Despite regulatory complications hanging in the balance, cannabis has been entering into food and beverage at a rapid pace. Investments are pouring in, companies are making promises to launch new products and consumer interest continues to spike.
Now C-suite level executives in the food and beverage industry are getting in on the action and going green.
From PepsiCo and Kellogg to Mars Wrigley and MillerCoors, top food and beverage veterans are increasingly changing jobs and making a move into the cannabis space.
In July, Kellogg’s former chief financial officer Fareed Khan joined Surterra Wellness as CFO. Several former leaders from Chipotle and food manufacturing firms also moved to CBD company NectarTek last month. These names add to the growing list of leaders in the industry making the exodus to cannabis.
But cannabis isn't federally legal in any form. Although the 2018 Farm Bill legalized hemp cultivation and an increasing number of states are making their own laws about cannabis legalization, the substance still remains a regulatory gray area. So why would these big executives want to jump into the cannabis space now?
Recruiters who lure these veterans into the space told Food Dive that more have been open to the idea of making a change as states have increasingly legalized cannabis. Thirty-three states and Washington, D.C. currently have passed laws broadly legalizing marijuana in some form.
"Executives with an entrepreneurial spirit who are eager to roll up their sleeves are recognizing that this is a once-in-a-lifetime opportunity to be part of a completely new industry," Josh Wand, founder and CEO of recruiting firm ForceBrands, told Food Dive. "We’re also seeing cannabis companies entice talent with very generous compensation and benefits packages."
Along with the financial potential, executives who have made the move told Food Dive they want to get in on the ground of an industry that could be the next big thing.
Big names lead the way
William "Beau" Wrigley, Jr. was heir and CEO of legacy confectioner Wrigley’s, where he expanded the company in 2004 by buying Altoids and Life Savers from Kraft Foods for $1.5 billion. In 2008, the company was sold to Mars for $23 billion. Now he has made the move into cannabis and thinks he can replicate the success of his family's chewing gum empire.
Last year, Wrigley was named CEO of Surterra Wellness, a developer and retailer of cannabis wellness products. The company has been successful in both recruiting employees and raising money. It brought in executives from Patrón Spirits and Kellogg to join its C-suite team, and recently closed a $100 million funding round to fuel its U.S. and international expansion. He said he is using his experience growing Wrigley to build up Surterra in a similar way.
"I've had big company public experience, branded experience, global experience, obviously running Wrigley, and that's where I saw there's absolutely the potential for this company to go," Wrigley told Food Dive. "I do believe we're in a sense creating another Wrigley company."
But Wrigley is far from alone in his pursuit.
Tim Spong, former executive director of supply chain and operations services for Chipotle Mexican Grill, was recently named CEO of NectarTek, a new high-volume hemp extraction company producing CBD. Spong — who served as an outside counsel to Chipotle when it started in the '90s and has been involved with the chain in various positions since — watched the fast casual Mexican restaurant grow. He wants to see the same for this CBD company.
"It is exciting and it is fun to do something new," he told Food Dive. "The opportunity is vast. And I also saw Chipotle started with one restaurant and became 2,500. So I had a front row seat and saw that it is possible to start something and turn it into something very successful. Those are the factors that really led me to say 'Why not?'"
Some are even leaving the traditional food and beverage industry to launch their own businesses. Keith Villa, a MolsonCoors veteran and former brewmaster behind Blue Moon, started his own company in the space with his wife. In December, his company Ceria Brewing Co. launched Grainwave — a new line of THC-infused, zero-alcohol beer — in Colorado. Villa said he has seen sales grow monthly, and the company is planning to soon go into the market in California and Nevada.
"It just seems like the perfect time to get into a category in its infancy and really try to apply all of your knowledge from another category to see if you can create something successful in this whole new category," Villa told Food Dive.
Recruiting to the cannabis space
To accommodate the growth in the space, more food and beverage recruiting companies have been adding cannabis businesses to their repertoire.
Earlier this year, ForceBrands — a top recruiting firm for the consumer products industry — launched HerbForce, a sector of its business offering executive search services, board of director assembly and a digital job board for the cannabis sector. Wand said this division was a natural evolution, especially since cannabis is used as an ingredient in food, beverage and beauty products. The firm's other divisions include BevForce, FoodForce and BeautyForce.
Wand said it's a natural fit for food and beverage executives to make that move. He pointed to CBD company Charlotte's Web, which sells cannabis dietary supplements. It recently brought on former Coca-Cola executive Eugenio Mendez as chief growth officer and announced Deanie Elsner, a former executive at Kellogg and Kraft, as its new CEO.
"There are a lot of synergies between traditional CPG companies and cannabis businesses and the talent they require to succeed," Wand said.
"It just seems like the perfect time to get into a category in its infancy, and really try to apply all of your knowledge from another category to see if you can create something successful in this whole new category."
Kara Bradford, CEO of Viridian Staffing, which was the first professional recruiting and HR firm to focus on cannabis, told Food Dive a lot has changed in the six years since she started recruiting in this space.
"When I first started reaching out to individuals from food and beverage — many of whom I had recruited to other companies in the past — there was mixed reactions," she said. "Some of them were like, 'Oh, that is really interesting,’ and others were like, 'Kara, you’re going to ruin your career. What are you doing?' "
But that has started to change and more executives are willing to move to greener pastures. On one given day, Bradford said she was recruiting for two open CFO positions, and 80% of the people she spoke to were from food and beverage looking to come over into the cannabis industry.
"It is a very popular area to look to transition," she said.
Laurie Hyllberg, vice president of Kinsa Group, which recruits executives in the food, beverage and cannabis space, told Food Dive her company started to see cannabis businesses interested in using Kinsa for recruiting about three years ago. Since then, she said, Kinsa has added more than 75 cannabis companies to its network.
So far, Hyllberg said, cannabis companies have been the ones reaching out to food and beverage executives to recruit, rather than the other way around.
"What we've found is the cannabis companies need food and beverage professionals to come and help them set up production when they go to large scale," she said. "They need food and beverage companies that know how to bottle a product if it’s a beverage. It doesn’t matter that the ingredients are a little different in the product, what matters is how to run that process and how to get that into the supply chain now as they are going more than just very local."
Although a lot of their experience carries over, it can be challenging for food and beverage executives to learn the ins and outs of a new space.
Villa said moving into the cannabis category was a "steep learning curve" at first. Alcohol is highly regulated but fully legal, so there are many different channels of distribution across the U.S. Cannabis is different because it is federally illegal. In the states where it is legal, there are regulations.
But once they have adjusted to the differences and understood regulations, Villa said the expertise of executives from large food and beverage brands is unquestionably helpful in this space.
"You've got experts — men and women who are just very seasoned experts on the sales side and the marketing side, whether you're talking food or beverage — and the same skills are needed in the cannabis side," Villa said.
Why would execs take the risk?
The cannabis space comes with risks since the substance is still federally illegal. Although the U.S. Food and Drug Administration recently held its first public hearing on cannabis and CBD, experts and analysts still say that it could still be a yearslong process to establish a legal path to market for food and beverage products with the cannabis compound.
"There are real risks associated with [THC and CBD] and critical questions remain about the safety of their widespread use in foods and dietary supplements," Ned Sharpless, FDA's acting commissioner, said at the hearing earlier this year. "While we have seen an explosion of interest in products containing CBD, there is still much that we don't know."
"What we've found is the cannabis companies need food and beverage professionals to come and help them set up production when they go to large scale."
Vice president, Kinsa Group
The FDA sent warning letters to some CBD companies it said were unproven illegal health claims about products. Although the FDA's power to shut down cannabis companies is a great risk, the business has rewards as well.
Most companies getting involved in cannabis now are start-ups. Similar to most start-up opportunities, recruiters said these companies are willing to offer executives a piece of stock or equity in the company that could eventually be lucrative.
"I don't know if it's necessarily coming to the cannabis industry that's so attractive or maybe coming to a startup that's attractive to get that equity," Bradford said. "It is a new frontier. People are excited about it. There is an opportunity to advance and grow quickly."
Wand agreed, saying there is potential for a big financial upside in cannabis, and executives from food and beverage realize their skill sets are desirable and transferable.
"When it comes to compensation, the green rush is real," Wand said.
'High expectations' for growth
Last year set a record of $1.2 billion of venture capitalist investment in the U.S. toward cannabis startups. This year already crossed that mark by nearly half a billion dollars, according to July data from Pitchbook.
Hyllberg said interest in the space is only going to continue to grow.
"There are some companies that are just waiting in the wings for the FDA to make some decisions... and then I think it will really explode because it is companies that are poised for that next stage of growth in the industry, and they want to be ready by hiring the right professionals that can scale their business, and those people that can help them scale are ones that have done it before with other food and beverage products," Hyllberg said.
Wrigley said that getting in now gives him a chance to shape the future. He said Surterra is working with governments, states and other countries to help mold the space in the proper way and allow companies to prepare for the expected growth.
"When it comes to compensation, the green rush is real."
"I have high expectations for the future. It's so explosive," he said. "There's so many opportunities that I just hope the growth is tempered enough that companies like mine can handle it because we want to do things in the right way."
Villa is also optimistic about growth. He said the cannabis industry is moving ahead quickly and almost everybody in his network of colleagues believes there will be federal legalization of the substance by 2022.
"And when that happens, that's going to be the kickstart that really gets this industry going. I believe we'll see cannabis in one form or another just permeate our American society," Villa said. "Once the United States legalizes it, that will be the kickstart that makes global legalization take place and that really makes this a massive, gigantic category in the future."