Beer Marketer's Insights - Hemp Threads Tangle as Biz Moves Thru Regulatory and Research Voids; Practicality and Precarity

State after state steps into the hemp-based voids left by the feds. And often, governors step into the regulatory voids left by legislators. So it went in Ohio this wk, like Texas and California before it and lookin' like Illinois to come. OH Gov Mike DeWine declared a state of emergency over sales of intoxicating hemp products on Weds, effectively banning their sale outside of adult use cannabis dispensaries. The Republican Gov's move mirrors the tactic taken by CA's Gov Gavin Newsom and the one threatened by IL's JB Pritzker, each Democrats with cannabis mkts to protect from the threat of chemically identical hemp-derived THC. But Gov Greg Abbott of TX went a different way. After the legislative session ended in locked horns, Abbott merely instituted a minimum purchase age of 21, a bare minimum legislators couldn't find on their own. While lawmakers debated, often finding themselves stuck in stalemates, the market moved forward. Some groups filled the voids with self-regulation, setting standards for labelling or testing. All the flux is "just the natural progression of a brand new category," in view of Hemp Bev Alliance exec director Chris Lackner, speaking at the Center for Alcohol Policy conference in late Aug. It's a practical stance: consumers want the products, but the politics are often fraught, so fledgling industry just has to move thru the messiness.Some members of the alc bev biz are doing just that, embracing this growth biz despite the lack of regulatory and legal clarity. Courted by savvy hemp bev entrepreneurs, many distribs set aside concerns for cases, generating incremental gross profits that offset good-sized chunks of the painful losses they continue to see in their core biz. No surprise then that sharp drops in 2023 spurred quite a few in AB network into action, jumping into hemp alongside some large wine & spirits distribs. Plenty of MC network distribs are now in the game too. But the biggest MC mega-distribs in beer have stayed away or even outright opposed this new biz.Supplier responses also remain mixed. Plenty of small brewers jumped into the fray for the same reason as some distribs, seeing beer sales stumble, while most larger cos view hemp bevs as a threat and are frustrated, even angered, by all the attention paid by the middle tier. But Tilray's public listing hasn't stopped it from playing in the space. Its stock price jumped this wk on steadier results and better vibes about cannabis prospects overall, following another leap after President Trump shared a pro-CBD video in late Sep alongside signals that rescheduling could be back on the table. Finding full alignment within natl trade orgs may be challenging, but big parties are moving behind the scenes.Feedback Loop, No Purchase Necessary; Poll: Cannabis Seen as "Healthier," Despite Research Void Whether or not you consider the cycle vicious, alc bevs and hemp bevs could be entering a feedback loop. The softer the beer and alc bev bizzes are, the more likely the folks are to focus on growth oppys like hemp. The faster that biz grows, the harder it could hit beer, feeding the loop. And tho the rise of hemp bevs only explains some of the pressure on alc bevs and beer this yr, consumers would need to buy more of these competitive products to further fuel the narrative fire faced by alcohol these days.A clear majority of American adults age 18+, 61% believe that "cannabis is a healthier option than alcohol," results of an MRI-Simmons poll released last mo show. An even larger 73% believe that "cannabis use has many health benefits" (our emphasis). Around half of respondents who hadn't used cannabis in the past 6 mos believe the former and a large 65% agree with the latter. While tuff headlines about alcohol & health aren't hitting as fast or furiously as they were a year ago, the damage may be done.Those sentiments appear to be based far more on vibes than on the current body of science on the topic. Simply put, "there's not been enough research" into THC, Dr Gillian Schauer, exec director of CANNRA, the Cannabis Regulators Assn explained during the Center for Alcohol Policy (CAP) conference. There's even less research into various lab-generated derivatives now showing up on the market. So while the impacts of alcohol on long-term health and the impacts of alcohol policy on the public have been studied rigorously for many decades, comparative research on THC simply hasn't been completed yet.Wide variations in how THC impacts individuals creates additional challenges to policy-making, experienced cannabis regulator and inaugural CANNRA prexy Norm Birenbaum said at CAP: if the intoxication is unpredictable, that impacts not only driving standards and server training but also issues of liability and dram shop law. Questions of liability haunt some alc bev industry members who still won't touch hemp-based THC, too. Insurers won't cover potential liability for distribs, INSIGHTS understands. That's a major impediment for some. Lawsuits claiming harm from cannabis use ain't new, but haven't been very successful either, tho a consumer liability suit filed in fed ct in NJ is the "one to watch," we're told, as it survived a motion to dismiss in June.Swift Executive Action and Slow-Moving Litigation Given the relative dearth of research, the wariness of legislators and regulators looks more reasonable. Many current tensions arise out of disconnects between the speedy pace of industry, slower government and even slower science. But that doesn't mean that things can't change on a dime, like they did in OH this wk. With the scratch of a pen, the state dramatically changed the outlets available to industry members. Abbott in TX took a lighter stance, but the rule written by state alc bev regulators still has teeth. Retailers found in violation of the rule can lose their license. Period. It's admittedly "a severe sanction, but the agency believes a significant sanction is warranted," the Texas Alc Bev Commission wrote last mo.Will such a steep penalty be challenged in court if the TABC pulls a retailer's license? After all, plenty of state hemp rules have landed in courts in last few yrs. And so far this yr, states have largely ended up on top. Following the 8th Circuit opinion clearing Arkansas' law in June, plaintiffs in neighboring Louisiana asked the ct to drop their suit holding up that state's new law. And a Maryland appeals ct similarly upheld that state's stricter limits on the intoxicating hemp biz in Sep. Meanwhile, a KY-based producer filed a fed suit against TN's new hemp law, specifically its establishment of a 3-tier system and use of in-state wholesalers. Its logic runs parallel to claims made by alc bev retailers seeking to ship wine across state lines. Cts have largely sided with states in those suits too. Can TN's law survive without the 21st Amendment's protection of state-based alc bev regs?Federally, Congress still has bigger fish to fry (like reopening the govt, for instance), but "closing the hemp loophole" remains a point of contention among fed lawmakers. A "clash" between KY Senators Mitch McConnell and Rand Paul exemplifies some of the complexities of the conflict. The former majority leader championed the 2018 Farm Bill and now seeks to remove what could be viewed as a hemp-shaped stain on his conservative record. As usual, Paul represents a more libertarian-leaning view, unwilling to shut down thriving businesses. And that's just on one side of the aisle.Regulators may remain reticent to act further without clear legislative direction, so it seems unlikely, but the FDA may have the legal basis to make a larger, national mark in short order. Food and drinks containing THC would probably meet the standards of "adulterated" under the Food, Drug & Cosmetic Act, Norm Birenbaum noted at CAP (speaking solely for himself, not state or fed regulators). Any co "marketing and transferring adulterated food products" violates that law. So far, FDA has largely gone after products appearing to appeal to kids or as confusable with existing food products. But newer mkt developments, like powders and tinctures or blends of THC with caffeine, could also elicit a greater response, Norm said, reminding of the swift responses by the FDA and state AGs to powdered alcohol and caffeinated high-ABV FMBs. Such speedy action has so far felt out of reach. How quickly could the winds of change blow in?

Hemp Threads Tangle as Biz Moves Thru Regulatory and Research Voids; Practicality and Precarity

Publishing Info