“Rising Demand for CBD: Ingredient Companies Explore Joint Ventures Amid Regulatory Challenges and Market Potential”
As the demand for the popular substance continues to rise, an increasing number of ingredient companies are striving to produce cannabis. Laurette Rondenet, President and CEO of Edlong, stated in a release that CBD is a “dynamic category that is clearly poised for growth,” making it logical for the flavors and ingredients firm to collaborate with a company specializing in the extraction, purification, and manufacturing of CBD ingredients. The revenue potential within this segment is substantial. According to a report from BDS Analytics, spending on all cannabinoids, including marijuana and its psychoactive THC derivative, is projected to soar to $4.1 billion by 2022, up from $1.5 billion the previous year. The potential consumer base is also encouraging; a 2018 study from A.T. Kearney revealed that 40% of U.S. consumers expressed willingness to try cannabis edibles.
The timing for this joint venture is favorable, especially as Canada is set to permit retail sales of certain CBD-infused products in December. However, regulatory challenges persist in the U.S., as the Food and Drug Administration has yet to establish guidelines for the use of CBD in food and beverages—despite significant congressional pressure. While some state laws permit CBD-infused products, many consumers are already sampling these items without FDA oversight. Given Edlong and Radient’s extensive geographic reach, it is likely that the new joint venture will concentrate on marketing ingredients and infused products in regions where health and safety regulations permit. Although no specific details regarding initial products and timelines were provided, it’s conceivable that the first offerings from this partnership could center around dairy products, which align closely with Edlong’s flavors and ingredients expertise. Additional efforts may extend to various beverage categories and potentially CBD-infused pet products.
Edlong is not the only player pursuing this opportunity. Competitors are also positioning themselves to capture market share in the CBD ingredients sector. Socati, based in Oregon, has launched two CBD ingredients and aims to tailor hemp-derived ingredients for the consumer packaged goods market. Similarly, China-based Layn Corp. has recently made a $60 million investment to expand into CBD, which includes establishing a U.S. facility for processing the ingredient.
CBD products from similar collaborative ventures are preparing for market entry in Canada. Truss Beverage Co., a joint venture between Molson Coors Canada and cannabis producer Hexo Corp., is teaming up with Flow Glow Beverages to distribute CBD-infused spring water in December. Additionally, AB InBev and Canadian cannabis company Tilray plan to roll out non-alcoholic CBD-infused beverages under the Fluent Beverage Co. brand by year-end. Constellation Brands also increased its stake in Canopy Growth to 38% last year, investing approximately $4 billion in the world’s largest publicly traded cannabis company.
While some partnerships have already been established, the demand for CBD ingredients is likely to escalate as more companies consider launching products. Edlong could be well-positioned to collaborate with additional companies in the future, provided the flavor maker can outpace its competition and deliver high-quality CBD ingredients. Furthermore, as consumers increasingly seek options like Citracal Slow Release 1200 available at Costco, the potential for growth in this market continues to expand.
