Speaking on the firm’s second quarter earnings call, Willis said: “Yes, we did launch CBD in the US [topicals] and in Hong Kong, China. Yes, it’s already contributing revenue, but our CBD-infused beverages [including relaxation beverages under the Marley brand] are not out yet.
"When we were first planning on this, we already had our samples and already had commitments from major retailers, in Q4 of last year, we expected to be able to execute shortly after the passing of the Farm Bill.
“We did not proceed, with the FDA... making navigation as murky as the Strait of Hormuz, and they are allowing thousands of other small companies to get out there first, not public enterprises that are compelled to comply with federal law.”
CBD and enforcement
But there are big opportunities outside of the US for CBD, he noted: “We have had some very good success on overcoming some of those regulatory barriers in other markets that gives us a lot of optimism for CBD outside the United States in the second half of the year.
“Within the United States, as I said, it's as murky as the Strait of Hormuz, that's a pretty difficult place to navigate these days and it's been murky for us too just in terms of unclear rules that apply for sure to public companies that have to comply with federal law like ourselves, but they are not being policed in terms of some of these other smaller companies...”
He added: “There may be some things that we can do where we can indeed comply with federal law, comply with our requirements as a NASDAQ listed company and still be able to execute on the beverage side, but we’re making sure that we can do that from a legal standpoint and making sure we can do that with the FDA, so we’re in constant dialogue with our lawyers that are in dialogue with all of these different entities to be able to make the navigation a lot more clear that it is.”
Floodgates will open when FDA provides guidance
Olivier Sonnois, president of North America, added: “I expect us to build competitive advantage with CBD across all channels and in a number of product forms… Like Brent said would I have like to have our CBD beverages out already of course, but having the option to prepare our launch more strategically and build a range a product forms across a range of channels might in fact be an even greater opportunity.”
Chief financial and administrative officer Gregory Gould said: “We really see that there's a big market here for infused beverages and we’re just looking for more guidance there from the FDA and once we get that, we think and hope that the floodgates can really open up.”
Don't worry, be happy
Speaking to FoodNavigator-USA earlier this year, Willis said New Age had received commitments for the new Marley Mellow+CBD range from “two of the largest US retailers in the convenience and grocery channels” and had confirmations from distributors reaching 125,000+ outlets globally.
The source of the CBD (cannabidiol) New Age is using is a broad spectrum hemp extract with less than 0.3% THC that had proved more effective than CBD isolates at delivering “that don’t worry be happy feeling” during consumer testing in Colorado, said Willis, a CPG industry veteran who has held leadership roles at Coca-Cola, Cott Beverages, Anheuser Busch, and Kraft Heinz.
The FDA recently re-iterated that CBD is illegal in foods, beverages and supplements, although it is focusing enforcement action on companies making “egregious” claims while it explores the regulatory pathway ahead.
In the meantime, several states have explicitly authorized the general sale of hemp-derived CBD products including Alabama, Kentucky, Colorado, Alaska (in licensed adult-use dispensaries and retail stores), Florida, Indiana, Illinois, Kansas, Maine, Maryland, Minnesota, Nevada, Oregon, Texas, Vermont, and Washington (at licensed cannabis retail stores and dispensaries).
(Several other states only permit its sale from licensed medical cannabis dispensaries for patients with a qualifying medical condition.)
Right now, California defers to the FDA regarding CBD as a dietary ingredient, but its legislature is currently considering Assembly Bill 228, which would permit for the retail sales of compliant CBD-infused food, beverages and supplements.
CBD and the law
The FDA recently reiterated that adding CBD to foods or supplements is illegal as it was first investigated as a drug. However, boosted by the passage of the Farm Bill (which removed hemp from Schedule I of the Controlled Substances Act), many food and beverage brands are navigating their way through the regulatory minefield by utilizing ‘broad spectrum hemp extracts’ in which CBD is a component but has not been isolated or modified. And most are being left alone by the FDA, provided they don't make unsubstantiated health claims, said Willis.
“In the US, we’re initially focused on four states – Colorado, Washington, Oregon, and Michigan – because the rules and regulations on interstate distribution and commerce are a little unclear, although that is not stopping every single retailer on the planet from saying I want it, and I want it now, right?”
Willis, who was speaking to us after signing an agreement to develop and distribute CBD-infused beverages in partnership with Docklight Brands, added: “This is a long term play for us.
“We want to be the first to roll out a major national brand, but we also want to be very methodical and measured and be in full compliance, because we want to lead, not just with the Marley brand, but want to lead from an industry standards standpoint, from a responsibility and communications standpoint.”
What does CBD do for you?
“People around the country are learning about CBD” online, rather than via food labels, said Willis, who acknowledged that the market had gotten ahead of the science when it comes to CBD, although he claimed the two would "converge" in future, and noted that small-scale human double-blinded studies suggested some benefits in reducing anxiety.
“When pushed, these companies don’t have the human clinical trials to support their claims, which is why we’re staying away from it [making health claims].”
But he added: “Purchase decisions are not just driven by the functional benefits of ingredients, but also the emotional side of things, which is why Marley, an iconic brand with 75 million facebook followers and that notion of ‘Don’t worry, be happy’ is an equal driver of purchase intent vs any knowledge of CBD.”
A 'biotech company in disguise?'
Colorado-based New Age Beverages – best known for brands such as Búcha Live Kombucha, XingTea, Coco-Libre, and Marley – recently merged with Utah-based Morinda Holdings, which has operations in 60+ countries, creating a healthy beverages business with $300m in net revenue.
It has also created a health sciences division that owns IP around functional food ingredients with a variety of potential applications surrounding cognitive, cardiovascular, and digestive health, hydration, and protection from radiation.
"In my view New Age is a biotech company in disguise," claimed Willis. "We bought all of these patents from the US government [covering functional food ingredients] that were developed for the US military in theater over the past 10 years, but there are also co-operative research studies to support these conducted with some of the pre-eminent institutions, and human trials, which means we can make validated claims."