Today’s legal cannabis-infused food and beverage market is home to a dazzling array of product types, spanning everything from top-selling mainstays like candy and confectionery to baked goods like cookies, salty snacks, culinary and cooking staples, and more.

Walk into any dispensary in the U.S., and you will find gummies for sale—and probably some chocolate and cookies. These are core products consumers have come to expect to find.

But the playing field is wide open. At this early stage of the legal cannabis industry, many fringe products are experimental. These fledgling brands offer products like infused honeys, dessert syrups, olive oils, and espresso beans … ice creams, freezer pops, long-chew taffies, and pop-in-your-mouth candies. These are young brands seeking to find a foothold in a regulated CPG niche—albeit a niche that continues to see impressive year-over-year expansion.

Over the past year, we have seen the number of U.S. states offering legal sales of cannabis products, to either medical or recreational adult consumers, increase to 31. During 2021, Connecticut, New Mexico, New Jersey, New York, and Virginia passed legislation to permit recreational adult sales.

Desire for widespread decriminalization of cannabis is very strong across the U.S. According to a recent Gallup poll, with results released in November 2021, more than two-thirds (68%) of Americans now support full cannabis legalization (see “Support for Legal Marijuana Holds at Record High of 68%,” Gallup, November 2021).

When specifically focusing on the cannabis market for health, wellness, and medical needs, support across American rises to over 90% (see “Americans Overwhelmingly Say Marijuana Should Be Legal for Recreational or Medical Use,” Pew Research Center, April 2021).

This industry momentum will eventually prompt legislative and regulatory action at the federal level, for products containing non-psychoactive cannabidiol (CBD) for use in mainstream foods and beverages, as well as adult-use and medical foods and beverages containing psychoactive tetrahydrocannabinol (THC). The country has spoken. It’s only a matter of time.

INFUSED FOOD & BEVERAGE GROWTH

The overall cannabis market across legalized U.S. state markets is now valued at an estimated $25 billion, with 40% sales growth for 2021.

Cannabis-infused foods and beverages have likewise seen strong growth, notes Jessica Lukas, chief commercial officer, BDSA, Louisville, CO. “Per BDSA’s U.S. Cannabis Market Forecast, the dispensary channel legal cannabis edibles market brought in an estimated $3 billion in sales in 2021 across all legal U.S. markets,” she says—with strong growth expected to continue. “BDSA’s Cannabis Market Forecast projects edibles in the dispensary channel to bring in $4 billion in sales in 2022 across all legal U.S. markets. Cannabis edible sales are expected to grow to total $6 billion by 2025.”

According to BDSA Retail Sales Tracking:

• Edibles accounted for about 15% of dollar sales in the dispensary channel across BDSA-tracked markets in 2021

• Candy dominates edible category sales in the dispensary channel, with candy bringing in about 70% of edible sales across BDSA-tracked markets

• Gummies, the preferred edible format for cannabis consumers, continue to drive the majority of candy category sales

• Gummies were responsible for about 90% of candy sales in the dispensary channel in California in 2021

• Infused foods and chocolates have seen their share of dollar sales gradually decline over the past two years in the dispensary channel, with infused foods making up about 5% of edible dollar sales in Q4 2021 across BDSA-tracked markets, while Chocolates accounted for 10% of edible dollar sales in Q4 2021

• Pills, a category BDSA includes in edibles reporting, steadily held about 5% of edible dollar sales in the dispensary channel

• Beverages have seen strong sales growth, but still make up a small (about 5%) share of edible sales in the dispensary channel across BDSA-tracked markets

In terms of overall relative growth, gummies set the pace. “According to BDSA’s Retail Sales Tracking data, gummies are still No. 1, so their growth in dollars is by far the biggest,” says Lukas. BDSA Consumer Insights data suggest convenience is a major factor driving gummy sales.

But beverages are rising fast. “Beverages are seeing the largest growth in percentage share of sales among edibles, but they’re still a very small base,” says Lukas. “Many new beverages offer fast-acting effects, and a familiar form factor that appeals to many consumers.”

THE FEDERAL WAIT

The legal cannabis food and beverage industry continues to wait for federal guidance on use of CBD ingredients in mainstream CPG product development.

“After the Farm Bill opened the floodgates for commercial hemp production, many—including BDSA—assumed a relatively quick FDA ruling that would allow edible products containing hemp-derived CBD,” says Lukas. “As the months turned to years, non-edible CBD products, especially pet products, have done well—but edible products have remained off the table for major brands and mainstream retailers.”

“According to BDSA’s Retail Sales Tracking data, gummies are still No. 1, so their growth in dollars is by far the biggest,” says Lukas.

Federal activity related to cannabis legalization continues to move forward. Most recently, Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Committee Chairman Ron Wyden (D-OR), and Sen. Cory Booker (D-NJ) sent a letter to Senate colleagues asking for participation in drafting a federal cannabis legalization bill they project to file by April.

But FDA has not yet advanced guidance for use of CBD in foods and beverages, thereby providing a clear regulatory pathway for product development, product safety, etc.—a necessary step that might have to wait until 2023. “We do not expect the FDA to issue a guidance regarding CBD as a food additive in 2022, which will in turn continue to limit the potential of CBD edible sales outside of the dispensary and e-commerce channels,” says Lukas.

“Allowing CBD as a food and beverage ingredient would make CBD products available to average consumers in states where it currently isn’t,” says Lukas. “Most of the CBD-infused beverage products are sold through e-commerce. Lifting the restrictions on CBD as a food additive would allow big box retailers to sell these products, thus making it available to other consumers across the U.S., growing the category.”

ONGOING ACTIVITY

Every year, consumer-backed, state-led legislation progressively opens new markets for cannabis industry growth. As of early 2022, 23 U.S. states have new or expanded cannabis legislation under consideration.

“Speaking to legal cannabis markets only (regulated, dispensary channel), continuing opening of markets at the state level and the eventual federal level will continue to have the greatest impact on cannabis market performance,” says Lukas. “As more markets legalize, availability increases, and the numbers of people who consume grows. So with that, demand for ingestibles will rise, too. Federal reforms such as the SAFE Banking Act, STATES Act, and others are also likely to improve the performance of legal cannabis markets, making it easier to operate within and across state borders.”

But remember that innovation is another path forward to grow infused foods, advises Lukas. “Inhalables are still king, so infused edibles that mimic the fast-acting effects (onset and offset) of inhalables are likely to attract a broader section of the consumer base and increase overall edible sales,” she says. “Further, innovations focused on catered experiences continue to drive category growth, with fast-acting, minor cannabinoids, solventless, terpenes, and beyond offering opportunities for brands and retailers.”

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