- Socati is introducing two new CBD ingredients, an oil product and a water-soluble powdered one. The company also announced that it can customize hemp-derived ingredients for the CPG market.
- The Oregon-based company said both ingredients have a broad-spectrum profile. They contain 80% cannabidiol (CBD), 4% of the minor cannabinoid cannabigerol (CBG) and non-detectable levels of THC, the psychoactive chemical in cannabis.
- Socati CEO Josh Epstein said in a release the company will be rolling out additional ingredients in the coming months, including some with customizable levels of other hemp compounds.
A recent Rabobank report found that CBD is entering food and beverage products at an "astounding pace," and that these new ingredients could push more companies into the space. Epstein said in the release the company's proprietary technology "creates hemp extracts that behave just like any other food ingredient." This would make CBD more attractive to manufacturers looking to use the ingredient to meet the increased demand.
Socati seems well-positioned to contribute to the growing CBD food and beverage market. It has raised more than $40 million from private investors. It recently acquired a 22,000-square-foot food-grade production facility following its purchase of Blue Marble Biomaterials in Montana. The purchase allowed Socati to increase production of full-spectrum hemp extracts and access Blue Marble's expertise in formulations.
Socati's new products could be a boon to its bottom line since CPG companies adding CBD to their food and beverage products could find customizable ingredients helpful in their recipes. Having them available in both oil and powdered forms expands applicability to a range of products — including beer, coffee, cocktails, jelly beans and potentially many others. CBD oil, powders and seeds are already being used to infuse beverages such as iced tea, and they are being added to a wide variety of other foods, including ice cream, salads and milk.
“Consumers are demanding increasingly personalized products, and manufacturers are looking for ways to respond to that demand,” Josh Epstein, Socati's CEO, said in a statement. “Socati’s proprietary technology creates hemp extracts that behave just like any other food ingredient, allowing CPG manufacturers address these demands.”
As a result, the market's revenue potential is quite promising. Spending on all cannabinoids, which also includes marijuana and its psychoactive THC derivative, is projected to grow to $4.1 billion by 2022 from $1.5 billion last year, according to a report from BDS Analystics.
But Socati won't be alone in targeting this growing space. Prospective competitors also are eyeing this lucrative segment. China-based Layn Corp. recently expanded into CBD with a $60 million investment, including a U.S. factory to process the ingredient. The company told Food Dive it will be able to process at least 5,000 tons of hemp biomass annually, resulting in 160 tons of high-purity CBD and 290 tons of full-spectrum oil per year.
A major obstacle for all companies looking to launch CBD ingredients is the murky regulatory climate. Although states are increasingly legalizing the substance, the Food and Drug Administration hasn't approved CBD for nationwide use in foods and beverages. Hemp and its derivatives are no longer classified as controlled substances since the 2018 Farm Bill, but the FDA's position has so far been that cannabis and CBD can't be legally sold in conventional foods or dietary supplements.
The FDA also raised questions about the safety of CBD and THC. At a public hearing on cannabis and CBD in May, acting FDA Commissioner Ned Sharpless said "critical questions remain about the safety of their widespread use in foods and dietary supplements." Experts have said the agency could take several years before it issues regulatory guidelines for CBD products so there is a risk to companies that are getting into the space now.
Regardless, more ingredients and products containing CBD are being introduced into the marketplace as individual states come up with their own regulations for cannabis-infused products and consumer demand continues to rise. If Socati can provide high-quality ingredients in sufficient quantities — and with non-detectable THC levels — the company could wind up in a favorable position in this increasingly competitive sector as regulatory clarity emerges.