The beverage giant cites the lack of certainty regarding the federal legalization of cannabis products: this is causing other stakeholders (such as retailers and distributors) to be reluctant to buy CBD brands.
Challenges in launching and scaling CBD products
Truss USA is a joint venture between Molson Coors and the cannabis producer HEXO Corp, launched in 2020 (reflecting its ongoing Canadian joint venture launched in 2018).
The aim was to ‘create a new space at the intersection of the beverage world and the CBD border’ with premium soft drinks and beverage drops.
Unlike the Canadian joint venture, Truss USA focuses only on CBD beverages (never exceeding 0.3% THC) per US regulations.
Hemp-derived CBD juice multiwellLaunched in January 2021 in Colorado and Truss USA is now available in 26 states including Alaska, Arkansas, Colorado, Connecticut, Florida, Iowa, Kentucky, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Texas is shipping. Vermont, Virginia and West Virginia.
However, the company does not see enough potential to continue its operations in this category in the near term: noting the challenges of growing the business, especially as it hopes to do in an emerging beverage category.
“While several U.S. states have legalized cannabis products in recent years, including a handful in the last election cycle, there is no near-term path to federal legalization, leaving the market uncertain.” says the company.
The FDA has recently sent out a series of warning letters to certain CBD-infused brands: creating a seemingly ‘aggressive’ position towards brands that fail to openly market their products.
While Truss USA isn’t one of those companies (and the announcement of the US operations shutdown preceded FDA warnings), the pressures point to the ongoing regulatory minefield and a host of government regulations facing CBD brands.
“This complicates distribution and makes the path to profitability a challenging one, causing some chain retailers and distributors to be hesitant to accept CBD beverage brands.”
However, if the regulatory environment in the US changes, the company says it will be ready to re-enter the space.
the importance of scale
Meanwhile, Molson Coors and La Colombe Coffee Roasters have jointly agreed to terminate a distribution deal for the latter’s RTD coffee beverages in March, as La Colombe combines operations for its RTD coffee business with bagged coffee and cold brew coffee multiservices.
Molson Coors says the RTD coffee and cannabis decisions will allow the company to “invest more time, energy and resources outside of the beer aisle in areas that offer the most growth potential”; for example, ZOA in the energy drink segment, the Five Trail full strength spirits segment, and the upcoming Topo Chico Spirited in the spirits ready-to-drink cocktail segment.
The company also continues to test and experiment with other soft drinks through its partnership with LA Libations.
“Not every project or innovation may meet our goals. The important thing is that we learn from each of us and develop skills that will serve us well in the future.”Pete Marino, head of emerging growth at Molson Coors, said in an email to US distributors.
“The key for us is to get behind what works and to get out of things that don’t work on a scale like CBD drinks in a smart way.”
Hear from Truss Canada and LA Libations in our beverage innovations webinar
If you missed last week’s Beverage Innovations webinar featuring speakers from Truss (Canada), LA Libations, Rabobank, GoodSport and Nerd Focus, don’t worry! You can still catch up on demand for FREE.