Rep. Andy Barr (R-KY) recently introduced a bill designed to amend the Federal Food, Drug, and Cosmetic Act to regulate cannabinoid hemp products. For those tracking the beverage space, this legislation proposes a distinct regulatory framework specifically for Hemp THC beverages by establishing a new two-tier system.

Under this proposed framework, producers have the flexibility to manufacture and distribute these hemp beverages anywhere across the country. However, the producer cannot sell the product directly to the consumer. The second tier of this system relies entirely on retailers.

Practically speaking, this will likely create a bifurcated distribution model: smaller, regional distributors will handle sales directly to local retail shops, while producers will distribute directly to large-scale retailers. In many cases, this involves shipping the product directly to a few central warehousing locations owned by those large retailers.

The Local Impact

Look at a heavily regulated state like Massachusetts for example. The Barr Act creates a completely new system that the state may or may not embrace. To understand why this is so disruptive, here is what the proposed hemp framework looks like compared to existing local models:

Cannabis (Vertically Integrated): Within the borders of Massachusetts, the cannabis industry is vertically integrated. A single company can own a grower’s license, a producer/distribution license, and a retail license. They can sell their products through the system directly to the retailer.

Alcohol (The Three-Tier System): Traditional alcohol operates on a three-tier model, where out-of-state producers sell to in-state distributors. Tax is collected as an excise tax at the distributor level. These distributors cannot own a retail license (Note: There is an exemption for in-state farmers and brewers, allowing smaller brewers and distillers to sell directly to retail and to consumers in their tasting rooms).

Hemp (Under the Barr Act): This brings us back to the proposed two-tier system. Under this act, a company could theoretically produce a beverage in New Jersey and ship it directly to a Target in Massachusetts.

Massachusetts currently bans hemp cannabinoids in food and beverages. Even if the Barr Act successfully passes at the federal level, I do not see this structure in place at the local level. A recent attempt at proposed legislation (S.222) in Massachusetts would have created a strict three tier system for hemp products. Instead of passing S.222, the final legislation adopted a more cautious approach. The new law mandates that the newly restructured Cannabis Control Commission (CCC) must first comprehensively study the market and impacts of intoxicating hemp products.

The Barr Act looks to undermine many local legislative actions that have evolved over years.