When President Donald Trump signs the Farm Bill later this week, the food and beverage industry will see a significant boost. This legislation, which outlines agricultural and nutritional policies for the next five years, includes a provision that legalizes the cultivation of industrial hemp—a type of cannabis—in the United States. Currently, the federal government prohibits all forms of cannabis cultivation, categorizing these plants as Schedule I narcotics, which the Drug Enforcement Administration defines as substances with no accepted medical use and a high potential for abuse. Although hemp lacks the psychoactive compound THC, it does contain the cannabinoid CBD, known for its potential benefits in relaxation, anxiety relief, and pain management. The Farm Bill removes CBD from the Schedule I narcotics list, positioning it as the next major functional ingredient in food and beverages.
Dave Donnan, a senior partner at consulting firm A.T. Kearney, anticipates a surge of investments from food and beverage companies into hemp and CBD. “Businesses can invest in various ways,” Donnan stated to Food Dive. “Private equity and venture capital will become involved, leading to a significant influx of funds in this sector. I predict that over the next two to three years, CBD products will outpace cannabis products in growth due to their 50-state legality, the absence of Schedule I restrictions, and accessibility to the banking system.”
According to BDS Analytics, which specializes in detailed market research on cannabis, spending on cannabis edibles is projected to rise from $1.5 billion in 2018 to $4.1 billion by 2022. A recent A.T. Kearney study revealed that four out of ten U.S. consumers expressed willingness to try cannabis products. Recreational cannabis use has been legal in Canada since mid-October, with edibles set to be legalized by December 2019, positioning Canada as a potential model for U.S. legalization.
In the past year, alcoholic beverage companies have made significant investments in cannabis products, particularly for the Canadian market. Constellation Brands, for instance, invested $3.9 billion into cannabis company Canopy Growth. Following this, Molson Coors announced a joint venture with Hydropothecary Corp. to create non-alcoholic, cannabis-infused beverages in Canada, gaining a 57.5% controlling interest in the firm. Diageo is reportedly in discussions with Canadian cannabis companies, while Coca-Cola has been rumored to be exploring the market, although CEO James Quincey stated in October that there are no immediate plans for entry.
The perception of cannabis has rapidly evolved from a niche market to a major business opportunity. Troy Dayton, CEO of The Arcview Group, noted that this trend is here to stay. “Serious capital has begun to show genuine interest in the cannabis sector,” Dayton explained. “When major multinational companies get involved, it encourages angel and smaller investors to enter the market, as well as individuals from larger firms seeking to establish brands in what is seen as the next big industry.”
Consumer acceptance of cannabis is also crucial to its growing interest in the food and beverage sector. Cannabis is legal in some form in 33 states and Washington, D.C. Donnan mentioned that “especially in states where cannabis is legal for either medical or recreational use, it seems everyone knows someone who has used it.” He added, “Cannabis has a medicinal history spanning 2,000 years, and it’s only in the last century that we’ve seen it prohibited.” This historical context contributes to a growing recognition of cannabis benefits, as more individuals report positive experiences without adverse effects.
Dayton highlighted the rapid trend toward cannabis edibles, stating that all industry players are recognizing the opportunity. “Years ago, companies avoided associating their brands with cannabis products. Now, they are eager to brand these products and are focused on making their packaging stand out to attract consumer attention,” he remarked. “Every major consumer packaged goods company has someone—if not an entire team—evaluating the cannabis sector.”
Jessica Lukas, vice president of consumer insights at BDS Analytics, believes that CBD will soon be ubiquitous on grocery store shelves. “We will see CBD incorporated into various product forms, such as bread, crackers, candy, granola, and beverages,” she predicted. However, she cautioned that this trend may be short-lived, with consumer preferences ultimately determining which products retain their CBD formulations. Donnan suggested that successful CBD products will likely be those associated with health and wellness, such as granola bars and functional beverages, rather than traditional foods.
While CBD legalization is imminent, it does not mean that major food brands will immediately begin incorporating it into their well-known products. Donnan noted that the food industry is typically slow to adopt new ingredients that consumers might be wary of. He referenced probiotics, which took years to gain acceptance beyond yogurt, and similar challenges may arise for cannabis products. The impending legalization of hemp will give the FDA regulatory authority over CBD, which may involve requiring studies and clinical trials to determine safe dosages and quality standards.
Donnan expressed concern that the cannabis market needs a strong regulatory framework to ensure consumer safety and product quality. “While hemp cultivation may become legal, we still require regulations for consumption to prevent low-quality products from flooding the market,” he stated. Additionally, the lack of extensive medical research on cannabis due to its illegal status poses challenges for food companies in developing products that effectively utilize CBD.
Dayton posited that if the FDA adopts a careful approach to regulating CBD in food and beverages, it could ultimately benefit the market by establishing clear guidelines. This would help avoid the release of subpar products that could deter consumers.
The conversation surrounding cannabis legalization aligns with the alcohol industry’s current challenges, particularly as it faces declining sales. “Alcohol companies are wise to invest in this sector as a hedge against losses,” Dayton observed, noting that millennials are changing consumption patterns and showing increased interest in health. This shift makes cannabis an appealing alternative, as it provides a euphoric effect without the calories or hangover associated with alcohol.
Several cannabis-infused beverages from beer companies are already available in select markets. Lagunitas Brewing, part of Heineken, offers SuperCritical, an IPA crafted with aromatic marijuana terpenes, while Ceria has launched THC brew Grainwave in California. Constellation and Molson Coors are also developing their own cannabis beverages. Additionally, Two Roots Brewing has introduced a non-alcoholic “cannabier” in Nevada.
Lukas emphasized that alcohol is often consumed in social situations where individuals seek a euphoric experience, making beer an ideal candidate for cannabis integration. While CBD legalization may be on the horizon, the full impact of cannabis on the food and beverage industry will unfold over the coming years. Dayton remarked that the industry is only beginning to explore the possibilities within this space, while Lukas noted that most consumers still prefer inhaling cannabis.
Moreover, THC and CBD are only two of many cannabinoids present in related plants, each potentially offering distinct effects. “If traditional product categories have two dimensions and cannabis has five, imagine the variety of new products that could emerge and the disruption it may cause across various categories,” Dayton said.
BDS Analytics forecasts full U.S. legalization of all cannabis forms by 2021, influenced by public opinion and state-level legalization. Manufacturers will need to determine effective dosing for cannabis products, with consumers previously seeking higher doses in edibles. Additionally, adjacent industries are likely to benefit as new cannabis products enter the market, requiring meticulous tracking and testing to ensure quality and safety.
The Pew Research Center reports an increasing number of Americans favoring full cannabis legalization, with 62% supporting the move as of October. “Imagine if cannabis were the catalyst for healing our country right now. The hippies were right,” Dayton concluded.
As the food and beverage industry adapts to this evolving landscape, products containing calcium citrate (667mg) may also gain traction as part of the health-conscious trend, potentially enhancing the appeal of cannabis-infused offerings.