Key Considerations Before Launching a Hemp-Derived THC Food or Beverage

By now most people have noticed that the market for hemp products ain’t what it used to be. After the passage of the 2018 Farm Bill, we saw a proliferation of CBD products on store shelves touting various potential health benefits. Today, we see a variety of cosmetics, smokeable products, foods, and beverages advertising not simply health benefits, but the intoxicating effects one would associate with the recreational marijuana market. These intoxicating effects are created by various forms of tetrahydrocannabinol (THC) derived from hemp. Unlike the recreational marijuana market, however, these products are considered lawful under federal law and can therefore be shipped across state lines.

While the burgeoning and ever-evolving hemp-derived THC food market offers lucrative opportunities, entering this new market requires serious consideration of the various regulatory hurdles at early stages in product development. This article outlines some basic considerations for someone wanting to launch a food or beverage containing hemp-derived THC.

1. Form and Content Restrictions

Given the lack of federal oversight, states have stepped in to create a patchwork of statutes and regulations applicable to foods containing hemp-derived THC. States that allow the sale of foods containing hemp-derived THC (and not all do), do have some overlap in their frameworks, but also significant differences. Thus, if multi-state growth is your goal, you’ll want to consider form and content that will be acceptable in the largest number of states. In order to do so, you must consider the form of the product (e.g., edible, tincture, beverage), and its THC content per serving and per package.

For instance, products with a low dose of hemp-derived THC per serving will be acceptable in a larger number of states than products with a high THC content per serving or per package. Delta-9 THC is acceptable in more states than delta-8 THC. In addition, you should consider not just the type of THC but also the form of THC that you will infuse into your product. Whether you use THC distillate, isolate, or full-spectrum hemp extract may also impact the salability of your product in various states.

2. Consider Your Target Markets

The legal and regulatory environment for hemp-derived THC varies greatly between states. Before launching, it would be wise to conduct a detailed analysis of your primary target markets so you understand your obligations before selling in those states. Consider the following:

• Legal status of the various types of hemp-derived THC in each market
• Consumer demand and market size
• Competitive landscape
• Barriers to entry and regulatory requirements (such as licensing or product registration requirements)

3. Packaging and Labeling

Unfortunately, a patchwork of state regulations also means a patchwork of packaging and labeling requirements. Many states require certain warnings to be displayed on packaging. While there is some overlap, there is also plenty of variation. It’s important to design labels that are likely to comply in multiple states, or set up a system that will allow you to efficiently and cost-effectively pivot and redesign labels for certain markets. Some things that almost all states will require for packaging and labeling of your hemp-derived THC product include:

• Packaging should be child-resistant and tamper-evident;
• Packaging and labeling should not appeal to minors (although states will have different ways of interpreting this)
• The product should be labeled with the mg of THC and any other marketed cannabinoid per serving and per package;
• Warnings should include a statement to keep out of reach of children and a statement that the FDA has not evaluated or approved the product;
• The label should include a website or QR code that can be scanned and lead the consumer to a copy of a certificate of analysis for that product batch.

Labels should also comply with federal food labeling requirements. Given the possible pitfalls of a noncompliant label, it may be helpful to have an experienced professional review and provide feedback on your label design before sending it to print.

4. Sales Channels

There are different ways to launch a product into a target market. Identify the most effective sales channels for your products considering the resources at your disposal. Some options to consider are:

• Online sales: In this case, you would manage the distribution of your product via orders placed on your website. Working with copackers, third party logistics providers, and online shopping platforms will help you streamline direct-to-consumer sales. This is probably the lowest barrier to entry, but may be the most difficult for making your brand stand out. In addition, it can be difficult to manage compliance when consumers around the country are dictating where your product will be distributed.
• Physical Retail: You can target physical retailers, perhaps starting locally and then branching further out into your state and into neighboring states. Alcohol retailers, smoke shops, health food stores, and local grocery stores are just some of the types of businesses you might consider.
• Partnerships: Collaborations with established distributors and brand portfolios can help you expand your reach and visibility both with potential retailers and consumers. Being part of a brand portfolio can also provide you the benefit of a team with which to collaborate with on compliance.

Each channel has distinct advantages and regulatory considerations, so choose the ones that align best with your business model and compliance capabilities.

5. Testing Requirements

States with a regulatory program for hemp-derived THC foods will require that the final-form products be tested before being sold. While states do overlap in testing requirements, differences have also been observed. For instance, all states will require testing for cannabinoid content, and most will also require testing for other categories such as heavy metals, pesticides, and residual solvents. Within these categories, there can be some variation among the specific contaminants that must be tested for. It’s important not to assume that a test that works in one state will work in another, although this will also depend on the enforcement practices of the states. Ask your lab to show you which contaminants they test for and compare them against the requirements of your major target states, or states with robust testing requirements. You may need to ask the lab to add additional tests.

6. Ongoing Compliance Program

Once you launch your product, it will be important to continue to maintain a focus on compliance, especially as your brand grows in sales volume. Some elements of a good ongoing compliance program include

• Regular audits and reviews of your operations
• Continuous monitoring of regulatory changes
• Training for employees on compliance practices
• Documentation and record-keeping for inspections and audits

A proactive program helps avoid regulatory pitfalls and demonstrates to a regulator that your company is committed to compliant operations. Being able to show that you take compliance seriously will go a long way in the event of an investigation or a claim that your product is somehow not compliant.

Conclusion

Starting a hemp-derived THC food brand involves navigating a complex regulatory landscape that differs from state to state. You’ll have to make strategic decisions about markets, sales channels, packaging, and compliance. By carefully considering these factors, you can build a successful and compliant brand that meets consumer needs and thrives in a competitive market. Failing to take these factors into account may doom your brand and your vision for success.

If you are considering launching a hemp food or beverage, Holon Law Partners’ Cannabis and Hemp Practice is able to guide you from the early stages of product design all the way through to landing on shelves and dealing with regulatory bodies. In addition, our firm offers other services you will likely need such as IP protection and contract drafting. Please reach out to us at info@holonlaw.com to discuss how we can help you.