Early protection of intellectual property rights is a critical component in any business’ efforts to secure a competitive advantage in the marketplace. A recent report has found that patenting activity for cannabis food and drink has seen a large increase in global activity, in the last five years. 242 simple patent families have been filed in 2015, up from only 144 simple patent families filed in 2012. However, not a single food and beverage company was found to be among the top 10 applicants.
Is this a sign that food and beverage companies are not well positioned to benefit from ongoing cannabis legalisation?
Analysing patent filings in the cannabis food and drink field shows that although patent numbers are small—possibly because the illegality of cannabis disincentivizing R&D, and therefore fewer companies seeking legal protection via patents—the rate of filing is increasing. This relative lack of patenting in the area of cannabis food and drink, and cannabis-infused edibles, could point to a looming patent war, with legalisation triggering a swarm of patent applications.
Indeed, many food and beverage companies have announced their intentions to join this growing market, with high-profile names such as Coca-Cola, Diageo, and Heineken included:
- Coca-Cola is in talks with Canada’s Aurora Cannabis Inc to develop drinks infused with cannabidiol (CBD).
- Heineken’s craft beer brand Lagunitas has launched Hi-Fi Hops, a beer-flavoured sparkling water with THC and CBD.
- Diageo, maker of Guinness beer, is holding discussions with at least three Canadian cannabis producers about a possible deal.
- Constellation Brands Inc. announced it is spending $3.8 billion to increase its stake in Canopy Growth Corp., the biggest deal in the burgeoning marijuana industry yet.
Molson Coors Brewing Co. is starting a joint venture with Hydrotherapy Corp. to develop cannabis drinks in Canada. The report “Cannabis Compounds in Edibles and Beverages” found the list of top 10 companies most actively patenting in this technology area includes (in order) BASF, Dupont, Firmenich, The Wrigley Company, Hercules Powder, Royal Dutch Shell, Arkena, Kuraray, Esso and Givaudan.
Not included in the list are any of the larger food and beverage companies one might expect to appear: PepsiCo, Coca-Cola, Nestle, General Mills, Kelloggs etc. Instead, the list comprises a mixture of chemical companies (BASF & Arkema) and fragrance and flavouring companies (Firmenich & Givaudan).
Legalization gathers pace
Legal cannabis US sales are expected to reach almost $10 billion in 2018, and hit nearly $23 billion in 2025, according to Bloomberg Intelligence data sourced from cannabis industry intelligence firm New Frontier Data. CBD sales are forecast to quadruple over the next four years, blasting off from $535 million this year to more than $1.9 billion by 2022.
This explosive growth is making companies across the food and beverage industry sit up and take notice. The legalisation of cannabis represents a once-in-a-generation opportunity for food and beverage companies to establish themselves as dominant players in (potentially) one of the fastest-growing sectors – edibles and beverages.
However, given the earlier patent applicants analysis, are these large food and beverage companies positioned to benefit? It seems that current patent filings are instead hinting at the potential for major food and beverage companies to partner with chemical, fragrance and flavouring companies. This might help them confidently acquire the methods, techniques and processes required for effective product development and market entry.
The report found that formulations derived from cannabis distillation methods provide fertile ground for potential patent protection. The majority of pure THC or CBD distillates remove the terpenes present in cannabis, providing a highly potent distillate which can be added to almost any recipe. The ability to add distillate to almost any recipe combined with the ability for producers to more accurately dose their products via distillates make this delivery mechanism highly desirable. However, as this method removes terpenes that are present in the cannabis plant, many producers look for ways to add these terpenes back and reintroduce certain flavour profiles (e.g. the fruity taste certain flowers can have).
There is great potential for producers to figure out what specific terpenes are present in different cannabis strains (C. indica; C. ruderalis; C. sativa), and which of these terpenes should be added back to the distillate to achieve specific flavour, psychoactive, or medical effects. There is also potential for non-cannabis specific terpenes to be added back into distillates.
New methods around extracting, synthesising, and re-introducing terpenes, once patented, could provide a high level of competitive advantage.
Patent landscaping is a 3D, topographical representation of the patents within a technology space, giving you a 360° view over any area of interest. The peaks indicate areas with a high patent count, while valleys and “white spaces” represent areas with minimal patent filings and unexplored frontiers.
The below landscape shows the top four companies with the most patents filed, as well as showing where the high-valuation patents are. From this landscape, it can be seen that the areas where both BASF and Firmenich have a high density of patent filings are also areas with a high number of valuable patents.
Despite the increase in patent filings, state-by-state legislation in the US may have some larger incumbents holding off on entering the market. PepsiCo has stated that the company would “turn over every stone to look for growth”, and that it “will look at it very critically”, but noted that cannabis is still illegal under federal law throughout the United States. This illegality at the federal level means that, in interstate commerce, it is not legal to sell food to which THC or CBD has been added.
Federal illegality of marijuana also means the industry lacks clarity over how intellectual property rights would hold up if challenged in a US federal court. An earlier IPWatchDog article, “Cannabis Extract Patent Assertion Underscores Issue of Limited Prior Art for Marijuana Inventions” highlights an interesting potential “test case”, although Neil Juneja cautioned that he had “never seen a weaker cannabis patent in my life”. So, perhaps not.
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