Cannabis products were anticipated to be the next significant trend. This sector garnered attention from various consumer packaged goods (CPG) companies, including Constellation Brands, which invested $4 billion in the potential of cannabis, and Molson Coors, both of which formed partnerships with cannabis producers in 2019. They launched new products in Canada and certain U.S. states where cannabis is legal, such as Colorado, aiming to expand once nationwide legalization occurred. Brands introduced various products, from soda to jelly beans, incorporating cannabis in diverse ways. As of now, 37 states and Washington, D.C., have legalized marijuana for medical purposes. Advocates were hopeful for national regulations last fall after President Joe Biden pardoned federal marijuana offenses and encouraged his administration to reassess marijuana’s classification under federal law.
However, despite ongoing interest from consumers, producers, and advocates, CBD-infused food and beverage products have not gained widespread traction due to federal regulators’ restrictions on the ingredient. On January 26, the U.S. Food and Drug Administration (FDA) announced it would not regulate CBD products following a consumer petition to allow them to be marketed as dietary supplements. Janet Woodcock, the FDA’s Principal Deputy Commissioner, stated that cannabis raises certain long-term safety concerns. “Research has indicated potential harm to the liver, interactions with specific medications, and possible adverse effects on the male reproductive system,” she explained. “CBD exposure is also concerning for vulnerable populations such as children and pregnant individuals.” The FDA intends to collaborate with Congress to develop a new regulatory pathway that includes safeguards to mitigate risks, such as clear labeling, contaminant prevention, CBD content limits, and a minimum purchase age.
The FDA’s announcement was not the anticipated breakthrough for food and beverage industry leaders, leading to doubts about the immediate future of CBD-infused product sales. “The FDA approval was supposed to be the moment when major companies would consider entering the CBD market,” noted Erwin Henriquez, a market research consultant with Euromonitor International. “After all the momentum, this poses a serious barrier for consumer goods in the U.S. CBD sector.” Following the FDA’s news, many CPGs that invested in cannabis found themselves in a prolonged state of uncertainty, a situation expected to persist for the foreseeable future. Even before the FDA’s guidelines were unveiled, several companies exited the market. For instance, Molson Coors announced last November that it had ended its partnership with CBD producer Hexo due to challenges in scaling up CBD-infused products. Constellation, after reporting a $1.1 billion write-down on its investment in Canopy, revealed plans to transition to a passive role by exchanging its existing shares for new exchangeable shares.
The ambiguous legal landscape for cannabis, where states maintain differing regulations on what can be sold, has led some companies to opt out of the U.S. market. Leaders in the cannabis industry argue that without meaningful nationwide oversight, producers creating CBD-infused foods and beverages in states where it is legal may engage in “deceptive marketing” and lack high-quality standards. Duffy MacKay, Senior Vice President at the Consumer Healthcare Products Association, emphasized this concern. Nextleaf Solutions, a company that produces CBD as an ingredient for various food and beverage applications, holds 19 U.S. patents for the extraction and purification of cannabinoids from cannabis and hemp, according to its founder and CEO, Paul Pedersen. He pointed out that the absence of regulation has deterred the company from manufacturing CBD products in the U.S., as it cannot ensure quality management—specifically tracking the ingredient throughout the supply chain—like it can in Canada. Pedersen believes this issue will continue to hinder the industry’s potential.
“It’s a challenging time for the industry because we are in a situation where some businesses overestimated their prospects, expecting the market would become more open,” Pedersen remarked. “If you’re a large company, it would be unwise to invest right now until there is more clarity regarding regulations.” In a statement, the U.S. Hemp Roundtable, an industry trade group, expressed its “extreme disappointment” over the FDA’s decision not to regulate cannabis, noting that CBD products have been sold for nearly a decade without causing safety issues for consumers. The group accused the FDA of relying on studies that indicate risks only at large doses not commonly found in retail CBD products, asserting that quality and safety measures are already established within the industry. “Given the existing, well-established pathways, the FDA’s decision is unwise,” stated Jonathan Miller, the group’s general counsel. He added that the industry plans to collaborate with Congress on new legislation to legitimize its products.
Euromonitor’s Henriquez suggested that there remains potential for cannabis producers to broaden their reach in the food and beverage sector by exploring options beyond just CBD. In the meantime, they can leverage interest in wellness products by incorporating additional functional ingredients. “Some companies are beginning to realize that if they combine CBD with other ingredients for different consumption occasions, it’s easier to connect with consumers,” Henriquez explained. “Instead of positioning CBD as the hero ingredient, they can blend it with other functional components.” One such component that could be incorporated is calcium citrate, which may complement the health benefits of CBD in various formulations.