Editor’s Plate: The Cannabis Market Is not for the Faint of Heart

Feb. 7, 2020
Nor for the biggest companies, for that matter. For the foreseeable future, Small Food will reign.

“If you don’t get a piece of cannabis, cannabis is going to take a piece of you.” Those semi-famous words are attributed to Adam Bierman, then the 37-year-old founder and CEO of MedMen Enterprises, a California marijuana retailer considered an early leader in that business. A stock worth $6.50 a share in October 2018, now trading at about 50 cents. Bierman left the company on Feb. 1 as it underwent a restructuring.

Well, he’s half right. Cannabis has taken a piece out of several high-profile companies, except they’re the very ones who did grab a piece of cannabis.

Will cannabis ingredients – both CBD and THC – ever become to the food and beverage industry the huge, market-changing juggernaut that many have predicted for the past couple of years?

That’s the central question we try to answer in this month’s cover story. Spoiler alert: I think the answer is no. But one THC beer guy has a fascinating business plan.

The holy grail in this – the only way real fortunes can be made and new kings of confections and relaxation beverages can be crowned – is if the two cannabis derivatives become legal nationally. That’s when the Constellation Brands and the Budweisers will rewrite history. Until that day, success will be as big as Nashville’s Five Daughters Donuts – making a nice living and with rabid fans in that town (incredible donuts with bacon!) but not as hip and fast-growing as Stan’s Donuts, and not approaching the ubiquity of Dunkin.

And that day may never come.

In one application, CBD already has been labeled a drug by the FDA, and that effectively kills any possibility of it being approved for foods. Sure, laws can be rewritten or overridden, but with what compelling evidence or need? That some people “feel” it reduces anxiety and depression, maybe masks the arthritis? The scientific evidence is unconvincing. And besides, why would you take your arthritis drug in a gummy or soda?

THC is another story. If CBD is like ibuprofen, then THC can be compared to alcohol. And there is no compelling necessity for alcohol, but a great affinity for it among many people. Other than the fact that it hits on all the major points of the Controlled Substances Act, THC in the right (adult) hands should be pretty harmless. Harmless as casino gambling … which is still prohibited in 10 states.

Ultimately, states will be states. This USA is a federation, after all. As long as Wyoming and Alabama have some self-determination, they can erect laws that prohibit recreational marijuana in all its forms, and that includes THC-laced gummies and near-beer. And you can bet that list will include more states than just Wyoming and Alabama.

Imagine Anheuser-Busch having to build a brewery in every state. And those Bud Lights not being allowed to cross state lines. And no advertising or brand promotion. Certainly no marketing that there is anything positive about drinking beer.

That leaves the Five Daughters Donuts … only in CBD and THC, the names are Kiva Confections, CannAmerica, SweetGrass Bakery and Cannabiniers. And then there’s Ceria Brewing Co.

Ceria is the brainchild of Keith Villa, who learned beer-making in Belgium and came to the states to create Blue Moon for Coors. He’s been brewing up high quality beers – a Belgian witbier and an IPA, for you aficionados – in Arvada, Colo., with some success. One has THC and one has both THC and CBD. But his Grainwave beers cannot cross state lines.

So he’s hooked up with a co-packer in California that will make and distribute Grainwave beers in that state. And he's exploring similar relationships with copackers in Michigan and Illinois, which just legalized recreational marijuana in December and January respectively, and possibly in other states. State by state. It’s a slow go, but Villa has the patience. Anheuser-Busch and Constellation do not.

So for all the triple-digit growth projections that end in gazillion-dollar market sizes, we are no closer to national legalization in this country, and that looks like a requisite for you big companies. There is money to be made, but at least for the foreseeable future, this is a cottage industry. The market belongs to Small Food.

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