The beverage giant cites uncertainty over federal legalization of hemp products: which has resulted in other stakeholders (such as retailers and distributors) being unwilling to do business with CBD brands.
Difficulties in launching and scaling CBD products
Truss USA is a joint venture between Molson Coors and HEXO Corp launched in 2020 (mirroring their ongoing Canadian joint venture launched in 2018).
The goal was to “find a new space at the intersection of the beverage world and CBD frontier”, with premium non-alcoholic beverages and drink drops.
Unlike the Canadian joint venture, Truss USA focused solely on CBD drinks (never exceeding 0.3% THC) in accordance with US regulations.
CBD water derived from hemp FairvilleLaunching in Colorado in January 2021, Truss USA now ships to 26 states including Alaska, Arkansas, Colorado, Connecticut, Florida, Iowa, Kentucky, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Texas, Vermont, Virginia and West Virginia.
However, the company doesn’t see enough potential in this category in the near term to keep operations running: especially noting the difficulties in expanding the business as it hopes to do in the emerging beverage category.
“While many US states have legalized cannabis products in recent years, including a handful in the recent election cycle, there is still a near-term path to federal legalization, leaving uncertainty in the market.” says the company.
The Food and Drug Administration recently sent out a set of warning letters to some CBD-infused brands: creating what appears to be an “aggressive” stance against brands that fail to market their products explicitly.
While Truss USA was not one of those companies (and its announcement to close US operations came before the FDA’s warnings), the campaign illustrates the continuing regulatory minefield and the array of state regulations that CBD brands face.
“This has left some chain store retailers and distributors reluctant to accept CBD drink brands, complicating distribution and making the path to profitability challenging.”
However, if the regulatory landscape in the United States changes, the company says it would be willing to re-enter the space.
The importance of scale
Meanwhile, Molson Coors and La Colombe Coffee Roasters have jointly agreed to terminate a distribution agreement for the latter’s RTD coffee beverages in March, with La Colombe combining its RTD coffee business operations with bagged coffee and multi-service cold brew coffee.
Decisions in RTD coffee and cannabis will allow the company to “invest more time, energy and resources behind spaces outside the beer aisle that offer the most growth potential,” Molson Coors says, such as ZOA in the energy drink space, Five Trail in the full-strength spirits space, and Topo Chico Spirited, an upcoming offering in the spirit-based ready-to-drink cocktail space.
The company also continues to test and experiment with other non-alcoholic beverages through its partnership with LA Libations.
“Not every project or innovation will meet our ambitions. What is important is that we learn from each and build capabilities that will serve us well in the future,”Pete Marino, Molson Coors president of emerging growth, said in an email to US distributors.
“The key for us is to get very far behind what works and smartly switch out what doesn’t work from a volume perspective, like CBD drinks.”
Hear from Truss Canada and LA Libations in our Beverage Innovations webinar
Don’t worry if you missed last week’s Beverage Innovations Symposium: with speakers from Truss (Canada), LA Libations, Rabobank, GoodSport, and Nerd Focus! You can still continue ordering for free here.
#Molson #Coors #exit #CBD #market #United #States
