CBD startup raises €1.15m to kickstart goal of creating ‘The Hut Group of cannabis’
Formed last year, South West Brands had now raised €1.15m (£1m) in capital from institutional investors and was set to launch its first two CBD beauty brands in the coming months: a self-care skin care brand in April/May and a menstrual cycle care brand in May/June. The first CBD self-care brand would include a variety of topicals such as face creams, lip oils, skin masks and hair masks – all designed to be used as part of a pampering ritual to create ‘me time’. The second menstrual cycle brand would include a mix of CBD topicals and ingestibles made with other active ingredients to target fluctuating skin conditions; pain; anxiety and vaginal health throughout the monthly cycle.
Democratising cannabis with a ‘brands-first approach’
Ultimately, South West Brands wanted to house a wide range of CBD brands, from topical cosmetics through to food and drinks, either designed in-house or acquired.
“We’re looking at a mixed model,” said Rebekah Hall, CEO of South West Brands. “My vision is to create a scaled portfolio of brands in a relatively short space of time,” Hall told CosmeticsDesign-Europe.
“This has really been a lockdown project. I first came up with the concept of the business towards the end of 2019 when I was trying to work out the best structure for getting across, comprehensively, the cannabis opportunity in consumer goods, and do it with a brands-first approach.”
Hall, who had already founded Botanic Lab – the first brand in Europe to launch a CBD beverage – said many companies in the cannabis space were vertically integrated and tended to “neglect brands at the end of that”. And whilst there was some interest coming from big consumer packaged goods companies, most “hadn’t quite got there yet” in bringing products to market.
“It seemed there was a window of opportunity here,” she said. Hall said the goal was to develop and curate a portfolio of successful CBD brands, each with a “compelling consumer proposition and great products”.
“I always use the analogy of Nike. People don’t buy their trainers because they’re made from the best rubber, they do it because Nike convinced them to do it,” she said.
‘Scale and purpose-led products’ – edging away from the ‘quasi-medical’ CBD tradition
Importantly, Hall said South West Brands’ portfolio would sit in the middle of the “super-premium” and “bargain basement” CBD space that had, until now, been largely underserved.
“South West Brands will house the global CBD brands of the future, bringing scale and purpose-led products to a segment that lacks real consumer cut-through. This sector will be defined by brand builders and we intend to create The Hut Group of cannabis.”
Currently, many brands in the cannabis and CBD consumer goods space appeared “quasi-medical”, she said – something the group wanted to overturn. “We need to get to a place where brand leads.”
Asked if scientific evidence would be pushed aside for more traditional branding, she said: “I think there’s a difference between referring to science and having a product that works and telling your consumer how it does that. What we’ve seen in the CBD industry, so far, is terminology and messaging literally around amounts of CBD and extraction methods; they’re not talking about what the product is going to do, they’re talking about manufacturing techniques.”
And whilst of course the regulatory environment perhaps played a part in this, she said “claims are different to talking to efficacy and being able to demonstrate efficacy”. It was possible, Hall said, to build a credible CBD beauty brand and show consumers what it did and how it worked.
The recent news of the European Commission adding natural whole-hemp CBD to its cosmetic ingredient database CosIng, for example, was a “hugely positive step” for the beauty industry and would likely create an important shift in how beauty manufacturers formulated products.
However, South West Brands remained “relatively cautious with European rollout” because of the patchwork of legislation and consumer preferences that remained across the region. Instead, the group would first prioritise the UK because of its highly engaged consumers and then North America for volume terms, she said.
Big beauty needed to ‘bring real credibility and consumer confidence’ in CBD
Asked if the CBD beauty and personal care space needed the bigger players to come aboard to create a truly viable and growing category, Hall said: “Yes – not just in beauty, across the board. The participation of experienced and scaled FMCG businesses in cannabis is essential to the industry. A lot of the smaller participants and brands fear that, as they think [the big brands] have more money and more budget and they’ll take consumers away, but I look at it differently. It brings real credibility and consumer confidence.”
Smaller CBD brands, she said, would do well to partner with larger businesses to access “operational scale” and in return provide “years of understanding about this ingredient and its complexities”. Such partnerships, she said, were certainly part of South West Brands’ long-term business model.
“In some ways you can understand why there’s been hesitation from the big CPG players, but it would be very naïve to think they’re not looking at this behind closed doors,” Hall said.