CBD is back on the menu in California.
After years of effort by activists including multiple legislative attempts, California Governor Gavin Newsom signed Assembly Bill 45 into law yesterday, creating a regulatory framework to immediately allow for the legal sale of CBD-infused products.
What does AB-45 do?
The new law, sponsored by Assembly member Cecilia Aguiar-Curry (D-Winters), regulates industrial hemp products and allows for the sale of food, beverages and supplements that contain either industrial hemp or the cannabinoids, extracts, or derivatives of industrial hemp. Food and beverage products that contain alcohol or tobacco are still prohibited from containing hemp derivatives.
Under the bill’s provisions, manufacturers must register with the California Department of Public Health (CDPH) and follow good manufacturing practices. That includes bans on marketing to children and pregnant women. Companies also must show that their hemp is grown in a state or country where it is legal to do so. The products themselves must be tested to ascertain that THC levels do not exceed 0.3% and must have packaging featuring web links directing consumers to lab testing results.
Aguiar-Curry has said that without the regulations created by the bill Californians were at risk of purchasing unsafe products. She also noted that the law will create more business opportunities for California-based manufacturers and retailers.
According to High Times, California’s CBD market hit $730 million in sales in 2019 — 2 1/2 times larger than any other state.
What was the California market like until now?
CBD-infused products makers have faced a winding road to legal clarity in California. Despite the passage of the federal Farm Bill in 2018 that opened up the market for hemp cultivation, the lack of FDA action on CBD as a food and beverage supplement has led to a taut marketplace for brands. In California, retailers like Erewhon, Bristol Farms and Lazy Acres have pulled infused products from their shelves as recently as last year.
In 2018, CDPH issued a revised FAQ advising that CBD derived from industrial hemp is not considered a cannabis product and therefore not approved for use in food and beverages. That decision saw significant pushback from the food and beverage industry, with CPG leaders signing an open letter calling for CDPH to issue a new FAQ. In July 2019, the Los Angeles County Department of Public Health (LACDPH) declared CBD-infused products were considered “adulterated” under the state’s Sherman Food, Drug and Cosmetic Law and operators could receive two-point deductions during official inspections for violations.
Still, enforcement could be erratic. In January 2020, LA Distributing Company co-founder Richard Medina told BevNET that “there are times when the public health department will come out in waves and then they’ll disappear for a few weeks,” leaving retailers and brands in a precarious position of avoiding sporadic crackdowns.
AB-45 is also far from California’s first attempt at passing CBD regulations. In 2019, a similar bill, AB-228, was expected to pass but ultimately died near the end of the legislative process. Last year, AB-2028 was introduced but likewise failed to garner support.
What has the industry response been?
Colorado-based Charlotte’s Web announced in a press release today that it plans to expand distribution of its CBD-enhanced tinctures, topicals, supplements and pet products to California as soon as possible. The statement also noted that its products are already sold by national retailers who, in total, have about 1,000 locations in California.
“AB 45 is a big win for Californians seeking wider access to the benefits of safe, high-quality hemp dietary supplements, the retailers who want to sell them, and the farmers and manufacturers who make and ship them,” Charlotte’s Web CEO Deanie Elsner said in the release.
Jonathan Eppers, CEO of CBD beverage brand Vybes, also spoke out in favor of the bill, stating on LinkedIn that its passage would allow the brand to gain new retail opportunities.
“Passage of AB 45 opens up the largest CBD market in the US, and gives VYBES a chance to be treated like any other beverage company by allowing retail opportunities that haven’t been accessible to us,” Eppers wrote.
But some in the hemp and cannabis industries were not excited by the passage of the bill. In a statement issued last month, the California Hemp Farmers Guild noted that the law would place onerous restrictions on farmers, particularly those who run small family farms. Of particular concern was the bill’s ban on inhalable or smokable hemp derived products in the state (though it is allowed to be manufactured in California under the new law). The Guild noted that this is one of the most popular forms of consuming CBD and the law will restrict producers from capitalizing on it.
The Guild also took issue with the fact that out-of-state producers would somehow have to find a way to be inspected by the CDPH in order to sell within California.
What’s next?
While manufacturers see the bill’s passage as a step in the right direction, many still want to see federal regulations passed. A core pain point is that states currently have passed different regulations, making it onerous for manufacturers to operate in multiple jurisdictions.
“We celebrate state-level progress and believe it underscores the ongoing need for clear, federal regulation of Hemp CBD from Congress and the Administration,” Elsner said in the release. “We will continue lending our voice and resources to measures that will ensure a safe, credible, and sustainable industry, such as House of Representatives Bill 841 which deserves a hearing in the Energy & Commerce Committee by year’s end.”