Trendy Hemp Compound CBD Set for Big Boost From U.S. Farm Bill

(Bloomberg) -- The status of cannabis component CBD as a trendy new superfood ingredient may be cemented this week by U.S. President Donald Trump.

The $867 billion farm bill, headed to the president for his signature, would remove industrial hemp from a list of federally controlled substances, a major step as weed culture pushes into the U.S. mainstream. That would create a legal market for CBD that could be worth more than $20 billion by 2022, according to research firm Brightfield Group.

“This is nothing short of seismic for the cannabis industry,” said Kristen Nichols, editor of the trade publication Hemp Industry Daily. “All the obstacles that cannabis faces stem from it being federally illegal.”

Senate Majority Leader Mitch McConnell, a Kentucky Republican, championed the hemp provision, aiming to boost farmers in his home state who are looking for another cash crop as tobacco consumption wanes. Congress passed the farm bill last week, and the president’s signature would legalize hemp-derived CBD, a chemical compound that doesn’t get you high but whose proponents say can be used for relaxation and to treat insomnia and inflammation.

CBD, short for cannabidiol, is the lesser known cousin of THC, the psychoactive component in marijuana. Found in pot and hemp, CBD is also the key ingredient in Epidiolex, a seizure medication that is the first cannabis-derived drug approved by the FDA.

Cocktails, Creams

The easing of marijuana restrictions in several states and Canada has put CBD on the map in recent months, with the suddenly buzzy ingredient, virtually unheard of until fairly recently, showing up in drinks, beauty products and tinctures. Around New York, cocktails and baked goods with CBD have been appearing on menus to draw in customers curious about cannabis.

Until now, regulations around CBD have been murky. The 2014 farm bill allowed industrial hemp production in some states. Still, hemp, which can be difficult to distinguish from marijuana, has been considered a federally controlled substance, a major obstacle for large companies seeking to use the ingredient in its products.

The formal signing of the current legislation would change that, potentially giving companies like Coca-Cola Co. a legal way to experiment with cannabis in the U.S. Next year alone, sales of hemp-derived CBD in the U.S. are expected to rise almost 10-fold to $5.7 billion, according to Brightfield.

Coke has specifically said it’s interested in CBD as a potential ingredient for “functional wellness” drinks, a corner of the beverage industry that has drawn increased focus as consumers turn away from sugar. As it stands, hemp oil commands a premium price: The Colorado cannabis brand Toast sells a one-ounce bottle with 500 milligrams of CBD at a suggested retail price of $100.

Still, it’s not clear how CBD’s use as an ingredient will be regulated by federal and state authorities and it could be months before details are ironed out. And while drinks and face cream with hemp-derived CBD will start hitting shelves in short order, larger public companies will most likely wait until the regulatory dust settles, Nichols said.

Latest Superfood

But that won’t mean a dearth of CBD products. There are scores of companies ready to flood the market with what’s viewed as the latest superfood, akin to kale or acai berries. Azuca, a New York-based company that makes CBD chocolate, simple syrup and sugar plans to sell its products wholesale to bars and restaurants around New York. They’re also pitching natural food stores.

The company was co-founded by Ron Silver, the owner of Bubby’s restaurants in Manhattan, where CBD drinks have been on the menu for the past few months. Kim Rael, co-founder and CEO of the company, expects the CBD market to get “very noisy” in coming months. And while it could be more than a year before there’s regulatory clarity, it’s only a matter of time before cannabis products are on the shelves of national retailers like Target Corp. and Walmart Inc., she said.

“It’s just a question of when,” Rael said.

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson, Mark Schoifet

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