Milling & Baking News Corporate Profiles - 2019 - 56

INDUSTRY REVIEW: CANNABIS

Cannabis
Market for non-psychoactive, psychoactive products emerging quickly
ncertainty is a key characteristic of the market for food and beverage
products derived from cannabis. While there has been much discussion and hype around the category, investors have become wary as the
market for products formulated with the non-psychoactive and psychoactive
components of cannabis evolves in Canada and states in the United States
where its recreational use has been approved.
In August 2018, Constellation Brands, the maker of such alcoholic beverage
brands as Corona, Modelo, Robert Mondavi and Svedka Vodka, invested $4
billion to acquire a stake in Canopy Growth, one of Canada's largest cannabis
companies. On Oct. 3, 2019, when Constellation's financial results for the second quarter of fiscal 2020 were released, the company recognized a $757 million unrealized net gain from its investment in Canopy. While Canopy Growth's
price on the New York Stock Exchange reached a 52-week high of $52.74 per
share on April 30, the stock was trading below $22 per share in late October.
Constellation Brands is not the only company to feel the impact of uncertainty in the cannabis market. In early October, Green Dutchman Holdings, Toronto, another publicly traded cannabis company in Canada, told
investors changing market conditions made some forms of financing unavailable on acceptable terms. The company said if it was not available to
find additional financing it may have to delay the building of two additional
cultivation and processing facilities.
In the United States, products formulated with cannabinoids (C.B.D.),
a non-psychoactive compound derived from hemp, continue to reach the
market at a frenetic pace. This despite the Food and Drug Administration
stating unequivocally in June 2019 that it is not permissible to use C.B.D.
in food and dietary supplements. The agency is taking disciplinary actions
against manufacturers that have made unapproved or unsubstantiated
health claims for their C.B.D. products, claims the F.D.A. said may discourage consumers from seeking medical assistance and treatment.

Despite the uncertainty and volatility, the market research company
Euromonitor International said the global market for cannabis, both legal and
illegal, totals approximately $150 billion in 2019. The company is forecasting
the legal market will grow to 77% of total sales at $166 billion in 2025.
"Within the next decade, some form of cannabis will be a part of consumers'
daily routines, either as a functional ingredient in foods, beverages and beauty
or as a wellness mood enhancer in health," Euromonitor said in its October
2019 report "Here comes cannabis."
The company forecast global sales of C.B.D. in packaged foods will double
over the next two years as consumer awareness grows.
"As C.B.D. and T.H.C. (tetrahydrocannbinol, a psychoactive component of
cannabis) become more mainstream and manufacturers recognize their potential, the market will be dominated by outcome-based products, which will address a specific condition," Euromonitor said. "This will further blur the boundaries between food and consumer health.
"C.B.D. food products are currently concentrated in sweet categories. However, once markets expand and cannabinoids as an added ingredient become
ubiquitous, cannabis will become prevalent in food categories beyond this, such
as bakery products, savory snacks, pasta and soups."
In October 2018, Canada became one of the first developed countries to
legalize the recreational use of marijuana. Health Canada, one of the country's
leading regulatory bodies, delayed the sale of food and beverages formulated
with cannabis for one year. On Oct. 17, 2019, manufacturers interested in
selling marijuana infused edibles could begin notifying Health Canada of their
intentions. Then they had to wait 60 days before selling such products.
Regulators, public health officials and manufacturers in the United States
will be intently watching how the edible regulations in Canada unfold. Canada's experiences may provide a roadmap to how the market for cannabisderived edibles emerges south of the border. CP

CLEARING UP

cannabis definitions
CANNABIS

(Cannabis sativa L.)

Hemp and marijuana are two kinds
of cannabis.

CANNABIDIOL (C.B.D.)

HEMP

MARIJUANA

The U.S. Agriculture Improvement Act, signed into law in
December 2018, defined hemp as cannabis and derivatives of
cannabis that are less than 0.3% delta-9-tetrahydrocannabinol
(T.H.C.) on a dry weight basis. Hemp was removed from the
Controlled Substances Act, meaning it is no longer an illegal
substance under federal law.

Cannabis that is more than 0.3% T.H.C. on a
dry weight basis is viewed as marijuana, and
not hemp, under federal law.

It currently is illegal to put into interstate commerce a food, beverage or
dietary supplement that has C.B.D. in it because C.B.D., which is in the
cannabis plant, is the active ingredient in Epidiolex, a prescription drug,
according to the U.S. Food and Drug Administration. The agency is exploring
potential pathways that will allow various types of C.B.D. products to be
marketed lawfully.

56 \ November 2019

DELTA-9-TETRAHYDROCANNABINOL (T.H.C.)
A psychoactive compound in marijuana.

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