Risk vs Reward
CBD in Food and Drink: Fool’s gold or the future?
By Whitt Steineker and Dexter Hobbs
Due to the explosion of interest for hemp-derived cannabidiol (CBD) products and ingredients following the broad federal legalization of hemp early this year, there is an understandable enthusiasm for CBD-infused food and beverages. After all, some analysts believe the CBD market will exceed $20 billion annually by 2022.
Many manufacturers and retailers, however, are hesitant to enter this nascent space based on the current statements issued by state and federal regulators. The dilemma: How do you balance the risks and the benefits of operating in the CBD business?
CBD is an extract taken from the flowers and buds of marijuana or hemp plants. Marijuana and hemp are different strains of the Cannabis sativa L plant. Until recently, federal law considered both hemp and marijuana Schedule I substances under the Controlled Substances Act – the most stringently regulated category of narcotics. This changed with Congress’ passage of the 2018 Farm Bill in December, in which Congress effectively de-scheduled hemp under the Controlled Substances Act.
Hemp and its derivatives and extracts, such as CBD, may now be commercially produced, distributed and sold for the ﬁrst time, provided the plant and its products contain less than 0.3 percent tetrahydrocannabinol, or THC. Because THC is the psychoactive ingredient in marijuana, a critical difference between marijuana and hemp is that hemp will not produce a “high.” Immediately after the 2018 Farm Bill became law, the FDA stated that is unlawful (with narrow exceptions) to sell food or beverage containing added CBD or THC without first obtaining FDA approval.
Infusing Food and Drink
The agency has, however, indicated that it is evaluating whether there are safe ways to introduce CBD-derived food, beverages and supplements into the marketplace. Indeed, the FDA held an open meeting on May 31, 2019, and provided a forum for public comments and submissions through July 16, 2019. So it appears that the FDA is open to changing its stance on CBD food and beverages upon further data and testing, but until then, the FDA has put its foot down on any food and beverage containing CBD, citing concerns for unfounded medical claims and reports of contaminated CBD as some of its reasons.
This broad prohibition also includes CBD in beer. At the federal level, alcoholic beverages – defined as beverages containing more than 0.5 percent alcohol by volume – fall under the jurisdiction of the Alcohol and Tobacco Tax and Trade Bureau. Every alcoholic beverage must first obtain licensing from the TTB, and the TTB relies on the FDA for matters related to health and safety. The TTB’s latest statement provides that the TTB must approve formulas containing hemp ingredients, and in doing so, it may consult with the FDA and require the formula to obtain FDA approval. The TTB is, therefore, unlikely to allow alcoholic beverages containing CBD unless the FDA’s stance changes or it otherwise approves certain CBD drinks. In fact, the TTB did approve a CBD-infused IPA beer from Colorado in 2016, but it has since revoked the license and required the brewery to surrender its formula.
At this point, one should not produce any edible or drinkable products containing CBD. But whether the FDA alters its rules, and when that might happen (if ever), remains to be seen. Many are optimistic that the FDA will change course, but fewer expect it to happen soon. An opportunistic food and beverage distributor might have products or a process to make certain products on stand-by for when the FDA eases its clamp on CBD, but that distributor also runs the risk of going through that effort to never see any movement. In the meantime, manufacturers, distributors and retailers should stay informed about the state and federal government pronouncements regarding CBD.
Whitt Steineker is a partner at the law firm Bradley Arant Boult Cummings. As the leader of Bradley’s Food, Beverage and Hospitality industry team, Whitt understands the unique challenges of these highly regulated and dynamic industries. He knows clients in these industries need legal advice that combines deep experience and comprehension of the law with a working knowledge of how these businesses succeed.
Dexter Hobbs is an associate in Bradley’s Charlotte office and contributes to Bradley’s Food, Beverage and Hospitality industry team, with an emphasis on helping North Carolina breweries. As part of this work, Dex advises breweries on various food, beverage and alcohol-related issues, including issues related to hemp-derived cannabidiol (CBD) as a product or ingredient.