Market and Business Implications of Delta-8 in the Cannabis Industry

view original post

Opinions expressed are solely those of the author and do not reflect the views of Rolling Stone editors or publishers.

Has there ever been another plant or product with a more interesting history than cannabis? The plant has made its journey from fiber for papers and fabrics to today’s societies and economies. The 2020 American cannabis market size sits at around $20.47 billion.

In 2018, the USDA Farm Bill removed hemp and hemp seeds from the DEA’s controlled substances act, further allowing a flourishing consumer economy around hemp-based products.

Today, U.S. CBD market sales are projected to land at around $16 billion by 2026. In this product category, you’ll see CBD edibles, beauty products, pet products, and yes, the entire delta-8 (D8) market. Industrial hemp products, like fabrics, papers and many more, are not included in this sales projection. Consistent, exponential growth is projected in both markets, even though 2020 blew many small CBD businesses out of existence. The total value of industrial hemp production in the U.S. for 2021 is valued at $824 million. We’re seeing product saturation in CBD and D8, but there is so much room left for innovation in the industrial hemp space as a whole.

Industrial hemp, while not as fun as its other hemp-based consumer counterparts, offers potential innovation as a carbon-sinking crop with a myriad of current and potential industrial applications. On the flip side, hemp as a whole has more room for regulation, alongside product innovation. Room for market innovation, combined with conventional cannabis prohibition, has yielded what some cannabis professionals consider a “bathtub gin.” This is D8 and it is not robustly regulated.

A lack of consumer protections and murky regulations around D8 production have led to the substance being banned or under review in 20 states and counting. The mixed sentiment on market growth and ever-evolving regulation has some experts calling the market unsustainable. Others have a firm belief that D8 is a viable, sustainable option for the future of American hemp.

A recent court ruling from the Ninth Circuit deemed D8 from hemp legal as of May 2022. The important distinction from this court ruling: D8 is legal to possess and sell, but the precedent is not set for legal human consumption via interstate commerce. This can change the next moment these substances come up in court.

Cannabis and hemp manufacturing are different beasts, especially regarding the industrial processes for deriving D8. But, there’s something to be said for comparisons in the CBD, D8 and hemp markets. In Missouri this past year, a hemp farmer set up a stall at his local farmers market with a sign that read “home-grown delta-8.” Professionals in CBD and cannabis might scoff at the irony of this sign. Consumers don’t know the difference. This sparked deep controversy and an article in the local news, yielding important questions:

• Can manufacturers of smokable CBD hemp or D8 be punished for not communicating clearly with consumers?

• How will consumers gain protections from businesses that may be ignorant or willfully mislead consumers about the psychoactive compounds, or lack thereof, in their products?

The Rolling Stone Culture Council is an invitation-only community for Influencers, Innovators and Creatives. Do I qualify?

Turning our attention to CBD, regulatory concerns arise for consumer-facing producers as well:

• Rapidly changing state laws around CBD and D8 can help or hinder these businesses at a moment’s notice.

• Federal regulation around CBD and D8 is also subject to change. This can potentially impact operating costs and testing procedures, as well as advertising and marketing language.

All of these questions impact investment decisions and other means of funding for farmers and small businesses.

There are countless articles showcasing legally operating retail storefronts that sell D8 products being raided by police. In Georgia, police took cannabis D8 products off shelves and money from registers from a shop owner. They were then forced to give it back by the courts. Shop owners are aware that all it takes is one law to be put in place to close their operations. Until then, they have a “green light” from the existing landscape.

In the face of murky, yet evolving regulations in both CBD and D8, a question emerges: Who’s at risk?

Of course, you have farmers and small businesses facing high risks of being shut down or fined because legislation is so unclear today. Alternatively, the sale of D8 products is opening up a new option for passionate operators looking to touch on “cannabis” in states not yet legalized. A North Carolina small business owner found that profits have jumped with their new product offering.

Market opportunities exist for D8 producers with a lower overhead cost to enter the industry than cannabis. Not needing a highly regulated license like a cannabis operator to produce D8 leaves consumers in the dark about the true contents, potency, trace chemicals and any other potential risks of D8 product consumption. Consumers are not fully informed. This could pose a risk for businesses to the tune of lawsuits.

We would be remiss not to mention the paradox in imprisoning people over conventional cannabis while D8 businesses profit.

Consumers and D8 businesses could be at higher risk if more regulations are put in place around manufacturing, testing and health impact research. This should yield a red flag to inquiring consumers and people-minded business owners. CBD companies stand to run the same risk in the face of increased regulation. However, there’s more peer-reviewed research readily available about CBD. Practices are also being put in place to track and manage product claims, like having a COA. In the CBD space, more research can help yield safer consumers.