Cannabis is in. It’s achieved a level of trendiness that few, if any, ingredients ever have. While the legalities of cannabis use are beyond the scope of this blog and will probably change by the time it’s published, there’s no doubt that nutraceutical companies are pushing the envelope when it comes to these products. This spells big profits for these companies, but it also entails a lot of legal ramifications that vary widely across legal jurisdictions.
Navigating the cannabis industry can get a little complicated because it may include marijuana, hemp, and/or cannabidiol (CBD), which can be extracted from either of the former.
In the U.S., sales of CBD products are expected to soar to over $646 million by 2022, with the natural product and specialty market channel bringing in $184.3 million of that.1 Hemp is an equally trendy ingredient, though its use and the regulations around it are different.
In 1970, cannabis, both hemp and marijuana, was classified as a Schedule I federally controlled substance and as such couldn’t legally be grown in the U.S. However, the Hemp Farming Act of 2018 changed this. It is now legal to grow hemp, which paves the way for its use in more products, including nutraceuticals. Proponents of the act argue that it will stimulate the economy, create jobs, and revitalize farming communities. In fact, one estimate puts the hemp industry at $1.9 billion by 2022, a considerable increase over its $820 million valuation in 2017.2
This is important for nutraceutical companies in several ways. This trendy ingredient is already used in many supplements and functional foods and beverages. If nutraceutical companies begin buying hemp grown in the U.S., they will have greater control over their supply chain and qualifying suppliers will become easier. Those companies that want to make an even bigger investment in hemp can grow it themselves, thereby controlling the entire supply chain.
The ingredient really expected to boom in 2019 is CBD. Nutraceutical companies as well as food and beverage companies are looking to include this ingredient in their products. It’s expected to make a big impact on the functional food industry, and supplement companies have already started incorporating it into their formulas. The numbers are encouraging, and it might seem like CBD is a goldmine, however, there are a lot of risks along with benefits for companies to consider.
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While hemp might be a valid ingredient for some foods and dietary supplements, CBD, at least in the U.S., most definitely is not.3 In 2018, the U.S. Food and Drug Administration (FDA) approved a drug containing CBD to treat seizures, and other drugs containing CBD are undergoing clinical trials. Since the FDA has approved the ingredient for use in a drug product, it falls outside of the definition of a dietary supplement. And since these products and the many conditions that they’re supposed to be able to treat are at the top of the FDA’s priority list, including CBD in a dietary supplement is a major risk. The agency has stated that it takes multiple factors into consideration before deciding whether or not to initiate an enforcement action against companies marketing these products. However, the plethora of warning letters issued to companies selling supplements containing CBD should serve as a cautionary tale.
The industry has urged the FDA to reconsider this policy so that CBD can be legally included, but this hasn’t happened yet. The retirement of commissioner Scott Gottlieb could further delay any action and Gottlieb himself suggested that a faster resolution might come through Congress. Any new regulations via the FDA could take over three years to implement and with the change in leadership, this could take even longer.
Businesses interested in using the whole plant as opposed to an extract can find success in states that have legalized marijuana for recreational use. Markets in these states have seen a dramatic increase in tasty treats featuring the drug — known as edibles. Beyond the cliché special brownie, edibles now include beverages, cookies, candy and even dried meat. Nutraceutical companies that have ventured into the functional foods space can take things one step further if they want to cash in on this highly popular trend. The biggest drawbacks here are the strict regulations and the limited market. Because the U.S. hasn’t nationally legalized marijuana, interstate commerce is illegal. Those states that have legalized it have also put in place strict regulations about how much CBD and THC can be included in the product, what the labelling can say and what kinds of foods can be used. For example, foods that might be appealing to children, including gummies and candy, are off the table in some states.
Due to the limited nature of the market, many small businesses have cropped up that specialize only in cannabis products. Businesses in this category are faced with a unique problem as they face strict regulatory and quality requirements that they must meet with relatively few resources. Many of these small businesses flourish because they’ve adapted automated software solutions. An electronic quality management system (QMS) puts a cannabis company in an ideal position to manage all of its processes in a connected, efficient way. And with the right vendor, a QMS doesn’t even have to cost that much, making this an investment well worth making to get in on a multi-million-dollar market.