Tag: The Beard

  • High Expectations

    High Expectations

    Credit: TSD

    While the legality of Delta-8 THC products is questionable, retailers say consumer demand is booming.

    By Timothy S. Donahue

    Delta-8 THC is currently one of the hottest cannabis products on the market. During the Tobacco Plus Expo (TPE) in May, an estimated 75–80 exhibitors out of 350 were offering a Delta-8 product. Many companies were introducing new Delta-8 products at the event; for example, Beard Vape Co., Charlie’s Chalk Dust, JustCBD and TD Distribution Co. all launched their own brands.

    Recent estimates predict CBD sales in the U.S. could reach $1.8 billion by 2022. Trevor Yahn-Grode of cannabis industry analytics company New Frontier Data recently told MedPageToday.com that Delta-8 THC had retail sales of at least $10 million in 2020. That number is estimated to double in 2021. Based on the number of Delta-8 vendors at TPE (see “Finally Face to Face,” page 20), sales could triple. It was probably the most heavily hawked cannabis product at the event.

    The Beard Vape Co. launched its HRVST Delta-8 brand after numerous distributors started asking about the new cannabinoid hitting the mass market, according to Zachary Kestenbaum, vice president of sales. He said his main objective at TPE was to talk with other distribution companies about where the Delta-8 market is headed. Kestenbaum said consumers like the product because it’s not as overwhelming as the traditional Delta-9 THC, the psychoactive component of marijuana commonly referred to as only THC.

    “In the ’70s, ’80s, ’90s, people were smoking marijuana with THC levels at 12 [percent] to 15 percent. Now they’re breeding strains that are 24 [percent] to 26 percent THC (Delta-9 THC). It really can give that head anxiety to people,” he said. “That’s why people like Delta-8 THC because you’re getting a little bit of the psychoactive effect but not at that 25 percent level like you get with the Delta-9 THC. People are preferring the Delta-8. They like it better.”

    First discovered in 1941, Delta-8 THC is only slightly different from its cousin compound Delta-9 THC. The two chemicals are only one chemical bond apart, according to Josh Church, a scientist and managing director of Roots Holdings. Research has shown that Delta-8 is a powerful anti-seizure drug. “The issue is it just doesn’t naturally occur at significant levels, so it’s really easy to ban,” said Church, adding that Delta-8 also promotes relaxation, clear-headedness and increased positivity.

    Research has also shown that Delta-8 significantly helps reduce stress, stimulate an appetite and lessen nausea. Delta-8 is a less “head high” and more of a body high without the nervousness and paranoia often associated with Delta-9 THC. Delta-8 THC, users should be warned, will also turn up on a drug test as “THC,” according to Church.

    Looking at legality

    While its popularity is spiking across the U.S., Delta-8 is not without controversy. While hemp itself is federally legal (at or less than 0.3 percent THC), each state has different laws and restrictions regarding byproducts derived from hemp, including Delta-8. No products containing Delta-8 have been tested by the U.S. Food and Drug Administration or are FDA-approved.

    Twelve states have completely banned Delta-8 sales. Those states include Alaska, Arkansas, Arizona, Colorado, Delaware, Kentucky, Idaho, Iowa, Mississippi, Montana, Rhode Island and Utah. New York has a proposed rule to ban Delta-8 products, which is under a comment period until July 19. California, Oregon, Vermont and Washington are in the process of enacting regulations for Delta-8 products. Several other states are also considering bans.

    The federal legality of Delta-8 products is disputed. The misinformation and ambiguity surrounding its legality is why some manufacturers in the CBD industry took time to develop and market their own Delta-8 products. Jakob Gutierrez, product specialist for JustCBD, which launched its JustDELTA-8 brand at TPE, said it took the company time to launch its Delta-8 product because it wanted to be sure it was working within the law. JustCBD only sells its products to retail shops and distributors; it does not sell directly to consumers.

    “We wanted to make sure we were covering ourselves and making sure we were doing it right, complying with the right laws. Now, we were missing out a little bit because of that, but we’re back on track,” Gutierrez said. “We got on the train, and orders are exponential for the Delta-8. People are coming in, just ordering various product, and walking out. It’s insane how fast this stuff is flying out.”

    Ask eight people if Delta-8 is legal federally and you’ll get eight different answers. Some believe that the vagueness of the 2018 Farm Bill, which legalized hemp and hemp-derived products, means that Delta-8 is currently legal under federal law. “Because Delta-8 is such a new product, many state laws don’t address it at all, which puts it in a gray area of de facto legality,” according to Leafly, a cannabis information source. The reason states have banned Delta-8 products is an uncertainty about what it is and what it does, according to many Delta-8 manufacturers.

    On Aug. 21, 2020, the U.S. Drug Enforcement Administration (DEA) issued an Interim Final Ruling (IFR) that stated hemp-derived Delta-8 is federally prohibited and is to be considered the same for enforcement purposes as Delta-9 THC and that “all synthetically derived tetrahydrocannabinols (THC) remain Schedule I controlled substances.” The memo states that these products cannot be shipped to customers from retailers through the U.S. Postal Service or any other shipping method, and it is illegal to use and possess these products in states where cannabis is not legal.

    The U.S. Department of Agriculture’s position on Delta-8 THC is that the Farm Bill mandates only a Delta-9 THC limit and doesn’t regulate Delta-8 at all, so Delta-8 is not part of the agency’s hemp mandate, according to previous statements. Since the amount of Delta-8 THC found naturally in hemp is almost 1,000 times lower than the amount of Delta-9, the agency saw no reason to address it at all, including as part of its “total THC” testing requirement.

    A hemp trade association and a hemp company have filed a petition in the U.S. Court of Appeals for the District of Columbia challenging the DEA’s IFR. That case is still being reviewed. The D.C. Circuit petition challenges the IFR on the basis that: 1) the DEA did not follow the appropriate notice and comment procedures, 2) the DEA does not have authority under the Farm Bill to issue the IFR, and 3) the DEA’s acting administrator lacks authority to issue the IFR.

    Not all states are anti-Delta-8. For example, Florida’s statute states that “any hemp product intended for human or animal ingestion or inhalation which is sold in Florida must comply with all Florida statutes and rules. Any hemp or hemp extract products offered for sale or sold in Florida must comply with all labeling rules and have a certificate of analysis that shows a total THC (THCA x .8777 + THC Delta-9 = total THC) content of 0.3 percent or less.” Florida is the only U.S. state to have enacted legislation to provide a framework for the legal sale of Delta-8.

    Florida’s statement on Delta-8 clarifies that Delta-8 does not run afoul of any Florida law and, in fact, certifies that the manufacture and distribution of Delta-8 is allowed in Florida, according to ACS Laboratory, a Tampa, Florida-based CBD testing facility. “Despite Florida’s conservative legislative trends, the state’s public policy toward Delta-8 is progressive and ultimately beneficial,” ACS’ website states. “By establishing a structured and comprehensive regulatory framework for manufacturers and distributors to follow, Florida is enabling a burgeoning industry to continue to grow and evolve while simultaneously ensuring the safety of buyers by mandating certificates of analysis for all [Delta-8] items sold.”

    Chemistry lesson

    The proposed updates to those New York rules that ban Delta-8 included a provision declaring that all cannabinoid and cannabinol products made through a chemical process called isomerization can no longer be sold in New York. The new rules specified the compounds Delta-8 and Delta-10.

    Isomerization is, in its most basic explanation, adding a chemical bond to a molecule, according to Church. “Basically, anything you can make out of the THC molecule is banned because all isomers of said molecule are banned—technically,” explains Church. “If you remember Spice or K2, they were synthetic THC. The issue was the DEA; the FDA would ban the new molecule—say tetrahydrocannabinol (THC) 9753—and then within the next week, they would come up with THC 9756. And it was this cat-and-mouse game where the DEA, the FDA, and the Chinese authorities couldn’t stop them fast enough until they finally just banned all isomers.”

    Many industry players say that the federal government will soon legalize marijuana, and the ambiguity around products like Delta-8 and Delta-10 THC will disappear. President Biden has publicly said that he supports the decriminalization of cannabis and removing it from the Schedule I list while Vice President Kamala Harris has gone further, stating that she supports full legalization. But like all the states that have legalized Delta-9 THC and have specifically banned Delta-8, it would not be surprising to see the federal government make some of those same decisions, according to Church.

    “Regulation of these cannabinoids … it’s going to take an act of Congress. Then it’s really hard to try and predict what Congress is going to lay forth in the legislation. I mean, look at the nicotine space with synthetic nicotine still not being closed as a loophole around regulation,” explains Church. “Because so many states are banning it right now (Delta-8), I think the federal government will come in with some sort of hefty regulation on all the isomers or conversion molecules.”

    Tony Riva, CEO of TD Distribution Co., parent to the Hi Drip e-liquid brand, also launched a Delta-8 brand at TPE. Riva said he didn’t have the concerns many of the other manufacturers had. He says the vapor industry has been dealing with a harsh regulatory environment for nearly a decade. He doesn’t see why the cannabinoid industry is going to be any different, especially as more and more cannabinoids come to market. 

    “If I lived in fear all the time in this industry, I’d never get anything done. We are just trying to provide a legal product and hope that the government doesn’t tell us that we can’t. It’s a constant battle with their … tyrannical overreach that they’ve thrown down on the vaping industry,” he says, adding that he expects the cannabis industry to be federally regulated in some form within the next few years. “People like Delta-8; people like Delta-10 or CBD. They feel that it helps them. We are just trying to provide high-quality, legal products to our clients. At the end of the day, it’s just going to be another hula hoop to jump through.”

    Church says that he recommends any retailer or manufacturer contemplating entering the Delta-8 market to consider having a firm process of chain-of-custody documentation, adding that the cannabinoid industry should look toward the legal marijuana industry as a guideline. Church emphasized that one bad player could destroy the market by doing something wrong and causing the potential for another situation like the e-cigarette or vaping product use-associated lung injury (EVALI) issues that occurred because a few bad players used vitamin E acetate in black market THC vape pens without doing any research on the chemical.

    “Those dirty conversions are out there; there is a lot of risk to a finished good. The last thing you want to see is a dirty lab pumping out a bunch of garbage. Then it gets distributed nationally, and we have another EVALI situation. This isn’t because of the Delta-8, which is largely safe, but because it’s a bad product. I would strongly encourage anyone looking to move into the Delta-8 or Delta-10 space to meet those high standards that are required for any type of legal consumer product,” says Church. “The reality is, though, that the sky’s the limit on these types of products. I think we’re just now seeing it with Delta-8 and Delta-10 … but it’s going to evolve into a crazy world of these new designer cannabinoids. And regulation is coming along for the ride.”

  • Finally Face-to-Face

    Finally Face-to-Face

    Exhibitors react to the industry’s first trade show since the Covid-19 pandemic struck in March of 2020.

    By Timothy S. Donahue

    The vaping industry has a lot of trade shows and conferences every year. So, when the Covid-19 pandemic struck in March 2020, it was a big change. Gone were face-to-face meetings and the networking opportunities the events offer to business owners. Many businesses saw sales slump and profits nosedive. Coupled with other regulatory requirements, the pandemic caused many businesses to close.

    That’s what made this year’s Tobacco Plus Expo (TPE) trade show so special. After being postponed nearly four months, many retailers said they had surpassed their sales goals for the entire show on the first day. TPE attendees said it was a good feeling being able to fist bump clients and talk about the industry in person instead of through a Zoom conference. The TPE felt like the beginning of a much-needed return to normal.

    Held May 12–14, an estimated 2,500–3,000 people visited the TPE on the opening day of the three-day event. According to security staff, approximately 4,000–5,000 attended overall. Every morning, several hundred attendees waited at the entrance to see the more 350 exhibitors. The show was moved to May from its typical January date due to the pandemic and was also the first major trade show to be held at the Las Vegas Convention Center (LVCC) since it closed in March of 2020.

    Dan Bilzerian (right), owner of the cannabis company Ignite

    Even professional poker player Dan Bilzerian, owner of the Ignite cannabis brand, made an appearance. “Honestly, I’m excited to be back,” Bilzerian said. “This industry is really set to take off again.” When asked about Ignite sales at the show during the second day of the event, Bilzerian said the numbers looked good. “We hit our sales target for the show on our first day,” he said. “We’ve had an excellent response.”

    Many exhibitors said that the show had exceeded expectations. Rich Zagari, a sales representative for Bantam Vape, said they were unsure of what the show would be like considering it was the first industry trade show in over a year. “We didn’t know what the response was going to be, but there’s a lot of people here,” he said during the second day of the show. “Yesterday was great and today’s already shaping up to be even better. When you’re seeing customers come up to the booth, having conversations and placing orders, it makes a difference. It’s good to be back doing business face-to-face.”Zachary Kestenbaum, VP of sales for The Beard brand, said that while he was hoping for a bit more foot traffic this year, for his company the TPE was more about getting facetime with distributors, vape shops and other industry players. “I enjoy face-to-face sales more than phone sales, anything of that nature,” he said. “I think it’s much better to conduct business outright. In that regard, the show has been a great success.”

    Some exhibitors initially questioned whether the show would be able to bring in foot traffic at all. Andy Lucas, director of sales for Ripe Vapes, said with the influx of restrictions, such as the premarket tobacco product application (PMTA) requirements for the U.S. Food and Drug Administration and the recent placement of electronic nicotine-delivery systems (ENDS) under the Prevent All Cigarette Trafficking (PACT) Act, alongside the issues brought about by Covid-19, he was a little hesitant about exhibiting.

    “Actually, it’s been pretty good. It’s been more like a traditional show, especially for a big show like this. You got all these organizations with tobacco and the hemp industry, the e-liquid industry; it has really lived up to the hype surrounding its opening,” said Lucas.

    Jakob Gutierrez, product specialist for JustCBD, said he was happy to be back in Las Vegas. The attendees were also ready to spend money. While he had hoped for even more buyers to visit the TPE, JustCBD had received more orders by Day 2 of TPE than the company had gotten at the last couple of shows it attended, according to Gutierrez. “People keep stopping by and loving our products,” he said. “People are absorbing it, taking it and just asking us for more. We keep providing high-quality products, and our customers keep coming back.”

    There was a noticeable reduction in the number of nicotine vaping companies showing on the floor. The impact of PMTA and PACT Act regulation was evident. There were only an estimated 16–18 e-liquid vendors, including Coastal Clouds, BLVK E-liquid and Fresh Farms. There were an estimated five to seven hardware manufacturers, including Mi-One Brands, Myle, NJoy and Inspire, and most of them produced their own brands.

    There was also a noticeable reduction in international participants, said Tony Riva, CEO of TD Distribution Co., the parent to the Hi-Drip e-liquid brand, which was also exhibiting. Normally, there are at least 20–30 exhibitors from China alone; this year, there were only a few Chinese brands present, and the booths were manned mostly by U.S.-based personnel.

    “The international community that is normally present at this show just isn’t here this year. That’s obviously due to the Covid restrictions and complications of international travel,” he said. “That’s having an impact on sales, I think. But business is good. We are just trying to navigate the changing regulatory environment and new policies that have been put in place.”

    Regulatory concern

    Before the show, exhibitors were concerned about what impact the PACT Act would have on show sales. The rule requires a manufacturer to gather data from customers to file the mandatory monthly reports with native, state and local governments disclosing the identity, address and product received for all customers as well as remit any excise taxes owed.

    “As a best practice, it’s our priority to collect licensing information upfront from any new customer and we were glad potential buyers came to the show prepared,” said Zagari. “They had copies of these documents on hand or emailed them right away.”While many companies have already stopped using the United States Postal Service (USPS) because the PACT Act prevents the USPS from mailing ENDS products to customers, the rules have not yet taken effect. At the time of writing, the USPS had yet to publish the finalized rule. Lucas said Ripe Vapes had a large following for online sales. However, Ripe Vapes has ended all direct-to-consumer sales because of the PACT Act and now only conducts B2B sales in the U.S. “It was a difficult decision,” he said. “In the end, it was the right one to make.”

    Zagari said Bantam plans to ship through USPS until the final rules go into effect. “We are working to identify alternative shipping options, which will help us continue online consumer sales once the USPS final rule is published,” he said. “It’s our goal to ensure our customers always have access to our high-quality, flavor-filled e-liquids that are in compliance with all regulatory requirements.”The PACT Act’s definition of ENDS is so broad that it includes vape-able hemp cannabis products too. JustCBD only sells cannabis products and felt that they were “suckered in” to the ENDS definition, according to Gutierrez. The company has filed an exemption with the USPS, but that exemption will not be considered until after the final rule goes into effect. “It seems like we are jumping through a lot of hoops to sell a legal product that has nothing to do with nicotine or tobacco,” Gutierrez said.

    Beyond the PACT Act, TPE exhibitors and attendees remain concerned about the PMTA process and the full impact of FDA regulation on the vaping industry. Numerous companies, including major industry players like Dura Smoke, My Freedom Smokes, Logic and Vape Wild, have gone out of business, merged with other companies or ended all online sales.

    Kestenbaum said that as the market condenses and regulation pushes players from the market, naturally sales to the companies that remain would increase. The recent release of the list of manufacturers that have submitted PMTAs has also served a guidance for vape shop owners. Companies cannot now claim they have submitted a PMTA without having done so.

    “So many companies were saying, ‘We’re going through PMTA. We’re doing it. We’re doing it,’ and they weren’t. I think we are starting to see many of those companies drop out of the industry, said Kestenbaum. “We’re trying to run everything by the book … I feel like we’ve gotten burned for doing that because there were a lot of companies that were not. The PACT Act, PMTAs, these aren’t all bad. Let’s clear out the lawless, let’s get a little bit more organized and allow the ones doing the right thing to continue.”

    Lucas said Ripe Vapes submitted only one PMTA for its VCT flavored e-liquid. The company has a considerable international business, so its other popular flavors, such as Key Lime Cookie, are still available outside the U.S. “Our attorney said, ‘Look, your best chance … the way this is going to go, looking at it from a cost standpoint, take your No. 1 e-liquid and just roll with it,’” said Lucas. “Some of these guys are trying 10, 15 or 20 flavors. They may get it if they have enough money, and there’s a couple of guys in this industry that probably do have enough money.”

    Another concern is that the FDA has been taking its time in reviewing PMTAs, according to Lucas. He doesn’t see a path for the regulatory agency to complete reviews on the more than 6 million PMTAs submitted by the 1-year deadline (Sept. 10, 2021).

    “We find it kind of hard to believe they’re going to have this done by next year. That’s what my next question is: What happens? Do they give you an extension? I think the industry is going to force them to make some decisions because you’re putting us through this,” explains Lucas. “The submittal alone for us was huge. So, when you’re spending all this money, you want some results. … It’s going to be an interesting thing as that deadline approaches.”

    Bantam Vape has received a filing letter for its submitted products, according to Zagari. He said that the company hopes to hear back from the FDA soon but is preparing for the likelihood that the agency will not complete all reviews come September. “We are working to better understand our options and in the meantime, we are continuing to monitor FDA communications and actions.”

    TPE 2022 will be held Jan. 26–28, 2022, in Las Vegas.