Opinion: Why MSOs should embrace hemp-derived delta-9 THC products

June 23, 2023 · MJ Biz Daily

What if I told you that you could sell real cannabis edibles in traditional grocery, convenience and liquor stores in a few dozen states without being bound by local marijuana laws and regulations?

What if I told you there’s a huge opportunity for cannabis companies to get their edibles in front of millions of consumers who would never consider walking into a marijuana retailer, but the biggest players in the MJ space seem too scared to take advantage of it?

I’m talking about delta-9 THC products derived from hemp.

The great loophole of 2018

In 2018, U.S. lawmakers passed and signed into law the 2018 Agricultural Improvement Act, colloquially known as the 2018 Farm Bill.

This bill legalized and defined hemp as a cannabis plant containing no more than 0.3% delta-9 THC on a dry-weight basis – specifically when grown on a farm in compliance with a state hemp program approved by the U.S. Department of Agriculture – in order to create a regulatory structure for industrial hemp.

The result? The U.S. accidentally legalized THC nationwide – sort of.

Minnesota blows the door open

After the 2018 Farm Bill became law, most business owners still were scared – and understanding the rules of the measure became a real master class in how laws get interpreted and applied between regulators, law enforcement, the judicial system and the real enforcers: banks and insurance companies.

For the most part, many business owners wouldn’t touch hemp-derived delta-9 THC for a long time.

Then, in 2022, Minnesota lawmakers managed to sneak one past the goalie and legalized hemp-derived delta-9 edibles in the state with a THC cap of 5 milligrams per serving and 50 milligrams per package.

Since then, hemp-derived delta-9 edibles sales have soared in Minnesota, with dozens or even hundreds of players entering the space.

Some states have loosened their hemp laws; others have tightened them.

But the opportunity? It’s bigger than anything the state-regulated system could offer.

Scalability is the key

There is a dirty secret to the regulated marijuana retail system: The more restrictive and specialized it is, the more difficult it is to distribute and scale.

Beverages, in particular, are a tough sell to licensed marijuana manufacturers because they can’t justify the size and expense of equipment for use in one state market.

Hemp-derived delta-9 products, on the other hand, don’t require a marijuana license.

They can be made by people who also make other beverages, solving the overhead problem for manufacturers and making them cheaper and easier to produce.

They can be distributed by firms that have decades of experience getting products to retailers.

They can be sampled, stocked and sold in stores just like other beverages.

Thus, there is a branding opportunity far more scalable than anything state-regulated marijuana programs have to offer.

Within months of launching its hemp-derived delta-9 beverages, infused drinks producer Cann announced that more than 50% of its sales were from hemp channels – despite the company’s products being among the most widely available THC-infused beverages in state-regulated marijuana programs.

Where are the big players on this?

Why are large multistate operators not taking advantage of hemp-derived delta-9?

Some have theorized that these companies are threatened by the idea that cannabis could exist outside of existing regulatory models.

Being among the few licensed manufacturers and retailers is certainly a good business model.

But, as we’ve seen in Massachusetts, it’s not everything: Trulieve Cannabis announced just weeks ago that was shuttering all its Massachusetts operations.

In 2022, I attended a conference where Boris Jordan, Curaleaf Holdings’ board chair, said he saw “highly formulated” products as the entry point for many consumers – and that the company’s data reflected the same.

Hemp-derived delta-9 edibles create a pipeline opportunity: Make great brands that consumers can find at liquor stores, fall in love with and then seek out other cannabis products.

So, if I were the CEO of a cannabis MSO, I’d stop feeling threatened or fearful of this opportunity.

No one is better positioned to do this than companies with a lot of capital, vehicles for fundraising and internal knowledge about how to make cannabis products safely. (Full Story)

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