A new dawn is rising for the budding cannabis edibles industry, which in just a few years has gone from nearly nonexistent to a bona fide food and beverage category. Research from Technavio shows the global market for cannabis edibles products, valued at $8.4 billion in 2017, is on track to register a compound annual growth rate of more than 25% between 2018 and 2022, to reach $25.7 billion. Holding the largest market share in 2017 was the food segment, which accounted for more than 60% of the market and is expected to increase by an additional 4% to maintain its domination through 2022.
As more consumers dip their toes into the world of infused edibles, awareness of the potential cannabis holds as a recreational and functional food ingredient has grown considerably. Among 1,000 U.S. and 1,000 Canadian consumers recently surveyed by A.T. Kearney, 79% have used (or know someone who has used) cannabis in some form. In addition, more than half of respondents indicated they would try recreational cannabis if or when it becomes legal.
“Of the survey respondents who said they’d be willing to try a product infused with cannabis, 55% said they would be willing to try a food product, such as snacks, candy, or packaged food; 32% said they’d be willing to try it in a nonalcoholic beverage; and 19% said they’d be willing to try it in an alcoholic beverage,” says Randy Burt, partner in A.T. Kearney’s consumer products and retail practice. When asked whether they believed that products derived from or containing cannabis could offer wellness or therapeutic benefits, 79% of respondents strongly agreed or agreed—a perception, believes Burt, that can translate into marketing opportunity.
In the last few years, a multitude of startup companies, as well as major food and beverage companies such as Molson Coors and Heineken, have begun exploring opportunities to launch new cannabinoid-infused products in locations in which it is legal. Currently, 33 states have legalized cannabis for medical use, and 10 states, as well as Washington, D.C., have legalized recreational cannabis for adults over the age of 21. However, laws governing the sale of edibles differ from state to state.
According to BDS Analytics, an estimated $1 billion was spent in 2017 on cannabis-infused food and drink in the United States and Canada, the majority of which fell into the candy and chocolate categories. The company estimates that cannabis-based food and beverage spending in the United States and Canada will total $1.5 billion for 2018, with sales on track to reach more than $4.1 billion by 2022. Although the Canadian government legalized cannabis on a national basis in October 2018, edibles are not expected to be legalized for recreational use until sometime after July 2019, with provincial regulations differing according to individual policies, standards, and regulatory structures.
Edibles are defined as food or beverage products that have been infused with cannabis extract—popular examples include baked foods, candies, chocolates, wine, and tea. Although cannabis has more than 100 chemical compounds, called cannabinoids, the two used in edibles are cannabidiol (CBD), which is not psychoactive, and tetrahydrocannabinol (THC), which is.
Currently, about 20% of Americans have legal access at the state level to products with both compounds. Although the recent passage of the 2018 Farm Bill removed hemp, defined as Cannabis sativa L. and derivatives of cannabis with extremely low concentrations of THC, from the Controlled Substances Act, it remains unlawful under the Federal Food, Drug and Cosmetic Act to introduce food containing added CBD or THC into interstate commerce.
In states where cannabis is legal, companies are investigating an array of consumer niches in their quest to develop new products. “We strongly believe that cannabinoids—especially nonpsychoactive cannabinoids like CBD—will become a new category of functional ingredients alongside probiotics and omega-3s,” says Keith Woelfel, research and development and supply director at Stillwater Brands, a company specializing in the processing, manufacturing, and distribution of soluble cannabinoid-infused consumer packaged goods and commercial ingredients.
One of the challenges in formulating new products, especially those marketed for their functional benefits, is ensuring the proper dosage of CBD and THC. “Dosing THC accurately is as difficult as it is important," notes Woelfel. "Homogeneous mixing and rigorous QC testing are absolutely essential. For most consumers, the difference between 5 mg and 10 mg is the difference between feeling better and feeling useless. There is very little room for error, so developing and adhering to rigorous SOPs is of the utmost importance.”
With CBD-infused products, dosing accuracy is less about safety than trust, explains Woelfel. “According to the World Health Organization’s Expert Committee on Drug Dependence,” he says, “CBD ‘exhibits no effects indicative of any abuse or dependence potential’ and ‘is generally well tolerated with a good safety profile’ so a little extra CBD won’t hurt (though a little less will certainly lead to a negative brand experience). This is a new industry, and brands can’t afford to sell consumers on a bill of goods they can’t deliver.”
Another challenge that occurs as consumers try edibles for the first time is educating them about how long it will take for their body to digest and metabolize the food or beverage. Because edibles are absorbed through the digestive system and processed by the liver, it can take anywhere from 30 minutes to several hours for the consumer to feel the effects.
“A user must be prepared to wait until their body metabolizes the ingested cannabis,” says Carol Culhane, president of International Food Focus. “There are several documented cases in which users of cannabis mistook this lag as inefficacity of the ingested cannabis and subsequently consumed additional cannabis, which resulted in unintended negative effects. Caution must accompany each and every ingestion of edible cannabis.”
“Educating consumers, particularly new consumers, can be a challenge,” says Scott Riefler, vice president of science at Tarukino, a company that provides materials development and edible product forms within the cannabis space. “We put a heavy investment into our brand ambassadors, who educate and train the dispensary staff known as budtenders. The budtenders are the interface between the consumers and products. These are professionals who guide consumers to specific products and product forms, similar to seeking guidance from a sommelier when selecting a wine.”
Nancy Whiteman, founder and CEO of edibles company Wana Brands, sees effective partnerships as essential when it comes to educating consumers. “Cannabis brands have to remain hands-on in the new markets they are entering to ensure quality and consistency,” she says. “With the growth of the infused product industry and more brands entering the marketplace every day, budtender education is essential. Dispensary budtenders are our industry gatekeepers, so providing them with in-depth training on our products and how they work in the body enables sales associates to provide consumers with accurate and appropriate recommendations, ensuring consumers have the best possible experience when they leave the store.”
In the end, believes Culhane, “The edible market will belong to manufacturers who can profitably operate within the legislative restrictions which can and will govern cannabis in edible form. Edible cannabis is, and will remain, a controlled substance.”
Manufacturers must also be prepared to lobby regulatory authorities for approval to conduct edible cannabis clinical trials, she adds, “and be prepared to finance these investigations. Accordingly, this market, when mature, will be characterized by a limited number of manufacturers with intimate, hard-earned knowledge of the technical demands required to deliver on an edible cannabis promise.”