Want to make a product based on an ingredient that is either ambiguously legal or technically illegal, often can’t be sourced or distributed across state lines, with undependable availability and quality, that’s notoriously tricky to process?
Welcome to ingestible cannabis.
As legal cannabis becomes less of a novelty, the market for cannabis-based foods and beverages continues to grow. Estimates vary, but according to Research & Markets, the legal cannabis market is poised to soar from $14.4 billion in 2019 to $147.5 billion by 2027. The great majority of that will be smoked, but a small yet significant chunk will be for ingestibles: foods and beverages containing a cannabis component.
As the market grows, it’s understandable that processors of all kinds and sizes will want to get in on it. But it’s one of the trickiest markets to enter, given the regulatory landscape, the supply situation and other factors.
The most fundamental distinction is between the two components of cannabis used for ingestible products (as well as topical ones like health and beauty aids). Those are tetrahydrocannabinol (THC) and cannabidiol (CBD). THC is the psychoactive component that produces a high; CBD is non-intoxicating but, at least according to its fans, eases pain and promotes relaxation.
The difference is significant from a distribution standpoint. THC in all its forms, whether actual marijuana or ingestible products, is illegal under federal law, and remains a Schedule 1 controlled substance alongside heroin. It is legal for recreational use in 15 states and for medical use in 33. But because of the federal situation, nothing containing THC can be transported across state lines. That means that it must be sourced, processed and distributed entirely within the borders of one state.
“If you’re in Colorado, you have to have a [test] lab in Colorado, you have to manufacture in Colorado,” says David Miles, executive vice president of MicroThermics Inc., a supplier of heat processing equipment. “The fact that Colorado may border on a state where cannabis is also legal is completely irrelevant. You still can’t bring it across state lines.”
The situation with CBD is more ambiguous. If it’s derived from marijuana, it has the same legal status as THC. If it’s derived from hemp – a crop that was made legal by the 2018 Farm Bill – it’s legal to distribute, but it technically is not approved under current FDA regulations for use in ingestible products. The problem is that the FDA officially views CBD as medicine, not food, meaning that it can’t be treated as a simple component or ingredient.
Nonetheless, ingestible products containing CBD abound online – the major sales channel at this point, says Kelly Nielsen, vice president of insights and analytics for BDSA, a consultancy that specializes in the cannabis market. These are mostly smaller organizations for whom a run-in with the FDA would be less risky than for large CPG manufacturers.
“Ultimately, people are making a bet that the FDA is not going to come after them in a severe way,” Nielsen says. FDA enforcement has been lax or acceptable for smaller organizations, but the ambiguous situation accounts for why mainstream, established consumer packaged goods companies are avoiding this market and potential severe penalties, she says.
The unfavorable, or at best ambiguous, legal situation accounts for a great deal of the difficulty involved in entering and operating in the cannabis market. Straightening it out is a priority of the National Cannabis Industry Assn.
“Variance in state regulations is certainly a problem,” says media relations director Morgan Fox, "but the primary barriers to pass production and standardization are directly related to the continued federal illegality of cannabis: lack of interstate commerce or federal guidelines.”
Practically speaking, the situation means that those who want to use a contract manufacturer – and for many seeking entry into the market, it’s the only option – have to find one in whatever states they want to do business in. Even in a big state like California, that can be a problem, as Garden Society found out.
Garden Society markets high-end chocolates infused with THC, as well as pre-rolled cannabis intended for smoking, in California. It doesn’t reveal sales, but 2020 revenue was almost double 2019’s.
Garden Society produces smokeable products itself, and even does some for other companies on a contract basis. But it contracts out the chocolate manufacturing, and finding the right partner wasn’t easy, says Karli Warner, co-founder and chief marketing officer.
“When the regulated market came into play, we were all starting from the same point,” Warner says. There were manufacturers who had been working with cannabis since California legalized medical marijuana in 1996, but they were few and far between, and they had to get recertified for recreational cannabis.
“Then we had to find people with the right skills and equipment to make our specific chocolate and then supply them with whatever equipment they needed,” Warner says. “So it’s not like in traditional CPG or food manufacturing, where you’ve got a wide breadth of different expertise and different companies with different machines. It was slim pickings, I’ll call it.”
Garden Society had to buy a used chocolate temperer with depositing head to install at the plant of its contract manufacturer. Then it ended up leaving that manufacturer for another that already had its own chocolate equipment, so now the temperer is at the company’s headquarters, where it might be used for research.
Garden Society sources the raw cannabis itself and supplies it to ingredient manufacturers who distill it into oil with low-pressure extraction. It then supplies this oil to the contractor who makes the chocolate products. Consistency, in both quantity and quality, is a major challenge, Warner says.
“There have been recipes where we’ve been like, ‘Oh, this is a fantastic recipe, that could be a great product,’ but an ingredient didn’t pass testing, or we couldn’t source the materials to the scale-up that we needed,” she says. “You have to find someone who can make chocolate, who can make it at scale, and at the price point that you need for the market.”
A big part of the problem is that cannabis is inherently difficult to work with. “Cannabis is hydrophobic, which means it’s oil-loving,” Warner says. “So when we’re creating water-soluble recipes, that makes it really challenging. And due to the nature of cannabis, you can’t do product formula in just any facility.”
But doing your own processing presents its own challenges, as Atlas Edibles found. The California-based company markets bars, granola clusters and dry drink mixes, all with THC and/or CBD, in more than 150 California dispensaries.
One big challenge is the highly viscous nature of THC oil. For the solid edibles, it can be blended with a lipid base like caramel. But the dry mixes have to be water-soluble. Working with a food chemist, Atlas developed a proprietary method of infusing THC into sugar for a completely soluble ingredient.
It’s all part of giving each portion of an edible a consistent dose, says Atlas CEO Ezra Malmuth: “It’s one thing to make a delicious product, but we want to make sure a consumer can have the same consistent experience every time they buy our product.”
Do it yourself
The licensing and regulatory situation, especially the inability to cross state lines with ingredients or finished product, accounts for much of why scale-up is such a challenge. One solution is for processors to do as much of their own scale-up as possible.
MicroThermics markets a modular miniature thermal-processing system that can replicate anything having to do with continuous-flow thermal processing, including pasteurization, aseptic processing, hot-filling and extended shelf life products. Miles says it’s a great way to test, or even produce on a small scale, cannabis products that require thermal treatment.
It can help processors settle such questions as whether to homogenize product before heaters upstream or coolers downstream. Such questions often come up in cannabis formulations, since CBD and THC almost always come in oil form and must be emulsified.
“They say oil and water don’t mix, but it does if you get it to the right temperature and put enough pressure on it,” Miles says.
Achieving and maintaining proper emulsions is a major concern in cannabis processing, especially when it comes to scale-up, says Ken Langhorn, vice president of sales at Ross Mixers.
“Scale-up is a common processing challenge, especially for products developed using kitchen mixers and blenders,” Langhorn says. “A reliable and scalable R&D mixer is often one of the most crucial tools that a company first acquires when considering to develop cannabis-infused products. A laboratory high-shear mixer, for instance, is very convenient for making small batches of emulsions and solutions in standard beakers and containers up to 4 gallons at a time.”
It’s often a challenge for equipment manufacturers to adapt their equipment to cannabis applications. Early cannabis processors were worried that conventional handling equipment would damage the product, says Josh Baker, Western regional sales representative for Yamato Corp. But many of them come around when they realize that hand packing can only fill about two packages a minute and is highly labor intensive, while a line with Yamato equipment can be staffed by one to three employees.
Like any product that comes in irregularly shaped pieces, cannabis is a candidate for combination weigh filling, which Yamato can accommodate, Baker says. “Our cannabis scale was designed specifically for cannabis flower and is configured for delicate handling. As the use of combination scales has become more commonplace, there have been less concerns regarding product damage.”
Material handling is another challenge, according to Karl Seidel, marketing director of Cablevey Conveyors. Cannabis in its raw form is both expensive and fragile, meaning that it’s easy to make mistakes in a situation where there’s little margin for error.
“We have worked with some experts in this field who have learned the hard way how difficult it is to work with these materials,” Seidel says. Before processing, raw cannabis has resin that is both sticky and easily damaged by heat – and protecting it from damage is vital, since the resin has the CBD and THC. After it emerges from the centrifuges that spin out the CBD and THC oil, it’s wet and messy. Cablevey’s tube-and-disk setup is advantageous for both conditions.
Miles says that the cannabis entrepreneurs he deals with fall into two categories: those with a background in food science and those without. The latter, he says, would do well to get expert help.
“They have a very difficult time because they don’t have any resources or any history or any education in it, and they’re kind of trying to wing it,” he says. “The companies I’ve seen that have gone out and hired a food scientist have done much better.”