The Zola products will be packaged in formats “similar to what we do now as well as two other packaging formats that allow us to leverage some Caliva investments in technology,” said Cuvelier, who said he had been working on beverage formulations with CBD before he met Caliva CEO Dennis O’Malley at a conference last October and started doing consultancy work for Caliva.
The decision to sell to Caliva was taken as the two parties got to know each other and it became clear that teaming up could unlock a significant new growth opportunity, he told FoodNavigator-USA.
“We were not looking to sell; we weren’t running a process or anything like that. This was more of a serendipitous event as we saw an opportunity to do something big in the cannabis space.
"We also saw there was an opportunity to put the Caliva brand [which is currently focused on dispensaries and online sales] into the mainstream retail market [where Zola has a presence] very quickly.
“Beverage is so underserved in both cannabis and hemp-based CBD at this point.”
Zola can take Caliva into new channels
Zola - which was purchased by KarpReilly in 2016 - has established relationships with multiple natural and conventional grocery chains across the country, supplying coconut water, acai juice, and sparkling energy drinks to 7,000+ stores.
Caliva - which owns a 110,000 square foot facility that includes a genetics lab, grow rooms [at this stage for marijuana rather than hemp], an oil extraction facility, and a dispensary - supplies cannabis products (flower, vape, oil) to more than half of California’s 500+ dispensaries via its own DSD network, supported by a 12-person sales team and a three-person business development team.
“Currently we’re not growing our own hemp,” said Caliva CMO Stephen Matt, “but we’re pursuing a strategy where we touch every part of the process.”
Why do people buy CBD?
But what kind of crossover is there between consumers buying cannabis products with THC to get high; those buying hemp- or marijuana- derived CBD tinctures to tackle chronic pain or deal with anxiety; and shoppers that might buy a can of soda in a grocery store with 10mg of CBD for a perceived ‘health & wellness’ benefit?
While there is a lot of crossover between CBD users and marijuana users, there are distinct usage occasions, need states, and product formats for all of the products in this marketplace, said Matt.
Some consumers regard CBD as a medicine that they expect to deliver a clear ‘result’ such as pain relief, while others simply “like the idea that they are at the forefront of health and wellness,” he said.
“We’ve found some processing techniques and emulsion technology that increases the bioavailability, and we’ve been testing it in some of our sparkling energy waters and coffee on friends and family who are feeling the effects at between 10-20mg, where they are getting a great sensation of body relaxation, although everyone responds differently. If people want higher doses they are going for tinctures.”
Retailers: I think people will pile in anyway unless the FDA really cracks down
Retailers, said Cuvelier, are in three buckets when it comes to CBD. “Some are jumping in now; some are just waiting for the regulations to change and as soon as there is clarity they want our products immediately. And others will be very late followers.”
If there is a lengthy delay while the FDA comes up with a rulemaking process around CBD, said Cuvelier, “I think people will pile in anyway [while they wait for the new rules] unless the FDA really cracks down on CBD. We can either go national or it could be a state by state rollout, so we’ll see how things play out.”
Formulating with CBD
So what is CBD like to work with, and does it make sense to combine CBD (which is claimed to provide a calming effect) with a stimulant such as caffeine (a combination recently explored by GT’s in its Dreamcatcher range)?
It might seem counterintuitive, but it works, insisted Cuvelier, who said new functional beverages infused with zero-THC broad spectrum hemp extracts under the Caliva and Zola brands will be targeted at mainstream retailers, while THC-infused beverages and other products would be sold in California dispensaries under the Caliva brand.
“We’ve been taking CBD and mixing it with all kinds of different things, and I’ve found it’s really interesting to see how it works alongside caffeine in our sparkling energy waters.”
As for taste, he said, the emulsification technology Caliva is deploying encapsulates the CBD, “which blocks the flavor, so the beverages we’ll be launching have minimal to zero flavor, you can’t even tell it’s in there.”
62% of CBD users purchase it to deal with medical issues from chronic pain to anxiety
According to a 2018 survey of 2,400 CBD users published in the journal Cannabis and Cannabinoid Research, 62% used it to address specific medical problems including chronic pain, arthritis, anxiety, depression, and insomnia; while 38% used it for “general health and wellbeing.”
CBD users are also much more likely than the general population to use marijuana, with 55% of the CBD users in the above survey saying they were regular users of marijuana vs under 10% of US adults that regularly use it according to government data.
Will lack of scientific evidence hold the market back?
While much of the research on CBD comes from animal studies or uncontrolled human case studies with very small samples, noted a recent report from Rabobank, The Future of CBD in Food & Beverage, lack of evidence will not necessarily hold the market back.
“Consumers are already using CBD in large numbers, even though there is little evidence backing its therapeutic benefits. Furthermore, they are turning to relatively unknown brands of unknown origin and often misleading labelling. This is a clear indicator that consumer excitement about CBD is an organic phenomenon, and not created by a big marketing spend from a large corporate food or pharmaceutical company.”
And if the science in areas such as sleep quality does stack up, it could be a gamechanger, predicted Rabobank.
“The biggest opportunity we see in the food-as-medicine category is the sleep-aid market, which is reportedly worth more than $70bn annually in the US. Unlike some other medical problems like pain, there is a history of using food and beverages as a natural sleep aid – herbal tea is perhaps the best example. A target formulation of CBD in a beverage with scientifically-proven sleep-benefit would be the purest 'pharma' play for CBD beverages, and a product like this could be thought of as a natural Ambien competitor.”
The bigger problem facing the industry right now is the regulatory climate, noted Rabobank, with the FDA recently re-iterating that CBD is illegal in foods, beverages and supplements, although it is focusing enforcement action on companies making “egregious” claims while it explores the regulatory pathway ahead.
“There is a real possibility that the FDA will not approve CBD food and beverage products at all, without congressional action,” noted Rabobank.
“And even if the FDA allows CBD to enter the food supply, they will likely severely restrict its concentration in consumer products.”
We don’t think there is a large first-mover-advantage in the CBD food and beverage space
But it added: “For companies that don’t want to break the law or potentially endanger consumers by making CBD products, there is one consolation: we don’t think there is a large first-mover-advantage in the CBD food and beverage space.”