Startups see an opening as big brands ease up on their cannabidiol research
by Annie Gasparro, Jan. 9 2020
Big food-and-drink companies are slowing work on products containing cannabidiol after regulators sounded a note of caution, making space for smaller players to capture more of the budding market.
The Food and Drug Administration told consumers in November that there isn’t enough research to ensure cannabidiol, or CBD, is safe to consume. It isn’t clear the cannabis-derived compound helps curb anxiety, facilitates sleep or conveys other benefits some producers and consumers ascribe to it, the agency said in an online post.
Unlike THC, the compound in marijuana that imparts a “high,” CBD isn’t psychoactive. Still, the FDA said people should consider risks associated with it, such as liver damage.
“The FDA is concerned that people may mistakenly believe that trying CBD can’t hurt,” the message read.
Some mainstream companies looking into drinks and snacks containing CBD are slowing that work. PepsiCo Inc. and Starbucks Corp. held discussions about drinks containing CBD, according to food scientists and consultants familiar with the matter. Kellogg Co. was looking at adding CBD in its Rxbar protein bars, said an executive familiar with that work. Monster Beverage Corp. and Red Bull have considered CBD drinks, consultants involved in those discussions said.
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All that work has been sidelined, according to people familiar with the matter. None of these foods or beverages had been produced for in-house testing or sale.
“It was all gas on one foot from the consumers’ interest,” said Mike Luce, co-founder of High Yield Insights, a consumer-products consulting firm. “Now there’s a very strong foot on the brakes from the FDA.”
Red Bull said it wasn’t working on a CBD beverage. Kellogg said it is interested in new and innovative ingredients but doesn’t have any plans to use CBD in its food because the FDA doesn’t recognize it as safe. A Starbucks spokeswoman said CBD coffee isn’t part of its current product plans. PepsiCo and Monster declined to comment.
A spokeswoman for Ben & Jerry’s said the company would work on a CBD ice cream only if the FDA approved the compound. “If it is not approved as an ingredient in food and beverage, we will not go forward,” she said.
That could take months or years. Companies must submit research on CBD’s use in food to the FDA before it can be certified safe for consumption. Some CBD manufacturers have joined forces to conduct research to present to the FDA. Their group, called ValidCare, said it met with the FDA in December and is conducting a liver toxicity study with the University of Kentucky.
The FDA has said it is considering whether to review CBD through the relatively shorter process for approving food additives and dietary supplements or a longer process for reviewing new drugs. The 2018 Farm Bill legalized the cultivation of industrial hemp, from which CBD is extracted.
Nic Balzer, co-founder of Cincinnati-based Queen City Hemp beverages, sees big brands’ hesitation to push forward with CBD consumer products as an opening for his startup to capture more of the nascent market.
“It’s an immediate kind of pullback in the market,” he said.
Queen City Hemp late last year put six-packs of CBD seltzer on sale at hundreds of convenience stores and grocers in seven states. Beverage company LifeAid recently began selling a CBD drink online and sold out of 200,000 units in the first 36 hours, co-founder Aaron Hinde said. Queen City’s Mr. Balzer said he isn’t worried about FDA backlash because his company isn’t mislabeling its products.
LifeAid said it sold out of 200,000 units of a CBD beverage within 36 hours after making it available online.
Sales of foods and drinks containing CBD are rising even without FDA approval. Hemp Industry Daily, a trade publication, estimates that revenue from hemp-derived CBD products exceeded $1 billion in 2019 and will climb to $10 billion by 2024.
Regulatory uncertainty has complicated retailers’ plans for stocking CBD products. One investor said some retailers are rethinking how such items are displayed or pulling them off shelves. As a result, some brands’ sales have fallen as much as 30% in recent months.
The FDA in November also sent warning letters to 15 small companies producing and marketing CBD-infused products that it said violated federal regulations. That has spooked other small companies putting CBD into food and drinks.
“Getting the FDA’s attention would be a major detriment to the company,” said an executive at one startup selling CBD-laden products. “We are certainly not the only company laying low.”