Cannabis companies piling into hemp THC-infused beverages🍹

DRINKS
Are hemp-derived beverages the next big thing?

What happened: Everywhere you look, a cannabis company is either dropping a new hemp-derived, THC-infused beverage line or rapidly expanding one. 

Just last week:

• Canadian cannabis and beverage giant Tilray launched Herb & Bloom, a line of THC-infused cocktails in flavors like Peach Bellini and Strawberry Daiquiri.

• Seth Rogen’s Houseplant launched THC seltzers across the US.

• Rebel Rabbit, a cannabis drink brand, signed a partnership to distribute its products with 24 Anheuser-Busch wholesalers in 30 markets.

Earlier this year, Curaleaf launched hemp-derived drinks in 25 states. Cann and other cannabis beverage companies have also launched hemp-derived products that allow them to sell their products more broadly than just through dispensaries. 

Why it matters: Hemp-derived drinks are a much larger, and much less regulated market that traditional cannabis companies are looking to take advantage of.

The recent product releases and expansions are part of a broad push for cannabis companies to look for ever-elusive profits outside of the “traditional” cannabis industry. 

Delta-9 THC derived from hemp was technically legalized in all 50 states by the 2018 Farm Bill, though some states, like California, have started to crack down on the burgeoning intoxicating hemp market. Illinois is weighing a similar ban as well. 

To most consumers, THC is THC. But to the federal government, hemp and cannabis, though the exact same plant, are treated differently. Traditional cannabis companies are limited to manufacturing and selling within legal states, as cannabis can’t cross state lines. Plus, they’re forced to pay onerous taxes like 280E, as well as deal with expensive compliance processes.

Even though THC is THC, companies selling products derived from hemp don’t have to deal with any of that. So the products are more profitable, and they can theoretically sell across the US.

Hemp is defined by the federal government as cannabis that contains less than 0.3% THC by dry weight. However, companies are able to produce much more THC from the raw material and input them into products like beverages or gummies, which have the exact same intoxicating effect as regular cannabis. 

Beyond that, it’s also part of a broader social trend of adults switching from drinking alcohol to consuming cannabis socially, as it’s thought to be healthier and doesn’t give you a hangover the next day. 

Zoom out: The broader cannabis industry — as we know it — is more and more bifurcated between “hemp” and “cannabis,” with the two sectors so at odds that they fell on the opposite sides of Florida’s well-publicized, ultimately doomed legalization fight earlier this year. 

If they haven’t dropped new products already, pretty much every cannabis company is strategizing around how to get into the hemp market and get their products legally in the hands of far more consumers.

That’s why, after many conversations at MJBizCon in Las Vegas, I expect to see pretty much every big publicly traded cannabis firm launch hemp products in the coming months.

And some cannabis beverage brand execs, like CanTrip’s Adam Terry, say that hemp-derived beverages can be a sort of tip-of-the-spear for consumers in states without legal cannabis. If the products are widely available on store shelves — and low dose — consumers may have a good experience and be more open to trying traditional cannabis products in the future.  

But, but, but: It’s a risky strategy. These companies are essentially investing in a loophole created by the 2018 Farm Bill. 

Lawmakers realistically didn’t intend to de facto legalize THC across the US. They wanted to spur domestic hemp production for industrial applications, and companies took advantage, which, of course, is predictable given the lack of clear guidance on cannabis from Congress. 

Some lawmakers have advocated for closing this loophole in the next Farm Bill, which is expected to be negotiated next year. If that happens, these once-legal products will be quickly banned.

It would also force some companies to go out of business, and many employees to lose their jobs. It’s yet another reason why the federal government, under the next Congress, needs to lead on cannabis policy and create coherent regulations governing the whole industry. 

The bottom line: THC is THC, whether it’s sourced from “hemp” or “cannabis.” It’s time for federal regulations to catch up.

-JB

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Cannabis companies are still selling far more product through brick-and-mortar shops than online, according to data from Headset and analysis from Vetrina’s Krista Raymer. 

More Americans consume cannabis near-daily than drink. But Americans still love drinking:

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Are Republicans friend or foe of the state-regulated marijuana industry? | MJBizDaily

The CEOs Are Tripping. Can Psychedelics Help the C-Suite? | The New York Times

Kentucky medical marijuana lottery dominated by out-of-state pot companies | Louisville Public Media