MINNEAPOLIS (KFGO-WCCO) — Congress this week, as part of a deal to reopen the government, passed a provision that would restrict hemp-derived THC products, a move Minnesota producers say would be a major blow to their business.
An agriculture spending package removed products with more than 0.4 milligrams of THC in them from the definition of hemp, which effectively puts a federal ban on the drinks and edibles available for purchase.
Most of what is on store shelves in Minnesota has 5 milligrams per serving. A hemp-derived drink can have as much as 10 milligrams per container.
“This law, as it’s written currently, would eliminate the hemp industry,” said Jason Dayton, cofounder of Minneapolis Cider Company, which sells its Trail Magic THC drinks in 24 states.
Coming out of the pandemic, his cidery — like many breweries — got into the hemp THC business after a 2022 Minnesota law explicitly legalized the products with certain regulations. Four years prior, the 2018 federal Farm Bill removed hemp from the list of controlled substances, creating an opening for THC and CBD products across the country.
Dayton said hemp drinks have been transformative. They sold 3 million cans last year.
“We never imagined the success that would come from THC beverages, and it has really propelled this business from being a small local operation to a national beverage company,” Dayton said.
Supporters of the new language in the shutdown deal have described that as a loophole being exploited and said that it needed to be fixed.
That distinction — legal at the federal level — makes it easier for businesses to operate compared to still-restricted marijuana. There are barriers for the latter because of banking and insurance limitations, and steep federal tax penalties.
Hemp can also be transferred across state lines, too. Making products illegal would mean prohibiting sales beyond Minnesota’s borders.
Since Minnesota has its own laws legalizing low-dose hemp THC products, businesses like Trail Magic could still sell here. But Dayton believes the drinks would no longer be available in liquor stores, tap rooms or restaurants. Instead, customers would have to go to a licensed cannabis dispensary.
It would be possible for Trail Magic to operate in other states with their own laws similar to Minnesota’s, but Dayton said that would be unsustainable because it would require manufacturing in each of those places.
Half of his sales are outside of the state.
“Hemp has been a way to expose the cannabis market to traditional retail. Imagine if General Mills had to produce Cheerios in every single state. Your Cheerios would be a lot more expensive on the shelf, same with beer, same with wine, same with any other product,” Dayton told WCCO on Friday. “That’s why we have centralized manufacturing in brewing, in consumer packaged goods, and that’s what hemp has allowed us to do in cannabis.”
The Minnesota Office of Cannabis Management in a statement said the hemp-derived THC products can stay on store shelves for now as it evaluates the impact of the federal change, which won’t take effect until next year.
“We are preparing to host a discussion soon with participants of the hemp industry, state officials and policy makers to discuss the impacts of this new law and how Minnesota will chart a path forward,” a spokesperson with the state agency said.
Minnesota has collected nearly $40 million in revenue from more than $350 million in retail sales in the last three years, according to data from the Minnesota Department of Revenue.
Leili Fatehi, owner of Crested River Cannabis Company, said most of her customers are in Minnesota. But her business bottles cans for national companies, which means the new law would still be a hit to her bottom line.
Fatehi also mentioned tax and banking implications as a concern. But for now, she isn’t changing course on her business plans.
“Our immediate posture is to not panic or make drastic decisions on the basis of this change that came out of nowhere and largely lacks support,” Fatehi explained in an interview. “We’re really taking a lot of our cues from national distribution partners and retail partners, who themselves seem to be staying the course and remaining optimistic that a change will come.”
Dayton, too, expressed confidence that Congress will repeal the law before it actually takes effect.
“We think there is hope for this industry once people start to realize the impact that this is going to have on jobs all across the state and at thousands of breweries across the country,” he said.
Comments