Socati’s top executive wants the CBD ingredients producer to become “the foundation for CPG manufacturers to launch products.”
And it could be on track to do so with its recent growth. In the last couple months, Socati launched two new ingredients, raised $40 million from private investors, acquired a new manufacturing facility and announced its executive headquarters would move to Austin, Texas to take advantage of its leadership in tech-driven startups.
Cannabis has been entering food and beverage at a rapid pace. It’s in everything from beer and coffee to ice cream and jelly beans, and even big CPG manufacturers are starting to plan product launches. Socati’s CEO Josh Epstein told Food Dive the company is working to provide consistency and precision in its CBD ingredients with the goal of being a trustworthy partner to CPG companies as the industry grows.
“We’re very focused on technology, and we’re focused on utilizing capital in a way that brings a level of credibility and trust to allow companies that want to launch products in this space to have a reliable partner,” he said. “We think that there’s a real void in the market of consistent, reproducible ingredients that can go into all the products that are going out there.”
Last month, Socati announced it was introducing two new CBD ingredients, an oil and a water-soluble powdered product. Both ingredients have a broad-spectrum profile, containing 80% cannabidiol (CBD), 4% of the minor cannabinoid cannabigerol (CBG) and non-detectable levels of THC, the psychoactive chemical in cannabis.
Epstein said the company has shipped the new ingredients to several different customers, but couldn’t disclose who they are. He said these ingredients can be used in food, topical items, flavors and fragrances.
“A lot of the companies that are entering [the] space, they want to focus on building their brands, they want to focus on launching new products and they’re looking for manufacturers of the cannabinoid-based ingredient, the hemp-derived ingredient that can provide them that base ingredient for their product in a way that they are accustomed to being in any other product launch that they might do either on a regional or national basis,” Epstein said. “There’s a very, very big need for what we’re doing and where we sit in the value chain.”
“We’re most focused right now on taking our technology, which was built over several years, and continuing to rapidly scale that so we can be the foundation for CPG manufacturers to launch products in a very significant way.”
The company announced last month it can customize hemp-derived ingredients for the CPG market. He said right now they are focusing on using their technology to allow for consistency in making these ingredients. Socati can target a precise ratio of cannabinoids depending on what a customer desires, Epstein said.
“We’re most focused right now on taking our technology, which was built over several years, and continuing to rapidly scale that so we can be the foundation for CPG manufacturers to launch products in a very significant way,” he said.
That has been an easier task since the company acquired Blue Marble Biomaterials, a global manufacturer of specialty ingredients for consumer goods. Epstein said Blue Marble built up Socati’s know-how and experience in ingredient innovation and development. Under the deal, Socati also acquired Blue Marble’s 22,000-square-foot manufacturing facility and laboratory in Montana, where it is producing CBD ingredients. Additionally, the company has a seed breeding and production operation in Oregon.
But the cannabis space comes with risks since CBD is still federally illegal. Hemp and its derivatives are no longer classified as controlled substances since the 2018 Farm Bill, but the FDA’s position has so far been that cannabis and CBD can’t be sold in conventional foods or dietary supplements.
The FDA recently held its first public hearing on cannabis and CBD, but experts and analysts still say that it could still be a yearslong process to establish a legal path to market for food and beverage products with the cannabis compound.
Epstein attended the public hearing and spoke about wanting the FDA to regulate the industry. For now, though, he said the first step is to provide a manufacturing platform that can be trusted.
“I think like a lot of the companies in the space who are trying to do this the right way, we welcome clarity, we welcome regulation,” he said. “And I think what we’re trying to do is adopt standards that would be applicable to any other ingredient in this world and give CPG manufacturers a reliable partner.”
Although investments are increasing and companies are making promises to launch new products, manufacturers are being careful since regulation is still murky. Epstein said it is important to be mindful of the lack of certainty in the industry.
“We’re very cognizant from a regulatory standpoint of making sure all I’s are dotted and T’s are crossed,” he said. “There’s obviously a great opportunity in an industry that’s being created from scratch. And the flip side of that, I suppose, is that things can change very quickly. You certainly have to be able to adapt as you learn more and as it continues to normalize. It’s a challenge, but it’s also an opportunity if you approach the industry the right way.”