- International Flavors & Fragrances and Neptune Wellness Solutions are collaborating to develop hemp-derived CBD and other plant-based consumer products for the U.S. market.
- Michael Cammarata, CEO of Quebec-based Neptune, said in a statement that IFF's formulation and technological expertise will benefit his company by accelerating market penetration in the U.S. CBD market.
- Neptune is licensed by Health Canada to process cannabis at a 50,000-square foot facility in Sherbooke, Quebec. It also has a 24,000-square-foot facility in North Carolina from its recent acquisition of SugarLeaf Labs. SugarLeaf uses cold ethanol processing to produce full- and broad-spectrum hemp extracts.
This deal could be a valuable opportunity for Neptune — which focuses on scientific and technological expertise for global cannabis and hemp markets — to partner with a U.S. ingredients company. Since IFF is now the No. 2 company for flavors and fragrances, the collaboration could bring Neptune a much wider U.S. customer base and potentially larger global footprint.
IFF recently reorganized, with one of its three new divisions focused on nutrition and ingredients. Joining with Neptune could help augment this restructuring by giving the U.S. firm expanded and diversified access to Canadian markets, where Neptune has established relationships through its health and wellness products.
The partnership is also likely to leverage Neptune's new state-of-the-art U.S. supply chain, which it touted when it acquired SugarLeaf earlier this year. This could position the Canadian firm to better meet its goal of becoming a global leader in extraction, purification and formulation of value-added cannabis and natural health products.
Exactly what those products will be isn't clear yet, although Neptune said they will be plant-based, including hemp-derived CBD products. This could mean a mix of oils, edibles and beverages — on-trend items increasingly showing up in the marketplace. Hemp ingredients such as CBD oil, powders and seeds could be used to infuse beverages such as iced tea and added to a wide variety of other foods, including sparkling water, ice cream and salads. Neptune and IFF could partner here as well, although some items might be outside their current areas of expertise.
Such infused products are debuting even though the U.S. Food and Drug Administration's position is that CBD can't legally be sold in conventional foods. This stance isn't likely to change unless the agency moves forward with interim regulations or Congress steps in and takes action. Some members of Congress have recently pressed the FDA on that very point, although it's uncertain whether it will have any practical effect in the near future.
Canada legalized recreational marijuana about a year ago and will permit some cannabis-infused products — edibles, beverages, topicals and extracts — to be sold in stores in December.
Despite the uncertain regulatory scene in the U.S., other companies are forging ahead with developing CBD ingredients. Oregon-based Socati recently launched an oil product and a water-soluble powdered one derived from CBD, and said it can customize hemp ingredients for the CPG market. Layn, previously known for sweeteners, recently expanded into CBD with a $60 million investment, including a U.S. factory to process the ingredient.
Ingredients companies could have a lot to gain from playing in this promising market. According to Nielsen figures, nationwide sales of hemp-derived CBD products could hit $6 billion by 2025. For Neptune, the new partnership with IFF could give it a valuable leg up in what is becoming an increasingly crowded and competitive segment.