Has the haze lifted? As cannabis-derivatives get the green light, NPD expansion is set to grow

15 Jan 2019 --- Cannabis-derivatives, such as hemp and cannabidiol (CBD), have been increasingly cropping up on ingredients lists in the US and elsewhere. A recent ruling, which came as the US Government launched its farm bill in December 2018, alleviates hemp of its illegal status, which is expected to spur further innovation. Part one of this NutritionInsight two-part report into cannabis-derived products in the nutrition and food industry explored the softening regulatory environment. Part two considers how the industry may respond to the opportunities that such regulation shifts may bring to the US and Canada, for example.

The US is where the majority of cannabis innovation is located. Innova Market Insights data reveals that of the global food & beverages and supplement product launches featuring CBD in 2018, the US accounts for 76 percent of launches. The US is also where 33 states have so-far legalized the use of cannabis for medical reasons in some form.

Recent research from the National Restaurant Association revealed that plant-based ingredients, including cannabis and CBD ingredients are tipped to be one the hottest overall US culinary trends of 2019. According to the Association’s 2019 What’s Hot Culinary Survey, 77 percent of the survey’s respondents identified cannabis/CBD-infused drinks as the number 1 culinary trend. Additionally, 76 percent of those tapped cannabis/CBD-infused food as the second most popular trend in dining.

Reesearch from the National Restaurant Association shows cannabis and CBD ingredients are tipped to be one the hottest overall US culinary trends of 2019. However, the use of cannabis-derived products, including hemp and CBD in food products, has been somewhat hazy. On December 20, 2018, the US Food and Drug Administration (FDA) released a statement that coincided with the signing of the Agriculture Improvement Act, or farm bill, into law. The bill legalized hemp and FDA Commissioner Gottlieb signaled that the government association was considering further “potential regulatory pathways” for cannabis-derived products.

Previous to Gottlieb’s statement, Maruchy Lachance, Co-Founder and COO of Boulder Botanical & Bioscience Laboratory (BBB Labs), described the regulatory environment surrounding hemp and CBD use as “seemingly wild-west,” but this is now set to change. 

“Now that there is clear-cut guidance for legal sales of hemp-derived CBD products and allowing interstate commerce, American companies can move forward in confidence with domestically sourced hemp and development of cannabinoid products to help consumers seeking to enhance their natural wellness,” she explains.

BBB Labs is a Colorado-based R&D and manufacturing firm that makes hemp-derived products, including contract private-label cannabinoid extract formulations, pet products and health & wellness products.

“CBD is known to be safe and effective for children, but responsible marketers should include a statement regarding users under age 18 and also warn users who are pregnant, breastfeeding, or taking other medications to consult a licensed health professional,” she adds.

Despite the long-standing “murkiness” of the regulations revolving around the use of CBD, whether hemp-derived or otherwise, the food and drinks industry has not been shy with its use such products in NPD, ranging from oils to drinks and snacks.

In navigating the murky regulations around labeling, Lachance says: “Products labeled only as CBD are mislabeled under the Food, Drug and Cosmetic Act (FD&C). It is better to label products as hemp or hemp oil ‘with naturally occurring CBD.’ Products labeled as CBD are not necessarily a scam, but many products don’t contain the exact amount of CBD specified on the label.” 

NPD booms
Innova Market Insights reports 34 percent average annual growth in the number of new food & beverage launches with hemp ingredients (global, 2013-2017), with US introductions enjoying an average annual growth of 21 percent over this period, amid a friendlier regulatory environment. Cereal & energy bars (24 percent average annual growth) was the top growing sub-category of new US food & beverage launches containing hemp (2013-2017).In August, Heineken’s Lagunitas brand launched Hi-Fi Hops,a brew made with marijuana instead of alcohol.

Innovation is now increasing in diverse applications too. For example, Gabriella’s Kitchen (GK), a lifestyle company focused on better-for-you foods, infused with ingredients including cannabis and hemp extracts, recently closed an upsized offering of units for total gross proceeds of US$6.2 million. Known for its skinnypasta, gabbypasta and noodi brands, GK added a fourth brand last year, alto, to represent its cannabis- and hemp-infused products – creating the cannabis sector’s first “savory and nutritionally dense THC- and CBD-infused edibles brand.”

In the beverages market, House of Saka launched a line of cannabis-infused, alcohol-removed wines from Napa Valley last year, while Flow Alkaline Spring Water, a Canadian brand of spring water, released a line of CBD-infused beverages called Flow Glow. In August, Heineken’s Lagunitas brand launched Hi-Fi Hops, a brew made with marijuana instead of alcohol.   

The cannabis market is set to further grow in 2019, especially in Canada, which also saw a softening regulatory environment. Last year, it became the second country, after Uruguay, to legalize recreational cannabis usage. This will “open up a whole new wave of innovation in cannabis-based foods and beverages,” Shelley King, the CEO of Natural Products Canada tells our sister website, FoodIngredientsFirst. 

“New development and positioning are happening now with some of the major beverage companies, such as Molson Coors Canada, taking big stakes in cannabis companies. When edibles become legal – tentatively expected in the fall of 2019 – Canada will be the place to be for anyone looking to participate in this space,” she adds.

In a further gain for the Canadian market, earlier this month Neptune Wellness Solutions received its license to process cannabis from Health Canada.

The Health Canada license enables Neptune to handle dried cannabis, to manufacture and purify cannabis extracts and cannabis oil and to sell its services to other license holders. Production activities are anticipated to commence shortly at Neptune’s 50,000 square foot good manufacturing practice (GMP)-certified facility in Sherbrooke, Quebec.

“In 2017, we embarked upon a new strategic vision to position the company in growth markets such as the legal cannabis market and to become a global leader in cannabis extraction, purification and formulation of differentiated value-added products,” Jim Hamilton, President & CEO of Neptune, said in a statement. “Today, with our Health Canada processing license in hand, we officially enter the sizable cannabis market and are fully ready to commence commercializing our extraction capabilities,” he added.

A collaboration with Lonza will allow the company to innovate in the “formulation of differentiated value-added products” by including capsules in its repertoire.

From gray to green
As the regulations around CBD move from the gray into the light, the interest exhibited by the big players could be expected to peak. In September 2018, beverage giant Coca-Cola was reportedly eyeing CBD-infused drink options. The beverage company was reportedly working with Aurora Cannabis, a Canadian medical marijuana producer and distributor. Following Bloomberg’s report on the companies' collaboration last September, Aurora’s shares jumped by 23 percent on Monday in New York to US$8. 

Going with the green appears to be a good business strategy that is far more mainstream than anybody could have anticipated just several years ago. 

By Laxmi Haigh