About those beverages with THC from hemp

IF YOU’RE A MASSACHUSETTS RESIDENT, you’re probably aware that in 2016 cannabis became legal in the state of Massachusetts. Since then, over 300 retail dispensaries have popped up across the Commonwealth, creating new legal access to THC, the psychoactive ingredient in marijuana.

This year you may have noticed THC showing up in places outside of dispensaries — in beverages being sold in liquor stores and other outlets.  Some have reacted with alarm at THC being marketed in these new settings, but what’s different is these products aren’t made from marijuana. They are made from hemp.  

In 2018, the US Farm Bill was renewed with a key new provision legalizing and defining “hemp” as any cannabis plant grown on a USDA-compliant hemp farm that is less than 0.3 percent d9-THC on a dry-weight basis. (D9 is shorthand for delta-9, which refers to the most naturally occurring configuration of the THC molecule.)

Hemp and marijuana are both the same cannabis plant, but with the key distinction that hemp is federally legal and marijuana is not. Almost all cannabis found in dispensaries is marijuana or products derived from marijuana, and all cannabis products on liquor store shelves are derived from hemp.

THC beverages initially began popping up in Massachusetts marijuana dispensaries in 2021 with the launch of Levia out of Georgetown (there were some outlier brands earlier than that, but Levia was the first broadly available recreational THC beverage in the state). Additional brands launched, including my brand Cantrip, later that year, and every year since then has seen new entrants into the marketplace. These beverages are capped at 5 milligrams d9-THC by state law.

The average price for the beverages was $7 a can at the time, and prices remain high – prior to the 20 percent tax levied on recreational cannabis products – meaning a four-pack would run you $33.60 out the door.

The cannabis beverage business wasn’t a big success. Cannabis beverages move slowly in dispensaries, as they are designed for new cannabis consumers, fewer of whom visit dispensaries generally. The 5 milligram cannabis beverages do not do well in dispensaries, accounting for 1 percent or less of revenue.

Running a beverage business in the dispensary system is difficult, as beverages have a higher necessary standard of quality and scale – making the endeavor very expensive from both a capital and operating cost perspective, and limiting the ability to make a quality beverage. Also, dispensaries demand margins of 50 percent or more, making the products prohibitively expensive. Dispensaries are also notorious for not paying suppliers in a timely manner, making the cash-intensive business of operating a canning line almost impossible to achieve without large sums of capital to fall back on while awaiting payment from dispensaries.

All of these factors have disincentivized beverage brands from selling their products in dispensaries or, in some cases, made it impossible. With the total sales of THC beverages in dispensaries being a tiny percentage of overall sales, dispensaries and manufacturers were not interested in solving these issues.

Then, in 2022, Minnesota signed into law its own hemp-derived edibles bill, which piggybacked on what some had called the hemp “loophole” in the US Farm Bill. The Minnesota law essentially said the state believes hemp-derived edibles are legal and not just a loophole, and should be permitted with some standards around them. This turned out to be a boon for the state. Quickly, breweries were able to add new products to their lineups – making up for the increasing shortfall and retraction of the craft brew market.

Suddenly, the public had access to tested THC products where previously there were none, as the state established testing standards. When Minnesota then went to fully legalize cannabis in the state, they kept these rules (with some important amendments, including specifying that liquor stores could sell these products and limiting the per container dose to 10 milligrams.) Since then, the category has boomed, with the state becoming the national leader in consumption of THC beverages.

Compliant products eventually ended up on retail shelves in large retailers like Total Wine & More. Some retailers are even reporting these products are among their best-selling SKUs, and distributors are thrilled to have a category that makes up shortfalls in beer sales as people increasingly are interested in alcohol alternatives.

So it’s natural that other states and distributors would be interested. Indeed, Tennessee and Kentucky have both passed regulations permitting hemp-derived THC products in their stores under certain conditions, and other states are moving to play catch up with their laws.

Unlike what has been asserted in some news outlets in Massachusetts, these products are regulated. In Minnesota, where many are manufactured, the state mandates testing that is up to snuff with any state marijuana program. As someone who developed state-legal marijuana products for nearly a decade, I can attest that the standards are as strict or stricter than most state programs.

Cantrip products from hemp are manufactured identically to Cantrip products manufactured from marijuana and to even higher quality standards, given that we are able to work with more experienced beverage manufacturers. Can we regulate and tax these drinks better? Absolutely.

There are also bad actors that need to be dealt with. For example, some companies have chemically converted CBD into d8-THC, which has not been evaluated or approved by the Food and Drug Administration and can have dangerous side effects. D8-THC is being sold in the Commonwealth at sketchy gas stations and vape shops, often targeting minors. This is illegal in Massachusetts as d8-THC was specifically banned in December 2021, with some exceptions for products sold through dispensaries.

Here’s what I think Massachusetts should do.

First, codify that THC from hemp can be used in drinks sold by establishments able to ID customers. Set an age limit of 21-plus for all intoxicating drinks containing hemp d9-THC and require batch-level testing meeting the standards of Massachusetts marijuana programs in terms of potency, microbials, mycotoxins, heavy metals, and pesticide panels.

The state should ban all synthetic cannabinoids and give the Department of Public Health the authority to regulate hemp products, check for compliance, and enforce bans on d8-THC. The current authority resides with local health boards that often do not have the resources to do the job.

Raise the limit on THC in beverages sold in dispensaries from 5 milligrams to 100 milligrams to be consistent with chocolate bars, gummies, and all other edible formats to allow dispensaries to profit from the audience they see most frequently. Meanwhile, limit the THC content of hemp-derived beverages to 10 milligrams.

Impose a reasonable hemp-derived tax at 6 percent to 8 percent, consistent with other states. This approach has worked well in Minnesota, and has become a win for brands, distributors, and retailers. It is even a win for the eventual dispensaries that will open, as they will have a broader audience of consumers who started with edibles and have graduated to the stronger products they will sell – increasing the total consumer base of cannabis. It will be a win for Massachusetts dispensaries for the same reasons.

What should we not do? Ban all intoxicating hemp cannabinoids. All that will do is force people to buy the less safe, untested products that will continue to pervade vape and smoke shops that don’t care about selling to teenagers or ripping off trademarked products. Bans don’t work, and people follow the path of least resistance. But allow low-dose THC products in liquor stores and retailers across the Commonwealth, and everyone wins.

Adam Terry is the CEO and cofounder of Cantrip, a Boston beverage maker.