Publication

May 3, 2019Client Alert

CBD Beer and Wine Might Have to Wait

The U.S. Alcohol, Tobacco, Tax and Trade Bureau (TTB) released an Industry Circular on April 29, 2019 clarifying the federal government’s position on the legality of adding cannabis-derived ingredients (hemp or marijuana) to alcoholic beverages. In short, don’t expect the TTB to approve cannabis derived substances like CBD or THC in alcoholic products any time soon.

TTB regulates alcohol production, distribution, labeling, and adverting at the federal level.  Federal regulations require manufacturers of certain alcoholic products, usually those that contain flavorings or coloring ingredients or involve a unique manufacturing process, to obtain approval of the product’s ingredients and manufacturing details in a process called “formula approval.” TTB’s focus is on the manufacturing and labeling process, not the retail sale of alcoholic beverages.

Under TTB’s policy, it will not approve formula applications from manufacturers that propose to add a federally controlled substance as an ingredient. While a majority of states have legalized marijuana in some form, it remains a controlled substance under federal law. 21 U.S.C. § 802(16). So long as marijuana remains a federally controlled substance, TTB will not allow marijuana or any of its derivative products, such as THC, to be added to alcoholic products.

Unlike marijuana and THC, hemp and hemp-derived CBD was removed from the federal Controlled Substances Act with the passage of the 2018 Farm Bill, yet remains a controlled substance in a small handful of states. However, as we have previously written, the U.S. Food and Drug Administration (FDA) retains jurisdiction over the addition of hemp-derived ingredients in food and beverage products, and the FDA has not approved CBD as an ingredient in beverages. So, while hemp is no longer on the federal controlled substance list, TTB is not approving formulas containing any hemp-derived ingredients that have not been approved by FDA. At this point, FDA only has approved hemp seed products as a food or beverage ingredient, like hemp seed oil or hemp seed protein, which do not contain CBD.

Looking ahead, TTB’s policy signals that any alcoholic beverage manufacturer that submits a formula containing hemp-derived ingredients will need to provide an analysis of the hemp ingredients proving the absence of CBD. While CBD cannot be one of those ingredients now, this policy should further encourage food and beverage companies entering the hemp space to set up a third-party testing program for their products, as such testing will likely be required in a future regulatory regime.

While TTB’s most recent cannabis policy marries the future of the hemp and marijuana alcoholic beverage industry to FDA approval or a legislative change in the U.S., the global alcoholic beverage industry continues to drive money into research and development of products that may one day be federally approved in the U.S. As we reported in December 2018, Anheuser-Busch InBev formed a $100 million joint venture with Canadian cannabis company Tilray, and Molson-Coors similarly partnered with Quebec-based cannabis company HEXO Corp. to develop cannabis-infused beverages. With product development well under way, it seems likely that TTB, FDA, and/or Congress will continue to revisit regulatory positions and legislative changes at the federal level in the foreseeable future.

We will continue to monitor regulatory changes that affect the hemp and cannabis industries. If you have any questions, please contact one of the attorneys on Michael Best’s Cannabis industry team.

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