California just passed a bill to legalise hemp – and there are ASX cannabis stocks that could benefit
Health & Biotech
Health & Biotech
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On October 6, California Governor Gavin Newsom signed Assembly Bill (AB-45), formally permitting the sales of hemp-derived CBD products in the state.
Hemp has been legalised at the US federal level since 2018, but state agencies have been slow to clarify the kinds of CBD products that may be added.
The framework has been confusing to say the least, and to play it safe Californian weed producers have been sticking to the Sherman Food, Drug and Cosmetic Law, which prohibited the sale of hemp-infused foods and cosmetics.
But now, the AB-45 bill changes all that by clarifying the regulatory framework and cleaning up the market with new defined standards.
The bill has practically overridden the the Sherman Law, so that dietary supplements, food, beverages, cosmetics, and pet food won’t be considered adulterated solely because of the inclusion of hemp in its ingredients.
The bill also covers testing, labelling, approved source and registration requirements, and will allow a lead time for products to meet compliance obligations.
California is the largest CBD market in the US, which means the passage of this bill will create a well-defined and stable regulatory environment that could result in new opportunities within the hemp space.
As the biggest state, the California bill is also expected to create a ripple effect, and influence regulatory change across other states of the US.
ASX-listed Elixinol Wellness (ASX:EXL) is one of a handful of Australian companies that could benefit from the legislative change.
California is Elixinol’s number one e-commerce sales market, accounting for 14% of its total US e-commerce revenue and where it enjoys the highest conversion rates.
The bill passage also coincides with the launch of Elixinol’s upgraded online shop and e-commerce platform.
The company estimates that 45% of CBD consumers purchase online, and the new site was designed to improve user experience, along with a buy now, pay later (BNPL) option.
“California is a major market opportunity,” said Elixinol’s CEO, Oliver Horn.
“The new guidelines for companies that sell products with hemp extracts could help clean up the CBD market nationwide, given California is by far the largest and most important CBD market in the US.”
Horn also expects the new bill to create new trade opportunities between hemp producers and major retailers, who were previously seeking clear regulatory guidance at the state level.
There are other companies on the ASX within the hemp category that could benefit from the latest regulatory move.
In the US, the company’s subsidiary Ananda Hemp is the leading pharmacy brand for hemp-derived CBD products. Ananda produces nutraceutical products for human and pet consumption, as well as topical creams and salves.
The company is benefiting from the increase in nutraceutical use across the US, where an estimated 77% of Americans use supplements.
EOF says it’s the only CBD manufacturer currently selling on the CVS pharmacies’ shelves, and is also the only company with an FDA authorisation to study a hemp-derived CBD product.
The company sources Tasmanian hemp to produce its range of CBD-based wellness products.
It currently distributes products under the award winning “13 Seeds” brand.
The brand was recently launched on Amazon’s US Marketplace, its first international foray outside of Australia.
The company has a range of CBD and hemp-derived products in the US sold through its licensed distributor, Health and Happiness International.
More than 30 products are now in the market, with an additional six expected to launch in coming months.
The company is involved in hemp seed selection, farming, processing, and packaging, as well as distribution and sale of bulk and retail products.
Although its primary market is in Australia, APH could potentially benefit from the new legislation over the long term as it looks for export markets.