How Hemp Food Fits Into the CBD Industry

February 21. 2019. 6 mins read

Here’s some food for thought: One of the longest running wars in U.S. history appears to be nearly over. More than 200,000 people have been killed on foreign soil, while more than eight million have been jailed. Some reports say we spend upwards of $47 billion per year in this never-ending conflict. We’re talking, of course, about the U.S. War on Drugs. The tide finally seems to be turning, with more than 30 U.S. states legalizing medical marijuana, and 10 of those granting full legalization. A major victory occurred in December when Congress legalized hemp, an action that sent the movers and shakers in the cannabis industry into a frenzy ever since. The latest jump off the deep end came just this week when Tilray (NASDAQ:TLRY) announced it would buy hemp food company Manitoba Harvest for about $317 million.

Size of the Hemp Market and Hemp Food Market

The purchase of the Winnipeg-based company buys Tilray a few things. It gets a company that claims to be the world-leader in hemp-based foods, with 2018 revenues more than double its own at about $70 million. It also gets access to 16,000 retail stores in North America, where Manitoba sells hemp food products like hemp hearts, protein powder, and granola. The hemp industry was valued at about $820 million in 2017, according to the Hemp Business Journal, with hemp food accounting for $137 million or just 17% of the total. Manitoba also produces a hemp dietary supplement in oil and gel pill form. Hemp supplements was a $45 million market in 2017. That means Manitoba enjoys a 38% share of the hemp food and supplement market, if we’re to believe these numbers.

Pie chart showing the scope of the hemp market.

Compass Diversified Holdings, which owns a controlling interest in Manitoba, claims the hemp food company owns more than a 50% share of hemp heart seed sales and hemp protein powder sales in North America. Let’s just suffice it to say that Manitoba Harvest is a major player in the hemp food market.

The New Secret Hemp Food Ingredient: CBD

It’s important to note that none of Manitoba’s food and supplement products currently contain CBD, the non-psychoactive cannabinoid found in cannabis that is booming in popularity thanks to its perceived health benefits. Some of the major CBD health applications include anti-anxiety and anti-inflammation conditions. The U.S. Food and Drug Administration (FDA) even approved the first anti-seizure medication containing CBD last year. Manitoba’s hemp oil supplements are CBD-free, but are rich in heart-healthy omega fatty acids:

No end to the benefits of the lovely cannabis plant.
No end to the benefits of the lovely cannabis plant. Credit: Manitoba Harvest

But Tilray probably isn’t all that interested in omega-3 hemp pills or hemp protein shakes. In an interview with MarketWatch, Tilray says it plans, through Manitoba Harvest, to “introduce a line of CBD-infused tinctures, a CBD spray, and CBD gel caps.”

Size of the Hemp-CBD Market

A cannabis industry analyst organization, Brightfield Group, claims the hemp-CBD market could be worth $22 billion by 2022, which on the surface sounds like someone has been partaking of the research stash. Even the analysts admit it sounds crazy, but stand by their numbers based on speaking with “hundreds of people, crunch[ing] tens of thousands of numbers, and research[ing] a great deal behind our desks.” (We assume they keep the bongs behind their desks.) But like the stock market itself, the numbers are also based on perception, as the Brightfield Group goes on to say:

It is popular among vendors from smoke shops to chiropractors, consumers from decorated veterans to soccer moms, even catching the eye of celebrities like Jennifer Aniston, Gwyneth Paltrow, Olivia Wilde and Kate Hudson, who have aimed to give consumers a glimpse into a glamorous and healthy lifestyle infused with CBD products.

We’re certainly seeing plenty of interest in the CBD market ourselves. We just wrote about a very interesting cannabis company in Canada called Charlotte’s Web (CWEB:CN) that produces hemp-based CBD products. And it may soon list on U.S. markets, according to Bloomberg, thanks to the passage of the farm bill. There are also other companies out there looking for some of the action.

Click for company websiteIn the same article, Bloomberg reported that another cannabis company called Vertical plans to spin off its hemp assets into a separate company called Vertical Wellness and list it on the NASDAQ. Anticipating passage of the Farm Bill last year, Vertical opened a hemp-CBD processing facility in Kentucky’s former tobacco country. Ironically, it was tobacco that originally supplanted hemp as the state’s main cash crop. Vertical expects to produce up to 300,000 pounds of biomass for CBD oil extraction.

Click for company websiteThen there’s a hemp farm in Vermont called Sunsoil (formerly Green Mountain) which raised $7 million last year from a VC firm named One Better Ventures that had also invested in brands like Seventh Generation and Burt’s Bees, according to the VTDigger. One Better Ventures and Sunsoil obviously hope to be early movers in the hemp-CBD space. Sunsoil extracts its CBD oil from hemp using organic coconut oil in a process known as lipid extraction. After lab tests have confirmed the concentration and quality of the oil, the company’s pharmaceutical grade robots get to work.

In the case of both these companies, we see a focus on the CBD component of the market as opposed to selling CBD-free food products.

Regulatory Indigestion for Hemp, Food, and CBD

All of this would seem to imply that we’ll soon be able to quaff CBD-hemp drinks out of vending machines at the rest stops off the interstate. Slow down. CBD drinks, regardless of their source, are still no more legal than THC cannabis drinks under federal law. The same goes for any food. The problem is that the FDA considers CBD a drug – a somewhat legal one at this point – which means it’s still illegal to put it into foods or supplements without the agency’s say so. Even local governments are cracking down. New York City, for example, has prohibited the sale of CBD-infused foods.

Still, plenty of companies are willing to test the waters.

Click for company websiteCount the Alkaline Water Company (NASDAQ:WTER) among them. Another player in the lucrative natural products industry, the Canadian company listed on the NASDAQ in just the last few months, with a line of CBD-hemp infused flavored waters in development as soon as the regulations are sorted out. It sounds like the sort of play that we saw from New Age Beverages last year in cannabis drinks.

Proposed line of hemp waters from Alkaline Water Company.
Credit: Alkaline Water Company

Brightfield Group says it took regulatory hurdles into consideration when it made its market forecast, but obviously takes the grass-is-greener approach to analysis. It notes, for instance, that only four states have expressly banned CBD and only two prevent hemp sales specifically (though one, strangely, happens to be California).


The yippies, former politically active hippies who are now mostly yuppies, seem to have finally won. The fallout from last year’s landmark farm bill has yet to fully play out, so expect the regulatory environment around CBD-hemp to remain as murky as a Florida swamp. The FDA has signaled that it’s willing to keep an open mind, but the machinery of government is not well oiled these days. Companies are growing bolder when it comes to producing projects in grey regulatory zones but high levels of regulatory risk don’t make for a good investment strategy for retail investors. At least in the case of Manitoba Harvest, they aren’t selling CBD products at the moment – only hemp food products – so they can keep on selling and avoid all that risk around CBD. Seems like a smart move by Tilray which could do well by decreasing the volatility of their stock price.

You can look at the roller coaster ride that Tilray’s stock has taken since it debuted last year – from a low of $20 per share to $300 – to see the volatility still in play with pot stocks in general. Tilray’s chief executive himself was careful to say that the company will continue to follow all applicable laws as it moves forward into the CBD-hemp space. Unfortunately, it’s still not entirely clear what that entails at this point. It’s the sort of confusion that ensues any long, protracted battle – but peace and profits will come.


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