CBD e-commerce startups in Europe must understand the unique regulatory challenges that are specific to each type of CBD product and work with a payments processor that is well versed in compliance.
Online CBD sales in European countries continue to face unique challenges, despite expanding opportunities in the marketplace. The CBD market in Europe recently opened considerably, which is good news for e-commerce CBD startups. Yet, CBD e-commerce in Europe hasn’t always been so favorable.
While many of the barriers involve regulatory concerns, there is also the question about CBD payments processing for merchants who want to begin e-commerce sales. Much like other market specific or niche specific merchant payments processing, it takes an in-depth understanding of the CBD market and its limitations to succeed with online sales.
To better understand what CBD e-commerce startups are facing in Europe, it’s important to grasp the current state of CBD products and their accompanying regulatory status. A recent report commissioned by Prohibition Partners, “The European Cannabis Report, 7th Edition,” highlighted both progress in CBD regulation, as well as certain obstacles CBD merchants are facing.
Expansion of European CBD Support
Overall, greater acceptance among organizations such as the World Health Organization (WHO) and the UN Commission on Narcotic Drugs is now paving the way for the CBD industry. What has been a sticking point for many years shows signs of progressing:
- The World Health Organization (WHO) called for de-scheduling of CBD as far back as 2017
- European Court of Justice ruled in November 2020 that CBD should not be considered a narcotic under the 1961 UN Convention
- The UK and European Court of Justice note that CBD is not to be classified as a controlled substance under the International Convention
- CBD is no longer considered a narcotic substance under French, EU, or UK law
Furthermore, the European Court indicated that banning CBD would be “contrary to the general spirit of [the UN Convention] and to its objectives of protecting the health and welfare of mankind” and that EU states cannot ban marketing of CBD produced legally in another member state, unless a risk to public health “appears sufficiently established”.
All of this pro-CBD support bodes well for online CBD startups in European countries.
This is especially monumental because, until recently, CBD e-commerce startups faced a “grey area” in regard to supply chains and point of sale.
Still, there are different considerations for online CBD sales in Europe based on the type of CBD being marketed. The following captures the primary categories of CBD products that fall under European regulation.
1. CBD as a Cosmetic
The European Union (EU) fully recognizes and protects the use of CBD in cosmetic products. In early 2021, CBD was included in the “CosIng Database” (Cosmetic Ingredients), which is the European Commission database that encompasses cosmetic ingredients. While this inclusion has no legal standing, it does reflect EU regulators’ acceptance of the legitimacy of CBD products.
2. Medicinal CBD
Two popular CBD medicinal products are Sativex and Epidiolex, of which CBD is the active ingredient. The Prohibition Partners report indicates that thousands of patients in Europe use Epidiolex, and its maker—GW Pharma—saw sales of €20 million in Germany alone YoY from March 2020 to 2021. Besides these pharmaceutical CBD products, many countries allow unlicensed CBD products (e.g. flowers, extracts). Even in more restrictive countries, low-THC/high-CBD flowers are available.
3. Ingestible CBD
There’s a great opportunity for online CBD startups in the ingestible category. Gummies, edibles, supplements, drinks, oils, etc. are becoming increasingly popular among consumers. However, the European Food Safety Authority (EFSA) has been a bit problematic to date in respect to how these cannabinoid-infused products are classified. Manufacturers had hoped to get full approval to be a Consumer Packaged Good (CPG).
Instead, CBD ingestible products are considered “Novel Foods” in Europe, which means they are subject to different regulations than CPG products.
For smaller CBD producers, the application process to get Novel Foods approval may be cost-prohibitive. Prohibition Partners reports that fees to apply may run between €300,000-€400,000 and could take up to four years to process.
Fortunately, even though CBD ingestible products (aside from full-spectrum or cold pressed hemp products) are technically not allowed to be marketed in the EU, regulation is variable and described as “light” in many countries. CBD ingestibles are typically available as a retail product and therefore eligible for online sale. E-Commerce merchants can tap into this ecommerce opportunity, as long as they are clear on CBD payments processing protocols.
4) CBD Flowers
Hemp flowers are more concentrated than the leaves and stems, which are used in cosmetics and oils. Flowers are also used for smoking, which adds another level of regulatory complexity to the mix. The courts are still trying to determine regulations surrounding hemp flowers, but a number of countries have set precedents for establishing flowers as a “common” retail product.
For example, Switzerland, Czechia, Luxembourg, Austria, and Belgium are just a few of the countries where hemp flowers are traded openly. Again, another favorable circumstance in which CBD E-commerce merchants can maximize their ecommerce profits.
Finding the Right CBD Payments Processing Vendor
When it comes to CBD payments processing, it’s important to know that not every payments processing service has the same penetration into the CBD market. Issues with compliance, product coding, and payment acceptance may prevent payments processors from serving CBD e-commerce merchants.
At Vendo Services, we are able to both comply with CBD sales regulations and conduct payments processing thanks to our strong relationships. Our company has partnered with a European financial institution that is willing to accept and review payment transactions from CBD e-commerce startups who wish to conduct online sales.
With Vendo, merchants looking to enter the CBD market in Europe have a reliable payments processing service and one less challenge.
The Bottom Line
As CBD acceptance continues to grow in European countries, e-commerce merchants will still need to consider the limitations of payments processing. It’s likely that CBD sales will remain a complex category for some time. CBD e-commerce startups in Europe must understand the unique regulatory challenges that are specific to the type of CBD product they wish to sell; and, work with a payment processor that is well versed in compliance.
Vendo offers comprehensive payment processing services to e-commerce merchants. Our innovative, AI-powered tools offer merchants simple, secure, and seamless payment solutions, along with expert customer support from integration to end-user concerns. Our expert team works 24/7 to shape your vision into reality.