

A 10-milliliter bottle of Dragonfly’s oil that contains 500 milligrams of CBD costs 40 pounds ($49). Five drops of the brown earthy-tasting liquid are placed under the tongue for two minutes (to maximize absorption) and then swallowed. Tesco began stocking the brand in its pharmacies in March in response to customer demand, a spokeswoman for the grocer said.

The company is tiny, with sales of 1.1 million pounds in its first six months of business, but online sales grew by 40% in its last quarter. It’s currently going through a financing round, seeking to raise as much as 8 million pounds, and is preparing to launch a skincare line in September.

Wronski’s last big startup was Zone Vision Networks, a television company he sold out of in 2007. Now he’s aiming for an initial sale of Dragonfly shares next year, and is keen to satisfy regulators by maintaining its manufacturing certification, and controlling all parts of its supply chain rather than relying on external farmers and extractors. The company looks to enter the vape market and expand into Poland, Germany and France within the next year. It isn’t ruling out expansion into the more crowded Canadian and U.S. markets.

British Startup Wants to Make CBD Part of Your Grocery Shopping

“Everyone that I meet, anywhere, is now consuming CBD or would like to but just don’t know what the reliable source of it is,” Wronski said. “And we really want to perfect it.”

Yet bogus merchandise, unsafe ingredients and brazen medical claims abound. Of the U.K.’s 30 top-selling brands, 11 have less than half of the advertised content, according the Center for Medicinal Cannabis, an industry group. One vial priced at 90 pounds contained no CBD, and nearly half those tested harbored some THC, the pot component that causes euphoria and is still illegal in the U.K., the center said in a report. Some also contained potentially dangerous solvents and heavy metals above safety limit levels, the tests showed.

Agencies in the U.S. and Canada have begun tightening oversight of CBD, with authorities in New York, Maine and Ohio opposing its use in restaurants, warning of fines and in some cases seizing goods. Canntrust Holdings Inc.’s chief executive and chairman were ousted after Canadian authorities found a regulatory breach at one of the CBD producer’s facilities, and its board is considering options including a sale.

British Startup Wants to Make CBD Part of Your Grocery Shopping

The prospect looms of similar clamp-downs in Britain and across Europe, where the product is broadly available. Blair Gibbs, who will serve in Johnson’s cabinet as an adviser on crime and justice, has advocated both wider legalization and tighter regulation of cannabis, calling in a column last year products to be “safely produced to high quality standards and prescribed in a regulated, clinical context.”

Retailers that stock Dragonfly’s products are generally looking for a traceable supply chain and a brand that meets requirements for compliance, said Hannah Skingle, the startup’s chief operating officer. The company grows cannabis on an 1,800-acre licensed farm in Bulgaria with 20 employees, and the CBD is extracted in Romania.

Dragonfly carries out internal and third-party testing to ensure unwanted compounds don’t seep into the product, but “these kind of important steps aren’t laid out anywhere,” she said. “We would love to see a framework on how we should run our businesses.”

©2019 Bloomberg L.P.

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