CBD Boom Spreads to Hong Kong as China Resists: Cannabis Weekly

Gufeng Ren

05 Apr 2021, 06:46 PM IST

(Bloomberg) -- From government-produced videos to posters plastered on subway walls, Hong Kong’s staunch opposition to cannabis is clear. But as it takes a more liberal approach to CBD, consumer demand is soaring.

Cannabidiol, or CBD, is popping up in cosmetics and beverages, while new businesses are catering to customers who hope the substance can ease pain or soothe anxieties. Hong Kong’s first CBD café, named Found, has boosted monthly sales fivefold since opening in June.

The city’s “CBD market is nascent,” said Rohit Dugar, founder of Young Master, a craft brewery that recently introduced a CBD-infused beer. “But early indications are that it has tremendous potential.”

The boom, mirroring surges in the U.S. and Europe, stands in stark contrast to many Asian countries, which have remained conservative on the topic of cannabis. Last month, China proposed a ban on CBD in cosmetics, and the compound is not allowed in food and drinks.

Hong Kong’s openness stems from a decision in late 2018 not to crack down on CBD. In the wake of cannabis legalization in Canada, Hong Kong’s Secretary for Security said in an open letter that CBD is not classified as a dangerous drug. That’s not the case for THC, the psychoactive ingredient in cannabis, and even trace amounts of it are prohibited in products in Hong Kong. CBD doesn’t have the perception-altering properties of THC.

The city has been quick to embrace CBD. Young Master’s infused beer, introduced in August, now sells about 10,000 cans per month and Dugar expects sales to double over the next year. A coffee shop called Elixir has allowed customers to add CBD drops in drinks, and owner Rity Wong said about 300 people tried it in February, compared with just 10 in the first month.

Found, meanwhile, has seen more locals coming in after initially drawing expats, according to Fiachra Mullen, chief marketing officer at parent company Altum International.

The local market still has gray areas. Companies aren’t allowed to claim medical benefits unless the product is classified as a prescription medicine, and there are currently no registered pharmaceutical products in Hong Kong that contain CBD. But the government has issued little guidance on wording, and the rule “is not very actively enforced,” according to Conor O’Brien, an analyst at Prohibition Partners.

As CBD catches on, some companies are already looking to expand. Mainland China could be a huge market someday, given its size and openness to activities such as hemp cultivation, but the proposed CBD ban is an obstacle.

Altum International wants to avoid getting tripped up by China’s regulations, Mullen said, especially after witnessing the country effectively banning online sales of e-cigarettes in 2019 after they flooded the market. The company plans to prioritize Australia, Japan and Taiwan before tackling China.

“Everyone knows how big China is,” Mullen said. But it’s “very hard to make money in China without falling into some kind of regulatory problem.”

COLUMNIST’S NOTE

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CBD Boom Spreads to Hong Kong as China Resists: Cannabis Weekly