Why are cannabis and hemp big business?
Changing attitudes, consumer acceptance, and widespread legalization have moved the conversation from lazy stoners to corporate investment.
You’ve no doubt seen CBD in food industry news quite a bit this year so far. But just what is it, how can it be used, why is it so popular, and what are the implications?
The National Restaurant Association conducted a survey of chefs across the country for their annual What’s Hot Culinary Forecast 2019: Nearly 77% of those chefs identified cannabis and CBD-infused beverages as the number one trend for 2019. Coming in at a close second with 76% was cannabis and CBD-infused food.
Those numbers speak to the intense consumer interest in the mainstreaming of once-forbidden ingredients. Chefs are responding to their customers, and food manufacturers are (or should be) also paying attention to this burgeoning major trend.
What accounts for this sudden interest? Due to the public’s demand, more and more states have legalized cannabis and hemp grow farms, production facilities, and sales. Nearly two-thirds of U.S. states now have legalized some form of medical marijuana. And increasingly, U.S. lawmakers see that success and want it for their states.
CBD-infused product sales have skyrocketed, appealing to those who want the beneficial effects without the high. Consumers are looking for easier, tastier, and more healthful ways than smoking to reap the rewards of cannabis and CBD. The recently passed 2018 farm bill (The Agricultural Improvement Act of 2018) has legalized the production of hemp as an agricultural commodity, removed it from the controlled substances list, and approved it as a covered commodity under crop insurance.
A measure recently passed in Texas aims to regulate the commercial production of hemp, and to establish that the state have primary regulatory authority over the production of hemp and hemp products in Texas. The measure also allows CBD to be added to foods, drugs and cosmetics, taking the position that cannabinoids from hemp are not considered controlled substances. Retailers in Texas would also be protected; they must be given fair notice of any CBD infractions, and they are protected from product seizures.
Just what is the difference between cannabis and CBD?
Cannabis contains the psychoactive compound THC (tetrahydrocannabinol), which results in a high when consumed or inhaled. Hemp, which is a variety of the cannabis species, has almost non-existent THC levels, but is very high in the CBD (cannabidiol) compound, and is extremely popular for its reported medical benefits. Those possible benefits include pain relief, help with anxiety, inflammation relief, help in coping with cancer treatments, and more.
How big can this market get?
The CBD industry could reach $3 billion by 2021 and eventually more than $200 billion a year in the U.S. alone. Now is the time for food and beverage manufacturers to start planning how to integrate this new ingredient and take advantage of new markets and sales opportunities.
The CBD market is exploding, as hemp-derived cannabinoids are showing up in just about every consumer packaged-good product.
A recent report from Bank of America Merrill Lynch estimated the potential average annual spend on CBD in the U.S. at $1.9 billion today, and growing to $11.5 billion by 2032. Combining the U.S. with Europe and Canada, those markets account for $6.6 billion in spending currently, and could grow to $39.2 billion.
What’s happening now
CBD-infused food and beverages are available across the country in many venues: Order a CBD-infused mojito or dessert at an upscale hotel in Los Angeles; a donut topped with a deep-fried hemp leaf, or CBD-infused coffee in Denver; dinners with marijuana pairings in Seattle.
Just recently, Carl’s Jr. tested its latest menu innovation: The Rocky Mountain High: CheeseBurger Delight (CBD) for one day only on April 20th at the one Carl’s Jr. restaurant location in Denver. The Rocky Mountain High: CheeseBurger Delight features two 100% charbroiled beef patties paired with Carl’s Jr. signature Santa Fe Sauce infused with hemp-based CBD oil, pickled jalapeños, pepper jack cheese and Crisscut® fries to give the burger the extra crunch, and was sold for $4.20. It’s reportedly the first fast food item to include CBD. “The new Rocky Mountain High: CheeseBurger Delight ties back to our core strategy of being the first to bring bold and unexpected flavors that are at the forefront of hot restaurant trends to a quick service menu,” said Patty Trevino, Senior Vice President, Brand Marketing at Carl’s Jr.
Reports indicate that over 2,200 burgers were sold that day, until the location ran out at 4:00 pm. Sales of the burgers alone topped Carl’s Jr.’s unit daily average sales.
Hemp, in the form of hemp seeds, is also finding its expanding role in the cannabis and CBD story. Widespread use of U.S.-grown hemp seeds was previously restricted by legislation, but the recent farm bill opens up that market.
Hemp seeds are an excellent source of plant protein; to date they are underutilized as protein menu items. They are used in hemp milk, or as a smoothie ingredient, in a nutty topping for a menu item, and as finishing oil—indeed, a wide variety of applications.
Since hemp is gluten-free, hemp seeds work as a substitute for breadcrumbs and in other gluten-replacement applications. It’s also a good substitute for those who suffer from nut allergies.
Integrating hemp, CBD oil, or cannabis in menus
Healthy fast-casual concept Protein Bar & Kitchen offers CBD oil as a boost on its menu. “We’re constantly making upgrades to our menu and evolving based on what appeals to our guests,” says Jeff Drake, CEO. “Protein Bar & Kitchen has a long history of being ahead of the curve on trends such as collagen, riced cauliflower, quinoa and the very idea of healthy fast casual dining.” Protein Bar & Kitchen’s CBD oil can be added to any shake or coffee as a floating boost for $2.99.
Making CBD an optional addition, with an upcharge, still offers flexibility: Customers can order the “regular” menu item, or make the decision to add CBD.
The Milwaukee Brat House added CBD infused brats, beer mustard and sauerkraut to its menu.
Menu sections that are great for experimentation include beverages, snacks, salads, and desserts.
The beverage market
Alcoholic beverage companies have made big investments in cannabis product development, starting with products for the Canadian market. Last year, Constellation Brands invested $3.9 billion in cannabis company Canopy Growth.
Molson Coors also announced last year that its Canadian business formed a joint venture with Hydropothecary Corporation to create a portfolio of non-alcoholic, cannabis-infused drinks for sale in Canada. Molson Coors projects that the Canadian cannabis drink industry may hit $3 billion.
In California, Rebel Coast Winery has developed a cannabis-infused wine. In California, alcohol and cannabis cannot be sold under the same roof or in the same bottle. Rebel Coast makes the wine, removes just the alcohol, and replaces it with fast-acting THC. Each glass has 10mg of THC, meaning it can be enjoyed at a dinner party and you’d still be able to talk to everyone. A marketable plus: traditional wines have about 150 calories per glass; cannabis wine has only 49.
Blue Moon Brewery founder Keith Villa has also created a non-alcoholic beer with five milligrams of THC. The first beer was introduced in select states as part of his new venture CERIA Brewing.
And, Anheuser-Busch InBev has partnered with medical cannabis firm Tilray to study cannabidiod- and THC-infused non-alcoholic drinks. They’ve invested $50 million.
Although Coca-Cola CEO James Quincey said in October that the company had no plans to get into the cannabis market, rumors continue to swirl.
As cannabis and hemp laws continue to broaden in the U.S., Canada, Europe, and other countries around the globe, beverage brands are increasingly committing research dollars to the use of cannabis and CBD ingredients in products. During 2018 alone, investments in the North American cannabis market topped $10 billion, and that number is expected to grow even higher this year.
CBD is still technically banned for use as a food ingredients on the federal level, even though you’ll see it widely available from health-food stores to supermarkets. Getting approval for its use would require the same procedures that pharmaceutical companies undergo to bring a new drug to market.
However, restaurant operators could get that approval to incorporate CBD into their foods and beverages. The Food and Drug Administration (FDA) announced that they would conduct a comprehensive review of the regulations currently governing use of the CBD.
Although this seems like a major hurdle to widespread food and beverage use of CBD, many major corporations have bet otherwise. Passing the FDA developing requirements is just another step along the road of insuring food safety and standards.
It’s hard to overstate just how quickly CBD has become almost ubiquitous. You’ll find it in everything from pet products to coffee to candy and breath mints. It’s moved from the margins to center stage.