Marijuana Business Magazine - May-June 2018

five years – to establish a brand,” said Smoke Wallin, chief marketing officer and president of distribution for Vertical, a company in Agoura Hills, California, that is developing a CBD oil that can be infused into alcohol. Some big companies are wasting no time, especially with Canada poised to legalize recreational marijuana. Last October, New York-based Constellation Brands, which distributes more than 80 wine, beer and spirits brands, paid $190 million (CA$245 million) for a 9.9% stake in Canadian cannabis cultivator Canopy Growth Corp.Wallin and others believe more large beverage companies will follow. “I’m absolutely certain the Anheuser- Busches, the Bacardis, the Jack Daniel’s are going to get into this, but they will wait until marijuana is fully legal to EXECUTIVE SUMMARY More alcoholic beverage makers are producing beer, wine and spirits infused with hempseed oil, cannabidiol or cannabis terpenes. It could become a lucrative product niche for hemp growers, CBD producers and extraction companies. Below are factors to consider before taking the plunge: • The marriage of alcohol and cannabis faces unique regulatory and legal hurdles, making it difficult for hemp, CBD and extraction companies to produce their own booze. • The better option for those companies is to sell their products to alcoholic beverage manufacturers. • The U.S. Drug Enforcement Administration’s declaration in December 2016 that CBD is a Schedule I controlled substance – like marijuana and heroin – complicated matters for companies interested in getting involved in CBD-infused alcoholic beverages. • There’s no formal system to connect cannabis and alcohol producers, but because hemp-, CBD- and terpene-infused alcohol is still a cottage industry, keeping it local is a good first step. do it,” said Wallin, who has more than 25 years of experience in the alcoholic beverage business. “Anyone that can get a brand established in the meantime, and show traction, is going to be very attractive to the big players.” That translates into business opportu- nities for hemp growers, CBD produc- ers and companies that extract oils such as cannabis terpenes.Those products don’t carry the same stigma in the United States as THC-laden marijuana, but it won’t be a slam dunk. The marriage of alcohol and cannabis faces unique regulatory and legal hur- dles, making it difficult for hemp, CBD and extraction companies to produce their own booze.The simpler option for those companies is to sell their products to alcoholic beverage manufacturers to get a foothold in what could become a lucrative product niche. Striking a Partnership That’s what Joe Pimentel did. In 2017, Pimentel, the owner of Luce Farm in Stockbridge, Vermont, decided to start producing CBD-infused honey to set his farm apart from other area hemp grow- ers. He approached Long Trail Brewing in Bridgewater Corners, Vermont, about carrying the honey in the brewery’s restaurant and gift shop. “The CBD hemp market is so imma- ture, so our strategy is to align with a lot of Vermont brands that are better known than ours,” Pimentel said. Long Trail decided not only to sell the honey, but also to make a beer with it. “We liked that the hemp gives us new flavors we can’t get anywhere else,” said Head Brewer Ian Harbage. But the honey played havoc with the beer’s con- sistency, so the brewers opted for Luce’s CBD extract and hemp terpenes instead. Terpenes are separated out at the beginning of the hemp-extraction pro- cess, like an essential oil, and then the CBD extract remains. Pimentel used to do his own extractions, but “nothing we could create in our kitchen had consis- tent levels of THC,” he said. He started researching the best extraction techniques and decided on a carbon dioxide method offered by the PhytoScience Institute in Waterbury, Vermont. PhytoScience now handles all of Luce Farm’s hemp extractions, and the terpenes are consistently documented at less than 1 part per million THC. CBD has more health properties but not as much flavor and aroma as ter- penes. “The main terpenoid in cannabis is the main flavor in hops, which makes terpenes and beer a good partnership,” said Andrew Follett, the owner of Philadelphia-based Keystone Canna Products, which was founded in 2014 to help hemp farmers distribute nationally. Follett also said CBD, which has a slightly nutty flavor, is a better option for wine and spirits manufacturers that don’t want a distinct cannabis taste or smell in their products. But he noted that it takes time, effort and creativity to mix the oily product into beverages, which can deter some brewers and distillers. Ian Harbage is the head brewer at Vermont- based Long Trail Brewing. Photo by Drew Vetere/Long Trail Brewing 42 • Marijuana Business Magazine • May-June 2018