The growing popularity of hemp-infused beverages has spawned legislation in multiple states this year to treat the intoxicating drinks like beer and wine rather than cannabis products.
Hemp beverage bills were introduced this year in more than a dozen states, including Alabama, Arizona, Arkansas, California, Connecticut, Illinois, Kentucky, Massachusetts, Missouri, North Carolina, Rhode Island and South Carolina.
Kentucky Gov. Andy Beshear (D) signed a bill last month that gives the Department of Alcoholic Beverage Control oversight of hemp beverages while banning their sale in bars and restaurants. A bill on its way to Tennessee Gov. Bill Lee’s (R) desk would also shift oversight of hemp drinks to the Alcoholic Beverage Commission.
“This is going to be a huge category, and it makes a lot of sense in the wine and spirits distribution space,” said Ryan Moses, president and CEO of Best Brands, a Nashville-based wine and spirits distributor.
Alcohol wholesalers backed the Tennessee bill and have found common cause with hemp beverage brands in other states as well.
Hemp-infused drinks are a fast-growing segment of the adult beverage market, with the potential to become a $4 billion industry by 2028, according to one forecast. The industry’s challenge has been getting the products into customers’ hands given the state and federal regulatory uncertainty.
Christopher Lackner, president and CEO of the two-year-old industry group the Hemp Beverage Alliance, said his members are increasingly engaging with alcohol wholesalers to strategize ways to give hemp beverage brands access to liquor retailers.
“What we are seeing is that when these products get on retail shelves next to other 21-plus products, they do very, very well,” Lackner said.
The fledgling alliance comes as states seek to create order out of chaos following the legalization of hemp for purposes of feed, fiber and grain in the 2018 federal farm bill. Entrepreneurs quickly seized on loopholes in the law to create new hemp-infused psychoactive products, which were sold outside of regulated cannabis and liquor marketplaces.
State regulators have been most alarmed by hemp edibles that are available online and in convenience stores and gas stations, often within reach of minors. California Gov. Gavin Newsom (D) announced in September a moratorium on the sale of THC-containing hemp products, citing risk to youth.
This year has brought a wave of state-level bills to regulate or even quash the industry, with high-profile fights playing out in Florida and Texas.
Read more: Hemp wars heat up in states
The hemp beverage industry increasingly sees alcohol aisles as a path to prosperity. Hemp drinks, Lackner said, easily fit into the beer and wine distribution system because they come in cans and bottles. Lackner also said consumers want to purchase hemp beverages in the same places they go for alcohol.
Liquor wholesalers also see opportunity, especially amid recent declines in alcohol sales. In some states, wholesalers are leading the charge to pass hemp laws with the goal of gaining access to a new line of products.
In Missouri, beer distribution company owner Steven Busch helped write one of several competing bills that have roiled the legislature.
Steve Barclay, executive director of Arizona’s beer and wine distributors association, was the primary drafter of legislation to regulate the manufacture, distribution and sale of adult hemp beverages. Among the bill’s requirements was that hemp beverage companies use licensed beer, wine and liquor wholesalers to distribute their products to retailers.
“We have a tried and true and tested system for regulating adult beverages that contain alcohol,” Barclay said. “If you’re going to do it, do it right. We have a system that works well.”
The Senate overwhelmingly passed the bill in March, but it never came up for a vote in the House. The hemp industry sued Arizona last week to block Attorney General Kris Mayes’s (D) order that intoxicating hemp products be removed from store shelves by April 24.
A beer wholesalers-backed bill in Minnesota this year met a similar fate. The measure would have automatically allowed licensed liquor wholesalers to distribute hemp beverages without an additional license. In 2022, Minnesota passed nation-leading legislation to legalize intoxicating hemp products containing a maximum of 5 milligrams of THC per serving.
Brandt Erwin, president and legal counsel of the Minnesota Beer Wholesalers Association, said he believes the best solution for hemp beverages is to incorporate them into the existing three-tier system for alcohol, which separates manufacturers, distributors and retailers.
“When you have a system that works and has worked, it makes sense to look to that as guidance,” Erwin said.
Jonathan Miller, chief counsel to the U.S. Hemp Roundtable, said he welcomes the liquor industry to the “big hemp tent.” But he expressed concern about state-level bills such as House Bill 28 in Texas, which would allow beverage sales while barring hemp edibles and tinctures. He also objected to bills that give liquor distributors exclusivity and ban direct-to-consumer sales.
“We ask them to join us in a framework that rejects prohibition and embraces competition, prevents access for minors and protects retail and e-commerce sales for all elements of the hemp industry,” Miller said.
Some retailers also oppose state laws that require hemp beverages to go through established alcohol distribution channels. Jon Halper, owner of Top Ten Liquors, a 15-store chain in the Twin Cities, said hemp beverages account for 15% of his sales and he expects significant growth in the coming years. Halper said he is not “anti-distributor,” but he doesn’t like the idea of mandating that hemp products ride on beer trucks.
“The alcohol wholesalers, particularly the beer wholesalers, are trying to lock up the industry because there’s a lot of money involved,” Halper said. “I think that brands and retailers should have the right to pick their path to market.”
Sean O’Leary, a former Illinois liquor regulator who now practices law under the moniker the Irish Liquor Lawyer, agrees.
“The beer wholesalers are taking the lead on hemp beverage bills in many states, which should be a concern of anyone that wants free and open markets,” he wrote in a recent blog post.
The National Beer Wholesalers Association said in a statement that states should look to the regulatory structure for alcohol as a model for regulating intoxicating hemp products.
“The three-tier system has a time-tested record of balancing access and availability of intoxicating products, with public health considerations and revenue collection,” said David Christman, vice president of state affairs for the Wholesalers Association.
Correction: This story was updated to fix a quote attribution.