Episode 87 – Latest Headlines with Hemp Industry Daily



Joe: On this episode of the "CPG & CBD University Podcast," we are going back behind the headlines with "Hemp Industry Daily," the latest happenings in the industry, the big stories of the summer and year so far, the emergence of Delta-8, what's ahead in the final five months of 2021. This is the "CPG & CBD University Podcast," and it starts right now.

I'm Joe Agostinelli, host of the "CPG & CBD University Podcast," and if you are a returning listener, we welcome you back to our podcast. If you are a new listener, we are glad you found us on your podcast platform of choice. Full video episodes on YouTube and hit that subscribe button wherever you get your podcasts, audio or video versions, you'll get notifications when new episodes are published. And speaking of video, we are joined via Zoom. It feels like just yesterday you were on, but we're into August. Where's this year going?

Kristen: I know.

Joe: Kristen Nichols is the editor of "Hemp Industry Daily." She's back. Hi, Kristen.

Kristen: Hi, thanks for having me.

Joe: It's been, you know, it's funny, I guess the year's going by so fast because it's just been so busy in the industry. It's hard to keep up and the days all just kind of blend into one another. So let's catch up on some of the latest headlines in the industry. So the first half of the year wraps up, we've got five months left in the year, as crazy as that sounds. Safe to say one of the biggest stories of the year so far is the emergence of Delta-8.

Kristen: Absolutely. That's the most exciting or interesting thing doing in hemp right now.

Joe: How did it become so hot so quick? I mean, I remember back, you know, going to the end of the year and doing some predictions, we weren't even talking about it.

Kristen: Oh, this bit me in the behind, just like, I think, a lot of people, just like smokable. Smokable also bit me. I didn't see this coming. I would say there are two main factors driving the trend. One, a lot of folks have CBD. They can't sell or prices have gotten to a point where it's not worth selling. Price is getting so low, looking for a way. And then there's this other trend of something called color remediation, where you process an extract to get the gunk out of it, maybe chlorophyll, maybe some fatty lipids or waxes that are in the plant. And then folks, it's getting cheaper, this color remediation, and then folks discovering when they did it, hey, this might not be CBD anymore. This looks like a different kind of isomer of Delta-9 THC, without getting too sciency. I think the two combined with, hey, there's a very simple, like, someone explained to me, not easy for me, but if you have any understanding of organic chemistry, which I certainly don't, but if you can extract CBD, you could do this process. And it was really catching on, particularly in markets where you didn't have any access to what you'd think of conventional THC products.

Folks were really getting excited and seeing prices rebound for CBD because of this Delta-8 trend. Of course, everybody flipped out, and you're seeing state after state kind of crackdown or get alarmed about it. That's I think where it's coming from and why it just blew up out of nowhere. I absolutely six months ago had no idea this was coming.

Joe: And you've written a couple of columns on it. And is anything going to stop it?

Kristen: Yes. I think the states will stop it, but interestingly, because, of course, our industry is so smart, everybody's already onto the next. There's different isomers, there's something called THC-O-acetate you can make. Basically, you can futz with a molecule in a lab and make different kinds of things with it. And it's really eye of the beholder if it's crap, dangerous or, you know, just people say, "Oh, it's just crap being made in the lab." Well, even like a THC vape that you think is so close to nature was kind of heated and treated in the lab if you didn't pick it out of the ground that way. So, I think there's a lot of innovation in the industry. I don't think it'll go away, but I do think states will start cracking down on isomers, but it'll also lead us to like, "Hey, what is the difference? Why does any of this need to be illegal? This is kind of silly." So we'll see, but I think for a minute, it's definitely gonna be state after state updating their language to make sure that this is covered as a controlled substance.

Joe: And something you talked a little bit about prior and I want to hit on for the next point as we talked about the price of CBD dropping and Delta-8, you know, boosting that CBD slumped economy, is CBD becoming more of an ingredient in products more than it is in industry because of that price drop and the emergence of other cannabinoids?

Kristen: Yes. I think that was always headed that way. And I don't think it's because of the price drop. I think of CBD like akinesia or other dietary or fish oil, kind of another dietary or supplement. Itself, if you need a certain...like if you have certain medical conditions that it can treat, then we'll see people taking it as the star of the show, but I think a lot of people want it incorporated in their overall wellness, and this is a good thing, because CBD isn't a very strong, potent...you know, really, people feel like it helps me, but no one feels like I am a different person. For that reason, I can see it being an element as an ingredient, but you're way closer to it than I am here. What do you think?

Joe: You know, I think, what you see is, and we've had a couple of episodes with our formulators and we've talked about obviously the gummy manufacturing, it's interesting to see all the different functional ingredients, and you talked a little bit about that, that are now going into products. And we've talked about this too before is, you know, making claims now with some other products in there. I mean, you can say, hey, it assist with sleep because there's melatonin in there and it's melatonin that's helping it where CBD is almost becoming more a little bit of the sideshow.

Kristen: And you bring...and another interesting point, at the early days, there was so little that we knew about CBD. We still have big questions, but we're knowing more. What the next frontier that is still just very few people have much understanding is blending. You know, as we talked to like, you know, a compounding chemist who says, you know, a lot of other dietary supplements, it does this when it's by itself, but when you add it to, you know, turmeric or something else, it can function differently in your body. So there's a lot to discover about if something is good and you add CBD, is it better? We don't know. You know, so I think that's kind of the next frontier.

Joe: And stuff that we've talked about in the past and we've seen it throughout this first half of the year is the consolidation in the industry. We've seen a lot of the CBD companies, not only merge or be bought out, but also expand into other areas outside of CBD into the health and wellness products. Is that something you see carrying on?

Kristen: Yep. I think it's gonna continue. A big operator is Neptune in Canada. They do not just CBD, not just a nutrient serve, they make krill oil and all kinds of health and wellness products. And I can see CBD being, like, in a larger suite for an overall health and wellness company. And when you think of it as an ingredient, if I have a business, are you maybe making cosmetics and there is an element there? Are you making food? Are you making again, dietary supplements or are you making intoxicants to party, you know, drinks? So I can see it being like, okay, if I'm gonna make party seltzers, I wanna, you know, an alcohol seltzer, and a CBD seltzer, and a THC seltzer, and where does everything fit in, and maybe CBD plays no role because that's not really a party element. So, I really think what you're hitting on at that, folks are going to start incorporating it into a larger business scheme that fits the market that they're aiming for.

Joe: We've talked a lot about regulation so far in 2021, not only on the CBD front, but we've talked a little bit about there on the Delta-8 front, kind of that same path where it's almost state-by-state because we still have no guidance. On the episode previous to yours, we welcomed Michael Patterson who talked a little bit about the recent Hemp Leaders Coalition Summit and some regulation. We've seen Senator Chuck Schumer pass some legislation through or at least propose it. Any hint as to what's gonna happen? Are we gonna see something by the end of the year, or are we looking for 2022 in the industry from the FDA and maybe even congressional action?

Kristen: No way this year, very unlikely next year, in my opinion. It's interesting, I think that change moves slower than people would like. We're seeing increasing interest. So, you know, just imagine any big social change. And I do think that drug legalization or rethinking drug policy is kind of a social change. It starts in some states and then other states that said, "Oh, we'll never do that," well, fast forward a few years, then they start looking at it. Then Congress starts to look at it. If you are an old-timer in cannabis policy, you would say, even having someone return your phone call in Congress, much less put their name on a bill, much less the head of, you know, a Democratic or Republican majority leader, put their name on a bill and even to have hearings. Just this month, or sorry, in July, just in July, the House approved a writer on an appropriations bill.

Again, this is super wonky, boring stuff, but think to reevaluate why we as a country decide that below 0.3% THC is legal and why do we pick that number and this is illegal? Kind of to rethink the Controlled Substances Act. So this stuff simmers and we're gonna be... And now, I think what's so interesting and exciting is that now the debate is how to legalize. What should the tax be? What should the social equity measures in there be? It's going to happen. Back to your earlier point, I do think this year, no way, I think 2022 is still really optimistic. Just also in the last few days, this group, the Consumer Products Association, which includes CPG companies like Coca-Cola, Pepsi, and Kellogg basically wrote another letter. We're seeing everybody write letters, wrote another letter asking the FDA to regulate.

Here's my skepticism on the FDA. This agency was created over 100 years ago with the whole reason for the agency is to take politics out of approving this, that, or the other, to say, okay, it shouldn't be up to politicians and people in business what is healthy to eat because this really should be for the scientists to decide. We really need to take Congress out of it and take business and politics out of this stuff. So there's going to be, although I think tomorrow, Congress would vote to make FDA set some regulations, I do think at the same time, there's just still like this real hesitancy to make FDA do something and say, "Okay, the role of the FDA is to go slow sometimes when it's annoying and to make sure things are safe." And I think even into '22 and possibly beyond, I think the FDA will be consumed still with pandemic response, and not have... It's crazy to me that we're in August and there's still no permanent director of the FDA. They're still under temporary, you know... So, I think their eyes are in a different direction. I think it's gonna go slow. And I think there's gonna be a lot of pressure to not put pressure, to avoid pressuring FDA on this. But, you know, I know everybody wants action tomorrow, but I think if I'm making business plans, I would not plan next quarter, I wouldn't plan next year.

Joe: And as we head towards the next quarter, the final months are here at 2021, we'll talk about one of the bigger industry trade shows in just a bit, but the international focus, we're talking Canada, the European market, and now the newest contender, Mexico. Do these markets maybe provide promise for manufacturers?

Kristen: No. And what I say about that is it's interesting to see lots of nations looking at this. And again, like the progress is slow but exciting. And almost every country thinks, "We'll be the exporter. We'll produce this and then send it to all you drug users, other places. We don't need this stuff ourselves, you know?" So, right now in Canada, they've only sold about 20% of what they...I mean, that's crazy. Like imagine if you made furniture and you only sold one in five couches, you wouldn't be in business for too long. So Mexico, as you pointed out is really barreling toward legalization. What that looks like is going to be something to see. Although I will tell you, if I'm a manufacturer or even a retailer, all my eyes are on ourselves, Mexico, and in Latin America.

Just this last week, there was a story about rose producers in Ecuador pivoting to hemp because of low prices in ornamental cut flowers. The reason I'm saying I'd watch those markets is because think about when you go to the grocery store, walking through the produce section, you don't see a lot of stuff in the produce section that was grown in Canada, but half of what you're looking at in the produce section came from Mexico. And they have a climate that is suited to growing this plant, very low labor costs, low land costs, low tax, really a perfect recipe for really competing against the US-based producer. So really, even though everyone says, "Oh, hold your horses on Mexico," I think, you know, who knows how long that's gonna take? It could be a couple of years. But when it happens will absolutely be disruptive. I think you're seeing, and I'm not sure what you're saying in your area, but I think already if I'm thinking of, let's say, building a big, huge $10 million greenhouse or, you know, thousands of acres in something, I'm really thinking how long can I compete when there's going to be production and if it will be legal to sell here from south of the border? So, I think it could be very disruptive. And even though it's not gonna happen this year, I think it definitely needs to be on everybody's radar.

Joe: And there's some sessions and some information on the international market, a part of MJBizCon coming up in October, Las Vegas, online, in-person 10th annual, we had the CEO of MJBiz, Chris Walsh on a recent episode, and also talking about the new podcast that he launched. So, MJBizCon, why should people go?

Kristen: You know, it's funny you think of, well, why should we do anything, you know, we have the internet? Let's just Zoom everything. And there really though is a difference in personal connection and seeing folks in person, which is why there exists a whole industry of conventions, conferences, and meetups. I do think there's just like, you know...I think we've seen in the last year or two, what we've been through the limits of trying to connect and make deals with internet and technology. So, I think that's why to go because there is a difference of making personal connections one-to-one, I think it's different in person. And I think there's a real thirst for that kind of interaction to get back to. And, of course, because the journalists have a big say, the reason to go is that the content just is the best.

Joe: Absolutely. Yeah, and we'll certainly have more on that, but you can also visit www.hempindustrydaily.com, you'll see the links to MJBizCon, you can register right on the website. Coming up in Las Vegas in October, 10th annual. And the keynote speaker I saw was recently announced since we last talked to Chris if I'm correct.

Kristen: Yeah, from Shark Tank. It's exciting. You know, what's funny, they say, you know, again, like I was saying that there were folks that wouldn't even answer the phone in Washington. Also, we're seeing leaders in business and like guys from Shark Tank that, of course, we would have loved to have had on stage, but they would not have gone to talk to a pot show. Another big new name we have this year, we have the vice-president of the Sierra Club is going to be talking about sustainability. Boy, the Sierra Club would not come to a pot show, you know? So I think we're seeing...I think our show is good, but I also think we're just seeing the industry mature. One thing that I'm really excited about is there's gonna be a big sort of debate on stage about big guys coming. Is it a good thing that we're seeing big CPG, big brands, big ag, you know, big food, getting big pharma, big alcohol, big tobacco? Just this week, British American Tobacco made another investment in Canadian cannabis. So is that a good thing or a bad thing? You know, I'm really intrigued about where those conversations go as this gets bigger and bigger.

Joe: And we look forward to previewing more of that as we get closer to October. And then, obviously, of course, the big show, as I mentioned in Las Vegas, good to see the trade shows coming back in person. I know it's like you talk about Zoom and in person, we'd love to have you out here to Tampa, do an in-studio podcast, show you around, enough of the Zoom stuff.

Kristen: I know. You've been to a show since the pandemic where people...? Was it weird?

Joe: I have not. I personally have not. We are going to a couple coming up ASD Market Week in Las Vegas in a couple of weeks, we'll be up. And then next in the beginning of October, which is scheduled for Chicago. So I know our team is looking forward to getting back on the road in person.

Kristen: Let me tell you, the best thing about NACS. If you're not aware is the National Association of Convenience Stores, they have an entire wall, as long as a football field of different new kinds of Slurpees. It's the best. It's just that you have to go on like, you have to be...

Joe: Oh, I will do.

Kristen: It's a lot of fun. I think live shows are coming back and it's cool to see.

Joe: Awesome. And we'll have more info as we wrap up in October. We'll have to have you back in the podcast in a couple of months to update everybody. By then, we'll be nearing believe it or not episode 100.

Kristen: Absolutely.

Joe: Kristen Nichols, the editor of "Hemp Industry Daily," my guest on this episode of the "CPG & CBD University Podcast." And since this is the last time you'll probably be on the podcast before a college football season kicks off, I can safely say to you ‘Go Dawgs’ as we go in the college football season.

Kristen: Oh, yeah. We'll see if we got into QB1.

Joe: We'll see.

Kristen: So SEC is getting crazy.

Joe: Yeah, you know.

Kristen: Now, we'll see.

Joe: As long as they can knock off Alabama, it'll be a good season.

Kristen: Yeah. I don't think that's a good season, but we'll see.

Joe: We're patient. Kristen Nichols, editor of "Hemp Industry Daily." Great conversation. As always, we look forward to having you back on the podcast soon. And as I mentioned, www.hempindustrydaily, that's where you can catch all the latest headlines, great news, and preview more of the MJBizCon show coming up in October and register. And hit that subscribe button to subscribe to our podcast, and you can catch up on the past episodes and all the latest news and industry trends. And you can also visit YouTube to catch full video episodes of our podcast. I'm Joe Agostinelli, host of the "CPG & CBD University Podcast." Thanks for tuning in.

These statements have not been evaluated by the Food and Drug Administration. CBD products are not intended to treat, cure, or prevent any disease or condition. Always consult with your personal physician about CBD and using CBD products. CBD should never be used by anyone under the age of 18. This podcast is not intended to provide legal advice regarding the legal status of CBD and CBD products.