CBD-infused beverage market: seller beware
In one of my first blogs of 2019, I discussed the top five non-alcoholic beverage trends in the National Restaurant Association’s (NRA) 2019 What’s Hot Culinary Forecast (in the United States). The top trend was cannabis/CBD-infused drinks. The NRA’s forecast was quite on point as CBD is ubiquitous these days. As CBD-infused coffees and teas are two of the most popular categories, T&CTJ has been covering it extensively this year. In our April issue alone, we have three articles (complete happenstance) discussing CBD-infused coffee or tea.
CBD-infused coffees and teas appear to be popping up almost weekly in the US and the market potential seems limitless, but there is one “slight” problem — the use of CBD in food and beverages has not yet been regulated by the Food & Drug Administration (FDA), thus, those marketing these products are doing so at a risk. It is smaller companies and brands that are marketing CBD-infused coffees and teas — multinationals are more risk averse since it is not yet legal and are therefore taking it slowly.
For example, The Coca-Cola Company, which recently acquired Costa Coffee, released a statement in September 2018 regarding speculation surrounding its interest in CBD-infused beverages: “We have no interest in marijuana or cannabis. Along with many others in the beverage industry, we are closely watching the growth of non-psychoactive CBD as an ingredient in functional wellness beverages around the world. The space is evolving quickly. No decisions have been made at this time.”
Given the evolving CBD market, the rapidly growing interest in CBD coffee, and the confusion about the difference between “CBD” and “THC” as well as the legalities, the US National Coffee Association (NCA) held a webinar in April on the subject. Presented by Todd Halperin, partner with the law firm Venable LLP and Jessica Lukas, vice president of consumer insights with BDS Analytics, “Coffee and Cannabis” provided an overview of the federal and state laws and regulations governing the manufacture and distribution of CBD. The market research perspective outlined the growth possibilities in the cannabis and CBD market, and their growing incorporation into coffee products.
“Legal cannabis is new, but cannabis is not. Legal cannabis is a game changer,” said Jessica Lukas. “Legal cannabis is and will continue to disrupt every consumer industry — consumption is purposeful, multi-faceted and complex.”
With cannabinoids like CBD crossing into general retail, Lukas said BDS Analytics projects a $45 billion US total cannabinoid market by 2024. “The marketplace is shifting drastically.”
Todd Halpern gave a legal and regulatory overview of CBD/cannabis. To clarify, CBD (cannabidiol) is one of dozens of “cannabinoids,” chemical constituents that are naturally found in the cannabis sativa L plant and is a non-psychoactive component of cannabis. THC or tetrahydrocannabinol is another cannabinoid but is psychoactive. Under the Controlled Substance Act Schedule 1, marijuana and THC are subject to Drug Enforcement Agency (DEA) regulations.
Halpern said the 2018 Farm Bill defined “hemp,” it did not legalize CBD but excludes “hemp” from the definition of “marijuana.” Hemp is defined as “cannabis sativa L and any part of the plant, including the seeds and thereof all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta -9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”
He said that if a CBD product meets the definition of “hemp,” and the CBD ingredient is derived from a plant that meets the definition of “hemp,” it is not subject to Schedule 1 restrictions (by the DEA). Although hemp is not subject to DEA regulation, it can be enforced by the USDA (US Dept of Agriculture, which oversees growing, cultivation and licensing of hemp), the FDA and the FTC (Federal Trade Commission), all of which look at different parts of cannabis/hemp.
Halpern further explained that the Farm Bill dealt with only one source of potential liability — it does not void individual state laws. CBD laws in individual states vary significantly, ranging from prohibitions to restrictions (labelling) to silence. States and Indian Tribes may create programs to regulate hemp production within their jurisdictions subject to USDA approval. The USDA intends to issue its first hemp regulations in Fall 2020.
He noted that it will take time for the government to promulgate regulations and issue licenses, adding that state laws prohibiting Industrial Hemp are not preempted. For example, in California, a CBD product cannot be sold as food or beverage item. New York is also clamping down on “CBD edibles.” During the interim period, Halpern said it will be important to ensure that all extracts and hemp-related products conform to the exemption under the Farm Bill of 2014. “The 2018 Farm Bill does not solve the FDA issue,” he stressed.
And the FDA issue is significant as it does not permit CBD as a food or dietary supplement. The FDA (Food & Drug Administration) regulates CBD, CBD foods/beverages, dietary supplements and certain others. As a public health and safety concern, the FDA monitors the manufacturing, distribution and labelling of foods and beverages. The FTC (Federal Trade Commission) also oversees CBD and CBD products (with exceptions). The FTC protects consumers against false advertising and has the authority to enforce rules to require substantiation to claims marketers make.
Despite the risk, we’re still seeing a seemingly constant flow of CBD-infused coffees and teas hitting the market. Why? Because, said Halpern, “there are plenty of products in the market that are in violation of FDA regulations, but the FDA cannot know of everything that is in violation of laws.” He said to beware and take a risk assessment. “A company might not care about an FDA violation, but this might expose them to other violations such as false advertising.”
So even though CBD-infused coffee and tea beverages are on the rise, there are significant legal and state regulations and hurdles to be aware of. To assist companies that may be considering marketing a CBD-infused coffee product, the NCA has created The Coffee Industry Guide to Cannabis and CBD. For more information, visit: http://www.ncausa.org/Industry-Resources/Coffee-and-Cannabis.