Citing FDA Regulatory Headwinds, Molson Coors, Others Exit U.S. CBD Business

Molson Coors will unwind the U.S. portion of its joint venture with Hexo at the end of this year, the beer giant announced. By shutting down Truss USA, Molson Coors will exit the CBD beverage business in the U.S., as of December 31. They follow numerous companies in the hemp and CBD space to either pivot or exit entirely in recent times.

The decision cited the continued inaction of federal lawmakers to reform cannabis laws in the U.S. In the company’s estimation, there remains no near-term pathway to federal legalization, which in turn has created an atmosphere of uncertainty and fear in which retailers and distributors hesitate to take on CBD brands, complicating distribution, and the path to profitability.

In July the House Agriculture Committee held hearings on Hemp derived CBD and regulatory issues.??Ranking Member Rep. Jim Baird (R-IN) stated, “I’d like to add is that the FDA hasn’t really had any kind of regulatory framework for hemp-derived CBD”.?Ranking Member Glenn Thompson (R-PA) additionally bemoaned that the “FDA is missing in action”.??While great members recognized it, it is clear Congress’s inability to take action and to hold the FDA accountable has created an untenable situation for the hemp CBD industry to be successful.

“Not every project or innovation will meet our ambitions,” said Pete Marino, president of emerging growth at Molson Coors. “What’s important is that we learn from each and build capabilities that will serve us well into the future. The key for us is to go big behind what’s working and smartly pivot out of what isn’t working from a scale standpoint, like CBD beverages.”

Molson Coors and Hexo launched Truss in 2018 to develop cannabis drinks for the Canadian market. In 2020 it debuted its full lineup of brands which includes Veryvell, House of Terpenes, Little Victory, Mollo, Bedfellows Liquid Arts, and MXG. The company has continued to expand its portfolio, capitalizing on trends like the seltzer craze when Little Victory, for instance, extended with three sparkling fruit-flavored seltzers in June.

Truss USA was formed in 2020 to pursue CBD opportunities stateside. After launching its Veryvell CBD line of sparkling waters in Colorado in early 2021, it expanded distribution to a further 17 states in October of last year.

In 2021, Hexo’s U.S. subsidiary?acquired a production facility?in Fort Collins, Colorado, to create CBD drinks for the U.S. Truss joint venture.?Hexo said Truss products were “now present across select grocery markets within Colorado” and 25 other states. Hexo said it stopped trying to sell the Fort Collins facility during its fourth quarter.

Smoke Wallin, who co-founded and led Vertical Wellness from 2019-2021 commented, “I understand Molson Coors decision completely.??We launched Vertical in 2019 with high hopes for ingestible products and had a wide range of beverages lined up for distribution but eventually concluded the FDA and Congress was unwilling to do what was necessary to enable the industry to thrive in mainstream retail in a realistic timeframe.???This caused virtually everyone who invested in the hemp and CBD business over the past few years to lose their investments and in many cases go out of business.??

This is an indicative headline from the US Food & Drug Administration’s website: “FDA warns 15 companies for illegally selling various products containing cannabidiol as agency details safety concerns?Violations include marketing unapproved new human and animal drugs, selling CBD products as dietary supplements, and adding CBD to human, animal foods”

Wallin continued, “The idea that Molson Coors decided to exit at this time, with their deep pockets and strong distribution footprint demonstrates how devastating the US FDA regulatory environment has been to the hemp industry.??It’s really counter to the ideas behind the 2018 Farm law, but consistent with the wishes of big pharma industry.??I made the case for regulatory relief publicly, throughout 2020-2021, in multiple publications and media shows. (see?NASDAQ,??DENVER POST)”

Should the regulatory landscape in the U.S. change, the company said it would be prepared to re-enter the space. Currently, however, the ability to scale in the category remains difficult, Marino says. “The key for us is to go big behind what’s working and smartly pivot out of what isn’t working from a scale standpoint, like CBD Beverages.”

“Long-term hemp-based and full cannabis-based beverages will be major sectors in the industry.??They just can’t do it in mainstream retail under today’s regulatory environment.??Even so, there are a continuous stream of entrepreneurs willing to risk everything to pursue this,” Wallin said, “It’s like a game of ‘frogger’ for anyone navigating the industry today. You must leap between lily pads and survive the FDA alligator and the rushing river of cash to make it to the other side someday.??I have no doubt there will be successes, but it’s hard times for now.”

Sources: Molson Coors Press Release, Beverage Industry News Sources, Impact Newsletter, MJBiz, FDA website, Congressional Public Records, Interviews.