Infused beverage executives seek path forward for hemp, marijuana

As the cannabis industry anticipates rescheduling and a new Farm Bill, the question of how hemp and marijuana can coexist is central to the conversation.

Manufacturers of hemp-derived THC drinks have carved out a niche in liquor stores and some bars, offering consumers a growing alternative in the adult-beverage market.

Some in the industry view hemp as a more viable business opportunity than marijuana, citing lower production costs and fewer regulatory barriers.

Kyle Neathery, CEO of Alabama-based hemp processor Samson Extracts, said companies will need to choose between marijuana and hemp unless they can separate their production processes, which would require a massive manufacturing space.

“Most regulators are going to require a separation of the operation,” he said.

“They don’t want marijuana mixing with hemp.”

Neathery also noted that growing marijuana is more expensive than farming hemp.

He said marijuana companies often base their business models on the price of flower when a market first opens and prices are high, but they don’t account for prices plunging a few years later.

“They don’t build models for bad pricing,” Neathery said.

“Hemp is not spoiled by bad pricing.”

Regulating hemp

Jonathan Miller, general counsel for the Kentucky-based U.S. Hemp Roundtable, said he doesn’t foresee marijuana becoming fully legal any time soon, but with rescheduling on the horizon, one discussion will be how to differentiate between hemp and marijuana.

Miller noted that some people in the industry believe hemp should not be tied to ingestible THC while others believe it is superior to marijuana, and the looser regulations should be kept as they are.

“I wouldn’t tell a current hemp business owner that there’s anything they need to do to prepare, but once there’s full legalization, policies will need to be reviewed,” Miller said.

“We don’t want to see everything wind up in dispensaries.

“We do believe there needs to be robust regulation of hemp products, which is not the case in some places.”

Miller said hemp businesses must follow the rules of the states where they operate, adhere to good manufacturing practices, properly label products and report adverse effects to continue succeeding as more states legalize recreational marijuana.

“You should behave as though you’re regulated by the FDA (the U.S. Food and Drug Administration),” Miller said.

Hemp is here to stay

Christopher Lackner, founder and president of the Chicago-headquartered Hemp Beverage Alliance, said current consumers of hemp-derived THC products aren’t likely to change their habits.

“Our consumer is looking for an adult beverage and is shopping for these in liquor stores or 21-plus gated sections of grocery stores,” he said.

“They have entire aisles dedicated to THC beverages – 15% of sales from Top Ten Liquors (in Minneapolis) are THC drinks.”

Some states also permit intoxicating hemp beverages to be sold in restaurants and bars so that people who want to gather for a drink can choose between alcohol and THC beverages.

“Everyone deserves a barstool,” Lackner said, quoting his friend Bob Galligan of the Minnesota Craft Brewers Guild.

“It’s just another addition to the ever-growing adult-beverage category.”

Solutions for hemp and marijuana

Cheech and Chong’s Global Holding Co., a California hemp-derived THC company, is considering multiple expansion scenarios as more states legalize marijuana and federal rescheduling is on the horizon.

“We’re trying to anticipate how this might play out and creating solutions for each path,” said Ted Whitney, the company’s chief beverage officer.

“We anticipate that borders are going to fall, and we’ll be able to ship cannabis nationwide just like we can with hemp right now.

“Hemp is creating a framework that cannabis can be inside of,” Whitney said.

As cannabis laws evolve, Whitney said it’s imperative for both marijuana and hemp companies to be involved in the discussions.

“We want to have integration and parity between both sides of the plant,” he said.

But other hemp companies say marijuana legalization – either federally or at the state level – won’t change anything for them.

Cantrip started as a marijuana-infused beverage company in Massachusetts in 2021.

It entered the hemp sector when Minnesota launched its regulated hemp program in 2022 and shut down its marijuana operations.

Now, Cantrip doesn’t plan to return to marijuana.

“It’s too expensive to produce a (beverage) product for the marijuana industry,” Cantrip co-founder and CEO Adam Terry said.

“I don’t think hemp beverages will enter the marijuana space,” he added.

Switching from marijuana to hemp

Marijuana companies face far more obstacles than hemp companies.

Their products can’t be transported across state lines, and they must deal with seed-to-sale tracking, which is not designed for high volume, Terry said.

“The question I’m asking marijuana companies is, ‘When are you guys joining hemp?’” Terry told MJBizDaily.

Denver-headquartered Fable is another company that ditched marijuana beverages in favor of hemp-derived drinks and does not intend to reverse course.

“If you’re building a business that’s investor-backed, you have to listen to the economics and look at the retail market,” Fable CEO Ben Kennedy said.

If Fable wanted to expand its marijuana-infused beverage business outside California, where it first started, it would have had to build a supply chain in every state it entered – a prospect that would have been both costly and inefficient.

Beverages account for only 2% of most retailers’ revenue, which makes sense for high-dose value brands but not for low-dose beverages such as Fable.

“We were forced to operate outside the regulated market,” Kennedy said.

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.