How Molson Coors' CBD Ambitions Got Blunted By Legal Uncertainty

The United States of America may be a single country, but that doesn't mean each state unites in perspective and legal actions. This especially applies to the cannabis market and its derivatives, namely the multi-faceted CBD products that get a wary welcome in many states. Both federal and state regulations apply to CBD use, explains Forbes, which can create confusion and thwart growth in CBD products such as food and drinks. According to a November announcement by Molson Coors, that's exactly what's happening with its distribution of the VeryWell CBD sparkling water drinks.

CBD, or cannabidiol, can come from hemp or cannabis plants, which both fall under the category of cannabis sativa and produce THC, the well-known psychoactive component in marijuana. But if hemp is used as the source of CBD, it has markedly lower THC levels. That means "a very low" chance of getting high, but an increasingly positive outlook for CBD in terms of health benefits. Harvard Health points to scientific evidence that CBD can help reduce seizures in childhood epilepsy syndromes and nods to research studies indicating its use for alleviating anxiety, insomnia, chronic pain, and addiction.

Despite the rising acceptance of CBD for medical use, the legal uncertainties and variations within state laws make it a gamble for widespread investment by beverage companies such as Molson Coors.

The feel-good VeryWell CBD drink from Molson Coors came by way of a partnership with Truss USA and Hexo Corp., with the venture showing high potential a year after its launch in the USA. It was described in the original company press release as a hemp-derived, adaptogenic sparkling CBD water, with an invitation for buyers to enjoy a moment of self-care through hemp extracts and natural flavors. By November 2021, Food Navigator reported a promising response from customers and retailer interest. Then sold in Colorado stores, the product had recently expanded direct-to-consumer availability in 17 other states. Things were hopping for the burgeoning new market of CDB beverages, with Molson Coors and Hexo willing to take the risk, especially with its extensive regulatory experience, explained Truss CBD USA general manager Jane Hockman. So why did Molson Coors pull the plug just a year later, with an unwinding date effective December 31, 2022?

Molson Coors explained in its Beer and Beyond blog that even with the recent U.S. elections producing a sprinkling of cannabis legalization measures, federal legalization seems precarious at best. Molson Coors is directly affected by the uncertainty in distribution markets and a general hesitation to embrace anything cannabis-related. That poses a problem for profits, which the company is unprepared to accept, according to Pete Marino, who heads up emerging growth at Molson Coors. He did, however, note a willingness to return to CBD beverages should U.S. regulatory changes occur in the future.

In the same Beer and Beyond blog post, Molson Coors announced the cessation of its coffee distribution venture with La Colombe Coffee Roasters, which centered on the coffee company's ready-to-drink (RTD) segment. The decision came as La Colombe moved toward merging RTD with other segments, including bagged coffee and cold-brew multi-serves. Marino noted logistical challenges by Colombe's new direction and explained the importance of early recognition when something is non-feasible for long-term partnerships. That distribution agreement, which began in January 2021, will wind down by March 2023.

The emerging growth segment of Molson Coors is far from over. In fact, the company targets a $1 billion revenue mark from that division by year's end 2023, according to Food Dive. Far beyond its well-established foothold in the alcohol space, the company has tiptoed into future-leaning products such as a plant-based diet soda, grain-based milk alternative, and a probiotics-infused seltzer, with much more to come. With its exit from the CBD and coffee distribution agreements, it plans to continue moving forward with more nonalcoholic beverages through L.A. Libations, home to the Huzzah seltzer drinks, as well as agreements for a ZOA energy drink, Five Tail full-strength spirit, and a ready-to-drink cocktail known as Topo Chico Spirited.