Monday, May 20

Companies were big on CBD. Not anymore.

Just below the rows of energy drinks and kombucha at Westside Market, a deli in Manhattan’s Chelsea neighborhood, sit a few glass bottles of Vybes. The drink, available in flavors like strawberry, lavender and blood orange, lime, is made with cannabidiol, more commonly known as CBD.

But a lack of federal rules and a hodgepodge of state regulations have made it impossible for a national retailer, such as Target or Walmart, to distribute Vybes. That has hindered the drink’s potential growth, said Jonathan Eppers, who left the tech industry to create Vybes in 2018.

“For the first two years, we were on board a spaceship,” Eppers said. “But the patchwork of laws and regulations in this industry has made it difficult for our business to grow.”

Just over six years ago, CBD, the non-intoxicating component derived from cannabis or hemp, was poised to become the next big “it” ingredient, part of a wave of drinks and foods promoted as having health benefits or can provide relaxation. Start-ups have flooded the market with products, many of which promise to calm stressed and anxious consumers.

At its peak around 2018, CBD was everywhere, present in water, candy bars, tinctures, gummies, and skin serums. Consumers could purchase leisurewear infused with CBD oil and feed their nervous pups CBD chews and treats. Even large companies have intervened. Molson Coors has teamed up with a Canadian cannabis company to create a line of CBD-infused beverages. Constellation Brands, the maker of Modelo beer, has invested $4 billion in a publicly traded cannabis company. Ben & Jerry’s has started trying to create CBD ice cream.

In the last two years, however, the sector has been at a standstill. Molson Coors ended its joint venture and Constellation wrote down more than $1 billion of its cannabis investments. Large companies have shelved plans for CBD products, and hundreds of startups have closed their doors, switched to other ingredients, or simply moderated their growth projections.

Hopes of market resuscitation through industry efforts to insert federal regulation of CBD into a new farm bill were dashed when Congress passed an extension of the 2018 version of the bill in the fall.

Also contributing to the industry’s precipitous collapse is the simple fact that many people are confused about what CBD is, whether it is legal, and whether it will get them high.

The compound comes from the cannabis plant. Cannabis plants that contain high levels of tetrahydrocannabinol, or THC, are marijuana and can get users high. Cannabis plants with lower levels of THC are known as hemp.

Five years ago, Congress legalized hemp-based CBD, although CBD produced with higher levels of THC remained illegal at the federal level. But the Food and Drug Administration has refused to create rules that would allow CBD to be used in dietary supplements or conventional foods. The agency said it needed to create a new regulatory pathway for CBD and that there wasn’t enough evidence to determine how much could be consumed and for how long. (The FDA has approved a drug that contains CBD and is used to treat some seizures.)

Like marijuana, which remains illegal at the federal level, CBD has been legalized by many states, creating a quagmire of different rules and problems for producers.

“I saw the writing on the wall in late 2019 and into 2020. It was going to take a lot longer to establish federal regulations on CBD,” said Ben Witte, who founded Recess in 2018 as a line of sparkling water containing CBD. Today those drinks account for less than 10% of its revenue. He instead focuses on mocktails and Recess Mood, a line of CBD-free relaxation drinks.

Even before hemp-based CBD was legalized, stores and online retailers were flooded with products containing it. But none of them had been approved by the FDA, and some made outrageous and unsubstantiated claims that the infused products could do everything from treat Alzheimer’s disease to cure cancer.

The FDA has begun issuing warning letters to manufacturers and retailers for selling unapproved CBD products or making unsupported claims about the products. In 2020, the FDA found in a sample of products that 18% contained much less CBD than indicated on the packaging, while 37% contained much more.

“I think the bigger question here is: Why do you need to have it in your food?” said Dr. Peter Lurie, president and executive director of the watchdog group Center for Science in the Public Interest. “What is the purpose? What does this ingredient actually do for you?

He added: “These companies have managed to create the belief that society needs these products when there is no evidence that CBD treats anything more than the rare epilepsy syndrome for which it was approved.”

As questions about the compound grew, state regulators began pulling CBD products from store shelves and confiscating the products. Businesses have also faced obstacles in selling or advertising online.

“My account on Meta was forever banned from any type of advertising after I once posted under our company page about our CBD products and was flagged,” said Clarice Coppolino, manager of branding and product development for Vital Leaf, which produces CBD chocolate, skin care and tinctures.

The Covid-19 pandemic has also put the sector to the test. While sales in the first weeks and months of the pandemic soared as nervous consumers sought relief through CBD products, interest among big companies and investors waned.

“Covid has clearly moved consumer packaged goods companies away from the CBD space and what was possible there to simply focus on meeting food demand,” said Carmen Brace, a consultant who has worked with companies that sell consumer packaged goods packaged consumption.

Amid pressure from heavy industry, some states have begun to legalize hemp in various products. In 2021, for example, California passed legislation allowing hemp-derived CBD in any food, beverage, and dietary supplement sold in the state. Other states legalized CBD with restrictions on the types of products it could be used in, the quantities and where the hemp had to be grown.

Mr Eppers founded Vybes after trying CBD oil to relieve the stress and anxiety he felt while working in the tech industry. The product gained a following in its first two years, but around 2020 California regulators began pulling the drinks from shelves. So Mr. Eppers joined with other CBD producers to push for laws allowing the product in the state.

But the confusing mix of rules has hindered Vybes’ growth. “We make a drink that many consumers want, but the big chains won’t touch it,” Eppers said.

For now, Vybes, made with 25 milligrams of hemp CBD, has found a home in small, regional and independent grocery stores across the country, Eppers said.

“When I entered this category in 2018, the sky was the limit,” he said. “No one starts a business to hit a low ceiling.”