Aurora Cannabis bought Reliva – a Massachusetts-based producer of hemp-derived CBD products – in a $40 million deal that included potential earnouts.
And Cronos Group spent hundreds of millions of dollars to acquire the Lord Jones hemp CBD brand.
The purchases came after the passage of the 2018 U.S. Farm Bill that legalized low-THC hemp, including hemp-derived CBD.
That legislation generated optimism about a new, multibillion-dollar market for hemp-derived products.
Now, after investor exuberance about the cannabis sector has largely worn off, several Canadian marijuana companies have retreated in one way or another from the hemp-derived CBD market south of the 49th parallel:
Canopy announced in 2020 that it would stop farming hemp in New York in the face of “an abundance of hemp,” although it continued producing and selling hemp-derived CBD products. The Kirkwood project was abandoned, local media reported.
Cronos announced in June it was exiting the U.S. hemp CBD market and relaunching Lord Jones in Canada.
This month, Aurora said it was closing Reliva.
Green Roads, a Florida CBD manufacturer acquired by Canadian cannabis manufacturer The Valens Co. – which was subsequently acquired by Canadian producer SNDL — filed for bankruptcy earlier this year and was acquired by Global Widget, parent company of Hemp Bombs.
The Canadian pullback from hemp CBD in the U.S. partly reflects the diminished fortunes of once-high-flying Canadian cannabis licensed producers.
It also reflects a general lull in the American hemp-derived CBD market, given the U.S. government’s continuing struggle over how to regulate products containing CBD.
“It’s a very, very difficult market in the U.S. right now,” said Bethany Gomez, managing director of Chicago-based cannabis analytics firm Brightfield Group.
Brightfield Group data shows the U.S. CBD market peaked in 2021 at roughly $4.7 billion in sales before contracting to $4.4 billion in 2022, with another decline expected in 2023.
Canadian ambitions
When big Canadian cannabis companies originally invested in U.S. hemp-derived CBD assets, they were well-capitalized and eager to expand their operations around the world.
“And around 2020, it was starting to become clear that there’s only so much that these cannabis companies can grow within the country of Canada – Canada’s only so big, and there’s only so much cannabis that can be consumed there,” Gomez explained.
Canadian licensed producers (LPs) invested heavily in international markets, but Gomez said the U.S. was “the golden prize.”
As publicly traded companies in the U.S., those LPs couldn’t deal with a substance that’s federally illegal.
The American hemp-derived CBD market seemed like a way “to get a foothold there without violating federal law,” Gomez said.
“They could play in the CBD space and then eventually take that presence in CBD into the (high-THC) cannabis space. ”
For Canadian firms, operating in the U.S. CBD space was meant to be “an opportunity to plant the seed of a brand early on (and) get that into the mainstream,” said Beau Whitney, chief economist of Portland, Oregon-based hemp and marijuana data and analysis firm Whitney Economics.
“And then, as the adult-use market opens up, you’ve already got a brand established – and then you just convert over to your adult-use product line.”
