Just below the rows of energy drinks and kombucha at Westside Market, a deli in the Chelsea neighborhood of Manhattan, New York, are a few glass bottles of Vybes. The drink, which comes in flavors like strawberry lavender and blood orange lime, is made with cannabidiol, better known as CBD.
But a lack of federal rules and a mix of state regulations have made it impossible for Vybes to be distributed by a national retailer like Target or Walmart. That has hampered the drink’s potential growth, said Jonathan Eppers, who left the tech industry to found Vybes in 2018.
“For the first two years, we were riding a rocket,” Eppers said. “But the patchwork of laws and regulations around the space has made it difficult to grow our business.”
A little over six years ago, CBD, the non-intoxicating compound derived from cannabis or hemp, was poised to be the next big ingredient, part of a wave of drinks and foods touted as having benefits healthy or providing relaxation. Startups flooded the market with products, many promising to soothe stressed and anxious consumers.
Around 2018, CBD was everywhere, popping up in water, chocolate bars, tinctures, gummies, and skin serums. Consumers could buy sportswear infused with CBD oil and feed their nervous pups CBD and snacks. Even big corporations got involved. Molson Coors teamed up with a Canadian cannabis company to create a line of CBD-infused beverages. Constellation Brands, the maker of Modelo beer, made a $4 billion investment in a publicly traded cannabis company. Ben & Jerry’s began looking into creating CBD-infused ice cream.
In the past two years, however, the industry has stagnated. Molson Coors ended its joint venture and Constellation has written off more than $1 billion of its cannabis investments. Major companies have shelved plans for CBD products, and hundreds of startups have shut down, switched to other ingredients, or simply tempered their growth projections.
Hopes of resurrecting the market through industry efforts to put federal CBD regulation in a new farm bill were dashed when Congress approved an extension of the 2018 version of the bill in the fall.
Also contributing to the industry’s precipitous decline is the simple fact that many people are confused about what CBD is, whether it’s legal, and whether it will get them high.
The compost comes from the cannabis plant. Cannabis plants that contain high levels of tetrahydrocannabinol, or THC, are marijuana and can get users high. Cannabis plants with lower levels of THC are known as hemp.
Five years ago, Congress legalized hemp-based CBD, although CBD made with higher levels of THC remained federally illegal. But the Food and Drug Administration has refused to create rules allowing CBD to be used in dietary supplements or conventional foods. The agency said a new regulatory pathway must be created for CBD and that there was insufficient evidence to determine how much could be consumed and for how long. (The FDA has approved a drug that contains CBD and is used to treat some epileptic seizures.)
Like marijuana, which remains illegal at the federal level, CBD has been legalized by many states, creating a quagmire of different rules and problems for manufacturers.
“I saw the writing on the wall in late 2019 and 2020. It would take a lot longer to establish federal regulations around the CBD,” said Ben Witte, who founded Recess in 2018 as a sparkling water line that it contained CBD. Today, these drinks represent less than 10% of their revenue. Instead, it focuses on mocktails and Recess Mood, a line of CBD-free relaxing drinks.
Even before hemp-based CBD was legalized, stores and online retailers were flooded with products containing it. But none of them had been approved by the FDA, and some promoted outrageous and baseless claims that the infused products could do everything from treat Alzheimer’s disease to cure cancer.
The FDA began issuing warning letters to manufacturers and retailers for selling unapproved CBD products or making unsubstantiated claims about the products. In 2020, the FDA found in a sample of products that 18% contained significantly less CBD than stated on the packaging, while 37% had significantly more.
“I think the biggest question here is why do you need to have it in food?” said Dr. Peter Lurie, president and executive director of the watchdog group Center for Science in the Public Interest. “What is the objective? What does this ingredient really do for you?â€
He added: “These companies have managed to create the belief that society needs these products when there is no evidence that CBD treats anything other than the rare epileptic syndrome for which it has been approved.”
As questions about the compound mounted, state regulators began pulling CBD products from store shelves and seizing products. Businesses also encountered obstacles to selling or advertising online.
“My Meta account is forever banned from advertising after I once posted on our company page about our CBD products and it got flagged,” said Clarice Coppolino, head of brand and product development at Vital Leaf, which makes CBD chocolate, skin care and tinctures.
The COVID-19 pandemic also affected the sector. While sales in the early weeks and months of the pandemic surged as nervous consumers sought relief through CBD-infused products, interest among major companies and investors waned.
“Covid clearly took consumer packaged goods companies away from the CBD space and what was possible there to simply focus on meeting the demand for food,” said Carmen Brace, a consultant who has worked with companies that sell packaged consumer products.
Amid heavy industry lobbying, some states began legalizing hemp in various products. In 2021, for example, California passed legislation allowing hemp-derived CBD in any food, drink, and dietary supplement sold in the state. Other states legalized CBD with restrictions on the types of products it could be used in, the amounts, and where the hemp had to be grown.
Eppers started Vybes after trying CBD oil to relieve stress and anxiety he felt while working in the tech industry. The product attracted a following in its first two years, but around 2020 California regulators began pulling the drinks off the shelves. So Eppers joined with other CBD manufacturers to push for laws that would allow the product in the state.
But the confusing mix of rules has hampered Vybes’ growth. “We make a drink that many consumers want, but the big chains won’t touch,” Eppers said.
For now, Vybes, made with 25 milligrams of hemp CBD, has found a home in smaller independent and regional grocers across the country, Eppers said.
“When I entered this category in 2018, the sky was the limit,” he said. “Nobody starts a business to hit a low ceiling.â€
This article originally appeared in The New York Times.
