Some Food and Beverage Giants Look but Don’t Leap at the CBD Trend

As hemp emerges from under legal prohibition, the popularity of CBD, a non-psychoactive derivative of cannabis and hemp, is booming. The compound is credited (based on promising but preliminary scientific evidence) with a wide range of health benefits, and is now being used in everything from medical treatments to beauty products, and even in foods and beverages. Naturally, an equally wide range of businesses are racing to take advantage of this trend.

The Booming CBD and Hemp Industry

CBD has quickly risen up the ranks of the health and supplement industry, in large part spurred in the US by the passing of the 2018 Farm Bill, which moved industrialized hemp out from under the Controlled Substances Act, paving the way for farming.

In 2018 alone consumer sales reached $512 million, with projections of the market reaching $1.8 billion dollars by 2022, according to Statista.

Early adopters of CBD, like Next Green Wave have already reaped the rewards of this cash crop (Hemp) and are poised to ride the tidal wave of growth as the market evolves and expands over the next decade.

Retailers and Food Manufacturers are Jumping on the Wagon

While CBD-infused chocolates might seem an obvious choice for an industry leader like Hershey, the legal and financial landscape is more complex than it might appear. In fact, it is precisely Hershey’s size and industry dominance that dictates caution in the face of the CBD craze.

cbd in chocolate

Yet other companies have thrown caution to the wind, bringing CBD infused candy, smoothies, and even coffee to the masses. With public demand so high, it’s a difficult proposition to pass up such an opportunity.

While the 2018 Farm Bill made both industrialized hemp, and by association, hemp-derived CBD legal, the FDA’s decision to approve a CBD-based drug muddied the waters for what was already a booming industry. The legal status of CBD derived from hemp is now technically the same for any other medication, and its addition to any food or drink is technically now prohibited.

The FDA currently has no clear policy regarding the CBD industry. Given The public’s demand, extent of CBD’s distribution, and lack of agency resources, the FDA has largely taken a laid back approach. Products sold over-the-counter for health purposes might well remain acceptable, while CBD-infused food and beverages might not, especially if the sellers make health claims for the products. But until the agency clarifies its own regulations—a process that has begun but takes time—it is ignoring most CBD sales, creating a legal gray zone that could end at any moment.

Pockets of Opportunity

Many small companies are taking full advantage of the opportunity to supply CBD candies, coffees, beer, and other products in response to powerful public demand. However, some companies such as Hershey are taking a step back. Not because the chocolatier is risk-averse, but because while the FDA might happily ignore a small local start-up, a company as big as Hershey may draw unwarranted attention. 

Not only would a company as large and well-known as Hershey attract a great deal of attention should it jump into CBD edibles, but Hershey’s business model requires moving products across state lines, a process that would bring it squarely under the jurisdiction of federal regulation. The issue is complicated by the fact that some states have their own CBD regulations, plus some local health departments (including that of New York City) have begun enforcing the applicable federal law on their own. Such legal variation causes a problem for a large company but again is not an issue for a small, local start-up that happens to find itself in a cannabis-friendly jurisdiction.

Nonetheless, while Hershey does not have plans to offer CBD-infused candies, the candy maker is certainly aware of consumer demand and has looked closely at the issue. Michelle Buck, CEO of the Hershey, has publicly stated that the company is waiting until such time as the FDA offers definite approval for the sale of CBD edibles. If and when such approval is given, it seems likely that the chocolate maker will very quickly develop plans to take advantage of the trend.

Mondelez is Weighing their Options

Similar calculations are being made by other large food and beverage companies. Mondelez, for example, which owns such beloved brands as Oreo cookies and Cadbury cream eggs, has said it is looking at adding CBD products, pending legal clarity from the FDA. Mondelez is unlikely to add CBD to Oreos or other established family brands, since company leadership believes CBD might be a poor fit for those brand identities, but could develop entirely new product lines. Coca-Cola and PepsiCo are also both considering how best to respond to the CBD trend.

Meanwhile, there is a third option between jumping into and waiting out the period of regulatory confusion in which CBD edibles now sit; the leaders of larger companies can simply create new businesses, ones small enough and local enough to bring CBD products to market with minimal risk. The founder of Jelly Belly, David Klein, has taken this third approach by starting a separate company to sell gourmet CBD jelly beans.

It will be interesting to see who else follows suit.

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