CBD Products Next Big Thing at Expo West

For Presence Marketing Newsletter, April 2018
By Steven Hoffman

Despite an uncertain regulatory environment, products containing agricultural hemp extract rich in CBD, or cannabinoid compounds, were featured throughout the exhibit halls at Natural Products Expo West, appearing in botanical supplements, body care products, in foods – and in new product offerings from leading national brands.

In addition, if you came late to Expo West’s first-ever CBD Summit, a half-day workshop held the day before the exhibit halls opened, you were out of luck. Attendance was standing room only and people were listening from outside the door.

“This is the hottest product in the history of natural products, and there’s an opportunity for retailers to really sink their teeth into this whole hemp category,” Josh Hendrix, director of business development for Las Vegas-based extract company CV Sciences Inc., told the approximately 500 people attending the CBD summit.

Josh’s statement may be an exaggeration, however, industrial hemp sales totaled $688 million in 2016, according to Hemp Business Journal, and are projected to grow to nearly $2 billion in sales by 2020, led by hemp food, textiles, body care, and CBD products. Independent natural products retailers are leading that growth, with sales of CBD consumer products up over 1,700%, according to 2017 SPINS data. Sales of CBD products in the U.S. are projected to reach $646 million by 2022, according to Hemp Business Journal, with 28 percent of those sales occurring in the natural and specialty channel.

In addition, nearly three-dozen states have passed legislation in recent years allowing research or commercial production of agricultural or industrial hemp, the non-psychoactive cousin to marijuana.

Photo by  Compass Natural
Photo by  Compass Natural

Bodycare brand leaders ShiKai and Andalou Naturals were among exhibitors introducing CBD products at Natural Products Expo West.

“It’s like anything that’s innovative and on-trend and disruptive — it tends to start in health foods stores, whether it’s pomegranate or plant protein or almond milk or CBD,” Todd Runestad, Ingredients and Supplements Editor for New Hope Network, told Alicia Wallace of the Cannabist in response to the sold-out CBD Summit at Expo West.

Complicating sales of hemp-derived CBD products is the fact that the U.S. Drug Enforcement Administration (DEA) has taken the position that CBD is illegal. The DEA created confusion in December 2016 when it filed a rule notice for the creation of a Controlled Substances Code Number for “marihuana extracts.” As the rule was finalized a month later, it met opposition by the industrial hemp industry, which filed a petition in the 9th U.S. Circuit Court of Appeals. The hemp industry’s lawyers, citing a 2004 circuit court ruling on agricultural hemp and the 2014 Farm Bill, have asserted that the DEA made a scheduling action against hemp and hemp-derived extracts and created a rule that has resulted in illegal seizures of hemp products. The court is not expected to rule on that case until later this year, the Cannabist reported.

The DEA rule temporarily shook the confidence of retailers, manufacturers and Expo West organizers in CBD products, said Runestad. However, after the Hemp Industries Association’s case against the DEA in 2017 and last year’s decision by natural and specialty retailer Lucky’s Market to carry lines of hemp extracts nationwide, Expo West trade show officials allowed hemp-derived extracts to be exhibited at the show, he told the Cannabist.

“That opened the floodgates,” Runestad said.

Among two dozen hemp extract companies exhibiting at Expo West, including CV Sciences and Ananda Hemp, other hemp/CBD product highlights included the introduction of Weller Snacks, a Boulder-based startup launching the first snack food line infused with CBD-rich hemp extract; Colorado Hemp Honey, a CBD rich honey; ShiKai CBD creams and lotions; and a new line of Hemp Stem Cell personal care products from Andalou Naturals.

When the smoke clears in the regulatory arena, given the rapidly growing popularity of CBD products, we should soon see the introduction of CBD product offerings from other major dietary supplement and wellness brands, as well.

Learn about the world of agricultural and industrial hemp at the 5th Annual NoCo Hemp Expo, April 6-7, 2018, in Loveland, CO. Colorado has become an epicenter of the hemp industry, and NoCo5 will draw 5,000 – 7,000 visitors and feature nearly 150 exhibits, making it the world’s largest trade show dedicated to industrial hemp. Learn more: www.nocohempexpo.com. 

Local Economies Benefit in Organic Agriculture “Hotspots”

While supporting local and organically grown has been on the rise, researchers at Penn State University set out to assess whether or not organic agriculture has a positive impact on local economies across the U.S.

Their findings, “Economic Impact of Organic Agriculture Hotspots in the U.S.,” published in the February 2018 issue of Renewable Agriculture and Food Systems by Cambridge University Press, concluded that organic agricultural hotspots, e.g., clusters of counties with positively correlated high numbers of organic operations, lead to lower county-level poverty rates and a higher median household income. The effect, say the study’s authors, appears to be specifically due to clusters of organic operations (whether farming/producing, processing, wholesaling, etc.), since the same effect is not seen with general agricultural hotspots. In other words, the researchers found that the countywide economic benefits are due to organic agriculture in particular, and not agriculture in general.

Organic Operations Hotspots: Red: Hotspot; Blue: Coldspot; Grey: Not Significant. Source:  Economic Impact of Organic Agriculture Hotspots in the U.S., February 2018.

Using spatial statistics to identify hotspots across the U.S. of organic operations, the researchers compared economic indicators to general agricultural hotspots “to confirm that the benefits associated with organic production hotspots were, in fact, due to the organic component,” said the study’s authors, Julia Marasteanu and Edward Jaenicke of Pennsylvania State University’s Department of Agricultural Economics, Sociology and Education.

“Our results show that organic hotspot membership leads to a lower county-level poverty rate and a higher median household income. A similar result is not found when investigating the impact of general agriculture hotspots,” said the researchers.

“These results provide strong motivation for considering hotspots of organic handling operations, which refers to middlemen such as processors, wholesalers and brokers, and hotspots of organic production to be local economic development tools, and may be of interest to policymakers whose objective is to promote rural development,” the authors concluded.

“Our results may incentivize policymakers to specifically focus on organic development, rather than the more general development of agriculture, as a means to promote economic growth in rural areas, and may further point them in the direction of not only encouraging the presence of organic operations, but of fostering the development of clusters or hotspots of these operations,” they added.

Download a .pdf of the report here: https://www.researchgate.net/publication/323151836_Economic_impact_of_organic_agriculture_hotspots_in_the_United_States

General Mills is Transitioning 53 Square Miles of South Dakota Farmland to Organic

General Mills announced in early March it is converting 34,000 acres – more than 53 square miles – in central South Dakota to certified organic to supply the organic wheat it needs for its popular Annie’s Macaroni & Cheese line. The multinational food company is creating South Dakota’s largest organic crop farm to help ensure enough organic ingredients to meet the growing consumer demand for organic worldwide.

With only 1 percent of all U.S. farmland dedicated to certified organic production, this is a big deal, and part of a trend where food companies are taking a more direct interest in farming to help secure organic ingredient supplies as demand continues to exceed production. General Mills is partnering with Midwestern BioAg, a firm that helps conventional farmers transition to organic, to convert Gunsmoke Farms, a 34,000-acre wheat farm in Pierre, SD, in fertile lands near the Missouri River.

“The Gunsmoke project is an opportunity to use our scale to help convert large areas of acreage to organic as one of our tools to create a more stable supply chain. We also see it as a way to support our growing portfolio of organic businesses,” Beth Robertson-Martin, organic sourcing lead at General Mills, told The New Food Economy.

General Mills, the third largest producer of organic and natural foods, reported on March 21 that its natural and organic products portfolio was a bright spot amid otherwise disappointing third quarter results. General Mills reported net sales of $15.6 billion in FY2017. The company’s natural and organic brands include Annie’s, Cascadian Farm, Muir Glen, Food Should Taste Good, Immaculate Baking, Liberté, Mountain High, Good Natured Soup and EPIC Provisions. General Mills hopes to reach $1.5 billion in sales in 2020 for its natural and organic brands. Since 2005, General Mills’ natural and organic category has grown an average of 10 percent per year, reports Sustainable Food News.

Companies including Nature’s Path Foods, one of North America’s largest family held organic brands, and Pacific Foods also have invested in or purchased organic farmland in order to ensure supplies. Nature’s Path sources much of its organic grains including oats, wheat, heritage grains, hemp, legumes and flax from the Canadian Prairie and the U.S. Midwest, where in the past few years it has purchased thousands of acres of pristine organic farmland.

“We started growing [organic] butternut squash because of availability, Chuck Eggert, founder of Pacific Foods, told FoodNavigator-USA in 2016. “We’ve been doing this for almost 30 years, and back then, even if you wanted to do an organic product there [weren’t] enough supplies around. So we started growing our own and then we started encouraging others to do it.” Campbell Soup purchased Pacific Foods in 2017 for $700 million in cash.

“As an independent, family-run company, we have the freedom to put our money where our heart is, in support of sustainable agriculture – beyond just making organic products, Arran Stephens, co-founder and co-CEO of Nature’s Path, told FoodNavigator-USA. “We live by the mantra of ‘always leave the earth better than you found it.’”

Steven Hoffman is Managing Director of Compass Natural, providing brand marketing, PR, social media, and strategic business development services to natural, organic and sustainable products businesses. Contact steve@compassnaturalmarketing.com.