New Iowa law means new drinks from THC beverage makers

Beverage producers in Iowa have launched new cannabis-infused drinks — and one says it has stored thousands of dollars of existing inventory out of state — to comply with a new law restricting the THC potency in consumable hemp products in the state

A federal judge last month refused to block enforcement of the law. With that legal setback for them, both Climbing Kites and Field Day Brewing have announced they've launched new products that comply.

  Buy Photo

Climbing Kites, a beverage manufacturer headquartered in Des Moines, last week announced in an Instagram post it was launching new products in compliance with the Iowa law.

Previously, the THC-infused drinks produced by Climbing Kites, which are sold by Lua Brewing and Big Grove Brewery, came in 12-ounce cans containing 10, 5 and 2.5 milligrams of THC. The new products now come in two versions, with 4 milligrams and 2.5 milligrams of THC, in multiple flavors. The sparkling water drinks also contain CBD.

Climbing Kites did not respond to messages seeking comment.

In its social media post, the company wrote that “while this isn’t the legislative outcome we and many of you hoped for, we’re not going anywhere,” and that its new THC drinks will still be available at Iowa retailers, bars and restaurants.

Field Day Brewing Co., a North Liberty producer of the “Day Dreamer” line of cannabis-infused sparkling water, changed the potency of its drinks on July 1.

Co-owner Alec Travis, director of beverage operations, said the brewer shifted production from beverages containing 2, 7 and 15 milligrams of THC per can to a single 4-milligram serving can that is compliant with House File 2605 and the rules put in place by the Iowa Department of Health and Human Services.

“So we have been adapting and trying to change as it's been kind of coming at us,” Travis said.

  Buy Photo

Both Field Day Brewing and Climbing Kites had asked a federal court to stop the state from enforcing the new THC limits.

The companies challenged the law on a number of grounds, including that it was preempted by the federal farm bill, that it was unconstitutionally vague and that it violated rules about interstate commerce and property seizure.

The law, which took effect July 1, limits the amount of THC — the main intoxicating chemical in cannabis — that can be in “consumable hemp” products that are legal under federal law.

A product cannot have more than 4 milligrams of THC per serving and 10 milligrams per container, and it must include a warning label.

The law also bans the sale of synthetic consumable hemp products and bans the sale of consumable hemp to minors.

The beverage manufacturers had believed they could change the labeling on their 12-ounce cans to include more than one serving, allowing them to sell cans containing up to 10 milligrams of THC. But rules adopted by the Health and Human Services Department, which regulates consumable hemp products in Iowa, state a 12-ounce can cannot contain more than one “serving,” meaning a can contain only up to 4 milligrams of THC each.

A federal judge expressed concerns about the vagueness of the “serving” definition early in the litigation, but wrote in her orders that the new rules have defined the terms and cleared up the previous confusion, writing “there is no longer a viable argument that ‘serving’ as set forth in the Hemp Amendments is an unconstitutionally vague term” as the final rules are now in effect and publicized.

Travis said Field Day Brewing has incurred tens of thousands of dollars in financial losses and has had to move inventory outside of the state. He estimated the company spent $40,000 to $60,000 on labels and design work “that had to be destroyed instantly” after the state published rules defining serving limits.

The company had shifted production of its 15-milligram cans to 10 milligrams of THC per can instead, believing it would comply with the limits in the state law.

“So at that point, we then kind of had to rework everything again,” Travis said.

In addition, he said the company has about $70,000 to $90,000 in inventory that is now considered illegal, that had to move outside of the state to comply with the law.

Sellers are not allowed to repackage or relabel products that do not comply with the new rules limiting the strength of consumable hemp products. And state rules require retailers in Iowa to send back or destroy products that do not comply with the new rules. Retailers cannot store or warehouse non-conforming products in the state, according to the Health and Human Services Department.

“We'll probably just have to destroy those products,” Travis said. “We're an Iowa manufacturing facility, and we only sell our products in Iowa. So being immediately forced to move outside the state has made it a difficult task to open up new markets for that.”

He said the company does not intend to continue moving forward with a legal challenge to the law.

“We’ve decided that at this time that fight doesn't really make sense for us,” Travis said. “And we feel like we tried to put our case before the court. … So we're taking that loss, and we're going to accept and just try to dominate the market with what we're allowed to do in the state.”

He said sales of “Day Dreamer” have increased drastically with 4-milligram cans as large manufacturers and retailers who distribute products in multiple states have now pulled out of the state and are not producing drinks specifically for Iowa.

“Very few companies make a 4-milligram can,” Travis said.

And the few that do lack the specific warning label required by the new state law.

“So our sales have gone up just because a lot of other companies had to back out, which is allowing us to take the space,” he said. “Rather than seeing six seven different options, now you're only going to see two or three options.”

Travis noted the company put warning labels and age restrictions on its THC drinks prior to the law being considered.

The changes have caused tension, turmoil and confusion for a company he said tried to “set the standards to be a mature market and be responsible.”

“From the beginning, we've always wanted to be fair and compliant with whatever the state put forth,” Travis said. “We will keep growing as we can and move into new markets that allow us to do more things or have more options, and that's just kind of what's been forced upon us” in order to recoup the “hundreds of thousands of dollars” the company has invested into its cannabis-infused drink.

Comments: (319) 398-8499; tom.barton@thegazette.com