Cannabis products were anticipated to be the next major trend in the market. This segment garnered attention from various consumer packaged goods (CPG) companies, including Constellation Brands, which invested $4 billion into cannabis, and Molson Coors, both of which formed alliances with cannabis producers in 2019. They launched products in Canada and certain U.S. states where cannabis is legal, such as Colorado, aiming to maximize their presence in states once cannabis sales are legalized nationwide. The brands introduced a variety of products, ranging from sodas to jelly beans, that incorporated cannabis in diverse ways. So far, 37 states along with Washington, D.C., have legalized marijuana for medical use. Last fall, there was hope for national regulations after President Joe Biden pardoned federal marijuana offenses and called for a review of its classification under federal law.
However, despite ongoing interest from consumers, producers, and advocates, CBD-infused food and beverage products have struggled to gain widespread acceptance due to federal regulators’ restrictions on the ingredient. On January 26, the U.S. Food and Drug Administration (FDA) announced that it would not regulate CBD products in response to a consumer petition requesting their marketing as dietary supplements. Janet Woodcock, the FDA’s Principal Deputy Commissioner, stated that cannabis raises certain long-term safety concerns. “Studies have indicated potential liver harm, interactions with specific medications, and possible adverse effects on male reproductive health,” Woodcock explained. She added that CBD exposure is particularly concerning for vulnerable demographics, including children and pregnant individuals.
The FDA intends to collaborate with Congress to establish a new regulatory framework with safeguards to mitigate risks, which would include clear labeling, contaminant prevention, CBD content limits, and a minimum purchase age. This announcement was not what leaders in the food and beverage industry had been eagerly anticipating and raised doubts about the immediate future of CBD-infused product sales. “The FDA’s approval was supposed to be a pivotal moment for major companies to consider entering the CBD market,” remarked Erwin Henriquez, a market research consultant from Euromonitor International. “After all the momentum, this presents a significant obstacle for consumer goods development in the U.S. CBD sector.”
The FDA’s news arrived as CPGs that had invested in cannabis found themselves in an extended state of uncertainty, which seems likely to persist. Even prior to the FDA’s guidance, several companies withdrew from the market. Molson Coors announced last November that it had ended its partnership with CBD producer Hexo, citing challenges in scaling CBD-infused products. Constellation, after recording a $1.1 billion write-down on its investment in Canopy, revealed plans to shift to a passive role by exchanging its current shares for new exchangeable ones.
The ambiguous legal landscape surrounding cannabis, where states enforce varying regulations on what can be sold, has led some companies to opt out of doing business in the U.S. Cannabis industry stakeholders argue that without significant nationwide oversight, producers of CBD-infused foods and beverages in legal states might engage in “deceptive marketing” and lack rigorous quality standards, as noted by Duffy MacKay, senior vice president at the Consumer Healthcare Products Association.
Nextleaf Solutions, which develops CBD for use in food and beverage products, holds 19 patents in the U.S. related to the extraction and purification of cannabinoids from cannabis and hemp, according to its founder and CEO Paul Pedersen. The absence of regulation has led the company to refrain from manufacturing CBD products in the U.S., as it cannot meet its quality management requirements—tracking ingredients throughout the supply chain—like it can in Canada. Pedersen believes this issue will continue to hinder the industry’s ability to realize its full potential. “In my view, this is a challenging time for the industry as some businesses anticipated an opening market too soon,” Pedersen commented. “For larger companies, investing now would be unwise until there is greater regulatory certainty.”
In a statement, the U.S. Hemp Roundtable, an industry trade group, expressed its “extreme disappointment” with the FDA’s decision not to regulate cannabis. They argued that CBD products have been on the market for nearly a decade without causing safety issues for consumers. The group accused the FDA of relying on studies that indicate risks only at high doses, which are not typically found in retail CBD products, asserting that quality and safety measures are already implemented in the industry. “Given the existing, well-established pathways and tools, the FDA’s decision is unwise,” stated Jonathan Miller, the group’s general counsel. He added that the industry aims to collaborate with Congress on new legislation to ensure the legality of its products.
Henriquez from Euromonitor indicated that there remains potential for cannabis producers to broaden their reach in the food and beverage sector by looking beyond just CBD. In the meantime, they can take advantage of interest in various wellness products by incorporating additional functional ingredients. “Some companies are realizing that by pairing CBD with other ingredients for different consumption occasions, they can more effectively connect with consumers,” Henriquez noted. “Rather than positioning CBD as the sole hero ingredient, they can integrate it with other functional components.”
Moreover, companies can also explore the inclusion of ingredients like calcium citrate in their products, which could enhance their appeal in the health-conscious market.