Organic Brands Need to be Prepared for a Massive Emerging Trend

CBD is set to become an ubiquitous ingredient.

The question that organic food companies may want to be asking themselves is: are we ready?

Cannabidiol, also known as CBD, is poised to hit the organic market in a very serious way, and brands do not want to be left behind. It is expected to become a $2.1 billion market by 2020.

Here are the two primary reasons why CBD will have a dramatic impact on the organic industry.

First, while the research is still in the early stages, it is believed that CBD, a non-psychoactive derivative of the hemp plant, could have incredible health benefits, such as reducing inflammation, treating diabetes, and helping with neurodegenerative disorders.

Second, the regulatory and legal roadblocks have either been removed or are on track to be removed.

It was widely believed that since cannabis is classified as a federally controlled substance and the federal also government regulates the term “organic”, CBD could not become USDA certified organic. Therefore, the organic industry did not have to pay much attention to this ingredient.

While this may have been true in the past, it is no longer the case.

Barlean’s will soon be unveiling a USDA certified organic CBD oil. This product has received organic certification from QAI. Additionally, Green Gorilla has released a USDA certified organic hemp and olive CBD oil.

A search of the USDA Organic Integrity Database shows that EcoCert has granted certification to two operations, Colorado Cultivars USA and Hammer Enterprises, for CBD products as well.

With QAI and EcoCert already certifying CBD, the next roadblock is the legal issue.

The Senate’s version of the 2018 farm bill contains language which would not only legalize industrial hemp farming but would legalize derivative products, including CBD. The combined bill will be sent to the conference committee, and this language has already been incorporated.

In the farm bill, H.R.2 – Agriculture Improvement Act of 2018, Section 297.A says:

“(1) HEMP.—The term ‘hemp’ means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.

The Senate and House must now merge these different bills, and it is expected that a final bill should reach President Trump’s desk by September 30th, the date when current farm programs expire. So, there will be a great deal of pressure on politicians to get it done before then.

One big question is whether this hemp farming language will survive the merging of the two bills. At this moment, there is no reason to believe that it will not, especially when you take a close look at which politicians are pushing for this piece of legislation.

The biggest advocate for the lifting of restrictions on industrial hemp farming, which is illegal without a permit because of the Controlled Substance Act of 1970, has been Senator Mitch McConnell (R-KY), arguably the most influential member of Congress. Senator McConnell is highly motivated to pass this piece of legislation because his home state is one of the largest growers of hemp in the country.

“I have never seen a politician so pro-hemp. If you would have told me five years ago the things that he would do, I never would have believed it,” said John Roulac, Founder of Nutiva and someone who has been on the front lines of fighting for legal hemp farming in the U.S. for decades.

THE IMPACT TO ORGANIC

Assuming we see a rapid surge in the demand for organic hemp CBD oil, this will have a very positive impact on the organic industry as a whole, as the need for organic hemp will grow quickly.

Aside from CBD, hemp can also be used for other purposes, such as in medicine or textiles, and the full legalization should benefit these categories as well.

One company that has been keeping a close eye on this hemp legislation in Congress is Patagonia.

“Hemp is a core fiber in our materials portfolio and has been a longstanding staple in key sportswear pieces for men’s, women’s and our kids’ line. There is a learning curve on what hemp varietals will grow best in different regions for fiber, and there is a lack of scaled infrastructure to process hemp fiber for textiles. But if hemp is legalized, there is definitely an increased opportunity to source domestic hemp for our line. We would always work to source hemp with the lowest possible impact, whether it is certified organic or eventually regenerative. Patagonia will continue to increase the amount of hemp we are using,” said Sarah Hayes, Director of Material Development at Patagonia.

Along with a much greater number of hemp-based products in the marketplace, the environment should see a real benefit as well.

Rodale Institute’s Industrial Hemp Research Project, which received $100,00 in funding from Dr. Bronner’s and contributions from Nutiva and others, is in the midst of a 4-year pilot program to demonstrate the crop’s benefits. Hemp could serve as a very effective cover crop because it could improve soil health and suppress weeds. Furthermore, it is a cash crop. This means that farmers could generate revenue from growing hemp, which would incentivize them to start planting it.

PUTTING PLANS IN PLACE

For organic companies, the key part of this whole story is to start getting prepared.

First, that means figuring out how CBD is going to fit into the product pipeline, and it’s important not to underestimate where CBD will show up in products. While beverages and chocolate may have been popular places to use CBD up to this point, people should expect it to see it everywhere.

For example, Earthshine Organics is now selling Jay’s CBD potato chips and Weetos CBD Honey & Oats Breakfast Cereal

The second part of the equation is working out the supply chain logistics — where and how to source organic CBD and in which form. We should expect organic CBD powder to arrive soon as well.

Lastly, companies need to get comfortable with the legal situation.

As of now, the 2014 farm bill allows industrial hemp to be grown for research purposes with regulation done on the state level. Non-psychoactive derivative products, such as CBD from approved farms in these states, can be sold in retail. However, enforcement agencies are not always clear about the law.

Case in point is what happened to Nikki Ostrower at NAO Wellness in NYC.

Despite the fact that she was following the law and selling non-psychoactive CBD, she almost lost everything in an undercover New York Police Department sting operation, where she faced a felony distribution charge of cannabis. Fortunately, the matter got resolved but it cost her dearly, from both a financial and emotional standpoint.

Even if hemp farming does become legal on the federal level, whether there will be blanket approval at retail outlets in all 50 states is a real question mark.

According to Lauren Rudick, a NYC-based attorney at Hiller, PC and Co-Founder of her firm’s cannabis law practice, “You have to understand each state’s position on CBD, and not every state has the same carve-out. States are still free to regulate this product, even if it becomes legal on the federal level.”

While the legal uncertainties may be somewhat ambiguous in the near-term, make no mistake about it. CBD will be an enormous ingredient in the organic industry.

“Get in early and get your strategy down because a lot of competitors are coming. CBD is a revolutionary nutraceutical and is much more than just a fly-by-night molecule” advises Erik Knutson, President of The American Trade Association of Cannabis and Hemp, and CEO of Keefbrands.

Have a great day! Max Goldberg, Founder