The loophole giveth, and the loophole taketh away.

With one technical tweak to its language, the landmark 2018 Farm Bill sparked much of the excitement and interest you’re seeing specifically around THC beverages right now. That loophole — the one that allows for hemp-derived products with THC to be sold outside of regulated dispensary channels — helped spark the long-awaited moment when low-dose infused beverages are breaking out into new stores, but also forced a reckoning in how state regulators can manage safety and quality control concerns. The fragile relationship is currently playing out in Minnesota and New York in dramatically different ways. 

The Empire State’s nascent legal cannabis ecosystem has been rife with complaints and controversy, but also interest and excitement, with the combination of rich agriculture and market access unrivaled in the Northeast. But in a sign of how quickly things can change, sales of hemp-derived products that contain more than 1 milligram of THC per serving were prohibited last month after the state’s Cannabis Control Board voted to pass an emergency regulation.

In one move, the burgeoning market for low-dose seltzers from national players like Cann to local businesses like Ayrloom (a division of Beak & Skiff Farms) has been effectively paralyzed. Yes, life will go on in regulated medical channels, and creating an effective safety and product integrity oversight structure for the hemp industry is a noble cause. But in the meantime, brands are scrambling to reassess strategies; Cantrip told a local news station it was pulling out of the state, while Ayrloom is pivoting to licensed dispensaries. Even retailers that paid $300 in annual fees for a license to sell hemp-derived THC products were left holding the bag. 

It’s a weird reminder of what Minnesota looked like last year as the state worked to wrangle a red-hot THC drink market into a governable and regulated system. With a new law in place since this spring, that market is starting to truly flex its economic power, generating monthly sales “likely topping $1 million” thanks to its widespread retail access in liquor stores, restaurants, grocery stores and other venues, none of which are required to hold a special license. Per Leili Fatehi, partner and principal of government relations firm Blunt Strategies: “We’re seeing that consumers are much more prepared and comfortable engaging in conversations, learning about the products and approaching them safely.”

Are New York’s growing pains just another necessary part of its evolution? Potentially, but as individual states adopt their own laws and business practices, leading to more competition, there’s a real danger of falling behind. 

Go Deeper: How The Hemp Beverage Alliance Aims To Standardize A Hazy Market

In February, we detailed the long and winding legal battles facing Takeover Industries, the penny stock beverage company behind the NXT LVL brand, which had built up a national distribution network and forged celebrity partnerships with names like Manny Pacquiao and T-Pain. 

But just as things appeared on the outside to be going great for NXT LVL, inside the company its sales were collapsing and deals fell apart amid a litany of unpaid bills, mismanaged financial records and lawsuits that resulted in a tangled web of infighting and fraud allegations between its founders, executives, investors and even “Pac Man” himself.

Now, a new CEO has stepped in – an investor named Tom Zarro – who has been working since this winter to settle the myriad lawsuits, restructure the company, and create a new brand identity. The business has now relaunched online with a new brand, called Lock’d In (the rights to the NXT LVL name were lost, Zarro said) and it has even salvaged its relationship with Pacquiao, who agreed to take $200,000, stock and a board seat in a settlement agreement.

That Zarro has managed to reshape the remnants of Takeover into an operational business is no small task. But lawsuits aside, the biggest question still remaining is the one all startups face: can they find the consumer?

Read the full story on BevNET.

After unveiling a brand refresh and bringing on rapper Jack Harlow as co-owner earlier this year, functional beverage brand PHOCUS is now expanding its partnership with The Vitamin Shoppe through an exclusive flavor drop. The new variety, Pineapple, will be available in-store and online through September 2023 for $29.99 per 12-pack, alongside the brand’s flagship Orange PHOCUS. 

• “Energy and functional drinks are exceptionally popular with our customers and this launch brings an existing new vision to the category, from the flavors and formulation to the design and branding,” said Muriel Gonzalez, president of The Vitamin Shoppe, in a press release. 
• PHOCUS, previously marketed as Clear/Cut Phocus, debuted its new name and brought on 25-year-old rapper and actor Jack Harlow as co-owner back in April. According to CEO Joey Nickell, the launch was more of a “clean slate” than a rebrand. 
• Following the refresh, Nickell told BevNET the beverage brand is preparing an ambitious national expansion with a goal of reaching 10,000 retail doors. 
• Available in four core flavors – Orange, Strawberry, Peach and Apple – each 11.5 oz. can of PHOCUS pairs 75mg of caffeine with 75mg of L-theanine. The drinks retail for a SRP of $28.99 per 12-pack on Amazon.

Investors in performance energy drink maker Celsius Holdings Inc. asked a federal judge last week to approve a $7.9 million preliminary settlement to end a class action case which alleges the company’s executives “inflated revenue by misstating costs of an employee stock compensation program,” Law360 reported.

• The lawsuit was brought against Celsius by the City of Atlanta Police Officers’ Pension Plan and the City of Atlanta Firefighters’ Pension Plan.
• The complaint alleged that Celsius gave workers stock awards in order to minimize compensation costs. After the company’s stock value spiked in 2021, nine workers left the company, leaving Celsius responsible for paying out their shares when the stock was valued at an all-time high.
• The complaint also alleges that Celsius falsely inflated net income numbers in 2021, including reporting a loss of $9.37 million in Q3 that year as a $2.75 million positive net income gain. In its defense, Celsius admitted to the discrepancy but said it was an accidental accounting error.
• The plaintiffs have now submitted an unopposed motion for preliminary approval, arguing that while they believe their claims are strong, ongoing litigation presents “clear risks.”

The hosts discussed a celebrity foodie’s new glitzy brand of $10/box pasta, the debut of a black-owned and gastronomic-inspired brand of toaster pastries at Target; French’s sweet limited-time partner and a brief recap of the recently held 2023 Tales Of The Cocktail convention. Also featured is the latest edition of Special Ops with Andrew Guard, in which the operations expert shares his take on both opportunities and challenges that are impacting new and emerging beverage and food companies.

Listen to the full episode.