This month, President Joe Biden directed his administration to reassess the classification of cannabis under the Controlled Substances Act, a development that food and beverage producers in the industry are closely monitoring after years of stalled federal legislation. Last week, the U.S. Department of Health and Human Services (HHS) recommended reclassifying marijuana, as indicated in a letter to the DEA from HHS Secretary Rachel Levine, first reported by Bloomberg. HHS stated that it has concluded an 11-month research study on the safety of marijuana and its classification.
Erwin Henriquez, a market research consultant at Euromonitor International, noted that the potential rescheduling could benefit food and beverage companies eager to enter the cannabis-infused market. However, he emphasized that it will not immediately enhance product availability. Henriquez remarked that the administration’s actions could favor producers focusing on medicinal products rather than adult-use cannabis, which is legal in certain states. “It’s still not making adult-use legal, so for that, we will need many other conditions to be met,” he explained regarding the potential rescheduling. “I don’t think we’re at a stage where large consumer packaged goods companies will feel comfortable saying, ‘Okay, now it feels safe.'”
Despite the uncertain legislative landscape, demand for cannabis-infused food and beverage products is on the rise, with projections indicating a compound annual growth rate of 19.32% by 2027, according to TechNavio. Currently, cannabis is classified as a Schedule I drug, a category reserved for substances with a high potential for abuse. HHS has suggested moving it to Schedule III, which is recognized for medical use and indicates a lower potential for abuse.
The cannabis food and beverage sector, once considered promising in the latter half of the 2010s, experienced stagnation earlier this year when the FDA failed to regulate the substance federally. However, the recent news about government departments reevaluating cannabis regulation has reignited hope in the industry. Last October, Biden pardoned all previous marijuana simple possession offenses, and last week, White House Press Secretary Karine Jean-Pierre stated that the president has “always” supported the legalization of the drug for medical use.
After facing continuous setbacks in achieving federal legislation that would make cannabis more accessible to consumers, the industry may find optimism in the reclassification. Many in the sector experienced funding declines when the FDA abstained from regulating cannabis, but producers are beginning to see positive developments following the recent rescheduling announcement. Canopy Growth, a cannabis grower in which beverage giant Constellation Brands acquired a 35.7% stake before shifting to a “passive” role last fall, saw its stock price surge nearly 50% at its peak last week, as reported by SeekingAlpha. Other cannabis producers, such as Tilray and Trulieve Cannabis Corp., also experienced stock increases of 28% and 62%, respectively, in response to this news.
Despite the uptick in Canopy’s stock price, the company still has a significant distance to cover to regain its previous financial status. The spike in stock last week came after an 84% decline over the past year, according to SeekingAlpha. Last October, Constellation reported a $1.1 billion writedown related to its 2020 investment in the company.
Given the legal ambiguities surrounding cannabis, where companies can only market their products in select states, some have explored alternative streams of income. Last month, Tilray announced a deal with Anheuser-Busch to acquire eight of the alcohol giant’s beer and beverage brands. Although the terms of the agreement were not disclosed, the deal is expected to elevate Tilray to the fifth largest craft beer company in the U.S.
As companies navigate these changes, some are considering the use of calcium citrate tablets as a potential supplement in their product lines, reflecting a broader trend of integrating health-conscious ingredients into cannabis-infused offerings. This could further enhance their appeal to consumers looking for products that align with their wellness goals.