Cannabis looms as a disruptive threat to big food companies that so far have been largely dismissive of the potential impact the substance could soon have on their industry, the head of marijuana producer Canopy Growth said in an interview.
Bruce Linton, the co-CEO of Canopy Growth, said cannabis has already attracted the attention of major beer and tobacco companies interested in the potential sales the ingredient could generate as more localities legalize sales and consumer opposition to the substance abates. Still, Linton said Canopy Growth, which received a $4 billion investment by Cornona owner Constellation Brands last August, hasn't been approached by any of the large U.S. food manufacturers.
"Right now, we’re not disrupting them. There is zero disruption, but once you start disrupting people they get a little scared about it,” Linton told Food Dive on the sidelines of the annual Consumer Analyst Group of New York conference in Florida. "Everybody from alcohol is looking at this. Everybody from tobacco is looking at this. I bet the food guys will say, 'Oh, that regulated hemp stuff does this or that ingredient actually takes 6% market share ... and we’re losing out. ' "
Marijuana is legal in some form in 33 states and Washington, D.C., with more expected to follow suit. Some companies are already infusing coffee, cocktails and other products with CBD — one of the more than 100 chemicals found in cannabis — despite murky federal restrictions in place. Use of cannabis in all forms has been legal in Canada since mid-October, and the northern neighbor has been considered a bellwether for what may happen if full legalization comes to the United States.
Scott Gottlieb, the commissioner of the Food and Drug Administration, said last month the agency is considering "regulatory pathways" to legalize the sale of cannabis compounds in food and beverages following the recent farm bill passage, potentially lifting a major hurdle for manufactures looking to sell these products across state lines. Such a move would not only be a boon to existing companies, but make the segment more enticing to new businesses and investors eager to cash in on a larger market.
"We recognize the potential opportunities that cannabis or cannabis-derived compounds could offer and acknowledge the significant interest in these possibilities," Gottlieb said in a statement. "We're committed to pursuing an efficient regulatory framework for allowing product developers that meet the requirements under our authorities to lawfully market these types of products."
Alcohol has long been touted as vulnerable to the growing legalization of cannabis, with the thinking that people may turn to products containing the ingredient instead of beer or wine to relax.
In addition to Constellation, Molson Coors Brewing, which has a controlling interest in HEXO, formerly known as Hydropothecary, is working to develop non-alcoholic, cannabis-infused beverages for the Canadian market. In Decemer, Tilray entered into a joint venture worth $100 million with AB InBev to develop non-alcoholic drinks with CBD and THC. Even Coca-Cola has reportedly looked into the space, but CEO James Quincey has downplayed getting into it anytime soon.
“The reason I pushed beverages for so long and for so hard is it is socially normal to consume an intoxicant if it came from a bottle or can,” said Linton, while sipping on a Corona. “It was the lowest hurdle."
After beverages, Linton said chewables and chocolates — two areas where the Canadian company is developing cannabis-laced products — could be the next areas to gain widespread popularity with food manufactures and consumers. A report on the cannabis edibles market from BDS Analytics said spending is expected to grow to $4.1 billion by 2022 from $1.5 billion in 2018. A study by A.T. Kearney in 2018 found four in 10 U.S. consumers said they’d be willing to try an edible. Pure hemp edible products — which don't contain psychoactive compounds — are also taking off. Tilray, another cannabis company, just announced its acquisition of hemp food manufacturer Manitoba Harvest this morning.
If regulators ease restrictions on cannabis , more venues like restaurants and stores will inevitably start selling cannabis food or beverage products directly to the consumer. As a result, Linton said, companies that once were reluctant to enter the space will have little choice but to join the fray.
”There is the potential to create great things that are to a category to what (energy drink) Red Bull was to cola,” Linton said. “The disruption is, I would say, categorywide. It starts with beverages but where does it finish? I don’t know.”