$28.4 Billion Dollar Hemp Industry Can’t Be Put Back in the Bottle ft Jim Higdon

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Jim Higdon: In order to get to a conversation where we rationally and logically decide how to regulate cannabis at the federal level, we have to demonstrate power to the people who don't want that to happen. And what we feel like we're doing in the hemp industry is demonstrating that we have a $28.4 billion industry and you can't put it back in a bottle. Once they come to terms with that, then we're in a position to have a rational conversation with them about a one-plant solution. But until they realize that they can't legislate us out of existence, we can't have that conversation. Bryan Fields: What's up everyone? Welcome back to episode of The Dime. I'm Bryan Fields. With me as always is Kellen. This week we've got a very special guest, Jim Higdon. Jim, thanks for taking the time. How are you doing today? Jim Higdon: Thanks for having me back. Doing all right, excited to dive in. Kellen, how are you doing? Kellen: Doing really well. Grateful to talk to Jim again. How are you, Bryan? Bryan Fields: Yeah, I'm stoked. There's a lot we need to unpack and understand, because every day that goes by is another day I don't understand how to make sense of this industry. Maybe it's two industries, maybe it's one, maybe it's three — who knows. And there's nobody better than Jim to help break it all down. Jim, we're going to skip the whole 'how you found your way into this space' — maybe you can just recap for us today: the fight to save hemp at the federal level. Is it still in progress? Are we in a catastrophic spot? Where are we today? Jim Higdon: First of all, remember Benzinga in June? That was a lifetime ago — three months ago, slash a thousand years ago. So much has happened since early June in this space that it's difficult to keep track of all the twists and turns. The fight to protect hemp at the federal level is alive and well, and we're having a good day. It's been a roller coaster, though — lots of ups and downs. Today, Friday, we published a bipartisan sign-on letter signed by 27 members of Congress from 13 states, members of both parties, about evenly split, demanding that the Andy Harris language to zero out all THC in hemp products be removed from the appropriations bill. Sitting here on the Friday before a government funding deadline, we could be headed for a shutdown, or a late-hour continuing resolution to keep the government open, followed by a conference committee for the appropriations bills, including agricultural appropriations, that could include this measure. So it's important for us to get the word out and establish a strong coalition going into a behind-closed-doors conference committee where the future of the hemp industry might be decided. Bryan Fields: Is the timing important, right before the shutdown? And how do two parties come together to ask Andy Harris to remove it, when he's from one of those two parties? How does that conversation happen? Jim Higdon: It's important to get the news out before the shutdown because the shutdown news will suck all the oxygen out of everything — and probably already has. We want to be in front of it and build momentum over the weekend. We could have gotten more signatures with another 24 hours — we probably would have cracked 30 — but it's important to get it out now, especially to the members designated as conferees for that conference committee. We want them to understand hemp has a robust bipartisan coalition across the country. As for the other part — the letter isn't addressed to Andy Harris, it's addressed to the Speaker of the House, because there's not supposed to be controversial measures sorted out in a continuing resolution. We want to make sure this is understood to be controversial, and that leadership knows we don't want this decided behind closed doors in a conference committee. There's a standard legislative path that hasn't been followed here — this should go through regular order, through a subcommittee of Energy and Commerce, with markups, hearings, and votes to establish appropriate guardrails for this industry. Instead we're being dragged through an appropriations bill, which seems to violate House rules but is moving forward anyway. Bryan Fields: The letter you shared says the hemp industry remains united behind a framework that restricts sale and possession of hemp products to adults 21 and older, standardizes packaging to eliminate lookalike products appealing to children, standardizes labeling to empower informed consumer choices, and requires independent third-party lab testing. To me this reads exactly like the framework for the regulated cannabis industry. Why can't we find a path where both industries merge into one? Am I missing something? Jim Higdon: You're not missing anything. In fact, this letter was written before the Texas governor's executive order, and it follows to a tee how Governor Abbott decided to regulate hemp products in Texas — age gating, regulatory standards, label standards, testing standards, just to make sure safe products get into the hands of adults only. So yes, there's a path toward a one-plant solution, but that requires descheduling the rest of the plant, because you can't have a one-plant solution ahead of descheduling. Right now hemp is descheduled — that's its strong suit — but at a low potency threshold, which is its weak suit. Full-strength marijuana doesn't have a potency restriction but does have federal restrictions. We've each got part of the animal, and we're trying to get the whole thing. That's going to require descheduling for all cannabis, and then a one-plant solution on the other side of that. Bryan Fields: This framework is a step in the right direction for hemp — essentially the regulated cannabis industry with interstate commerce — but it doesn't get us all the way to a one-plant solution. Why not just go straight to politicians and push for descheduling and one plant? Isn't that better, or do we have to hit singles before home base? Jim Higdon: We're all on the same page about the ultimate goal, but you have to realize what the playing field looks like to play the game. You can't just walk onto the field and say 'let's do it this way,' because that's not how the game is played. The gatekeepers of the committees we have to get through are not always our friends. Until some of these people get redistricted out of their seats, lose an election, or die in office, it's going to be difficult. We're losing Mitch McConnell at the end of next year — that's good news for us. Andy Harris might get redistricted out of his Maryland seat if Maryland does redistricting to counteract Texas. So there's hope for a better playing field down the road, with better players on the field. But that's what it takes to move through the mechanics of Congress and the committee process, which is brutal, slow, and long. It's frustrating when people have strong, rational opinions — and we agree with those opinions — but the process of getting things done is something else entirely. Bryan Fields: Do any of the politicians who signed the letter come from adult-use regulated states? In some ways this letter seems to contradict their own state frameworks if they already have a regulated cannabis market. Jim Higdon: Four signatories are from Kentucky, not a regulated state — we have dispensaries opening soon but not yet. Four from Texas, not regulated. Five from California. A couple from Colorado. And some from Washington State. So a significant portion are from regulated states, including five from California — four Democrats and a Republican. I can't know their exact thinking, but for some people in regulated states, hemp is a stepping stone toward full descheduling, so supporting it is a step forward, not backward. Kellen: California has always had such a different, pro-cannabis stance — it's a big deal that five representatives from there signed this. Can you talk through how California actually factors into this from a hemp perspective? It doesn't seem like hemp has a huge foothold there right now. Jim Higdon: There does seem to be some hemp cultivation happening in California, both outdoor and greenhouse. Some legacy cannabis operators have turned to growing hemp flower in California, especially some cannabis confectionary companies — gummy and edible makers — now making hemp edibles and beverages. Some California beverage brands are straddling the line, one foot in regulated, one foot in hemp. So there's business diversification into hemp happening. Ted Lieu from Los Angeles is one of the signatories, and two years ago he co-sponsored a hemp regulatory bill introduced in the House by Morgan Griffith, a Republican from Virginia. Ted Lieu has been consistent in supporting hemp even in the world's cannabis capital, Los Angeles. So this binary notion that hemp and marijuana interests are opposed to one another isn't universally shared. Many in the regulated space understand hemp legality is a path toward full plant descheduling, and they support it. Bryan Fields: That makes sense why California operators might be diversifying — the regulated market there just isn't working, with heavy taxes crushing operators. It seems like they're switching sides or diversifying because hemp gives them an outlet. But it feels like politicians just need to sit down, whiteboard it out, and fix this logically. Jim Higdon: Logic and reason aren't our friends here. We're speaking power to power, and the only way to get power to agree with you is by demonstrating power — it's the only language they know. In order to get to a rational, logical conversation about regulating cannabis federally, we have to demonstrate power to the people who don't want that to happen. What we're doing in the hemp industry is demonstrating that we're a $28.4 billion industry and you can't put it back in a bottle. Once they come to terms with that, we can have a rational conversation about a one-plant solution. Until they realize they can't legislate us out of existence, we can't have that conversation. Bryan Fields: Newsom alone is against it, correct? But then other politicians taking a stance against hemp make me wonder if California operators diversifying into hemp are just protecting their assets given the regulatory pressure. Jim Higdon: Keep in mind California has more than one industry it's trying to protect from the disruption caused by hemp. California wine producers feel directly impacted by the popularity of hemp beverages. Gavin Newsom, in his private capacity, is part owner of the Plump Jack Group, which owns multiple wineries in California and does significant wine revenue. So when he held a press conference banning hemp products, he was banning hemp beverages inside a Total Wine in California — it's not just regulated marijuana he's protecting. Bryan Fields: I understand this wine angle because here in Kentucky we get the same pushback from the bourbon industry, and in Missouri and Wisconsin there's the same issue with corporate beer producers. To me it's wild — being a farmer reliant on a single crop is dangerous. Having multiple crops should be a no-brainer. Why can't Newsom just add a hemp beverage to his portfolio instead of turning anti-hemp? Jim Higdon: The only way I can understand the negative emotional reaction from beer, wine, and spirits manufacturers is that they're going through the stages of grief, and they're stuck in denial and anger — not yet negotiation and acceptance. Because they're in denial and anger, we're getting full-blown rage, and they want to shut it down. Until we can convince them they can't do that, that's where they'll stay. Bryan Fields: So essentially the liquor industry calls up its lobbyists and says sales are down, kill this industry so people drink again? Jim Higdon: I don't know it's quite like that, but the spirits manufacturing industry has been in business and hosting fundraisers for politicians for 95 years, and for the last five, business has gone in the opposite direction. They want their taxes lowered — you can't lower our taxes, but how about you step on this upstart competition for us, because they're a pain in our ass. Bryan Fields: But there's also the opportunity for them to be first movers — pour gasoline on the fire, dive into the space, use their resources and distribution to diversify their portfolio and get ahead of changing consumer trends. Jim Higdon: I'll add a wrinkle that'll further frustrate you. All major spirits manufacturing is basically international conglomerates and large holding companies — Bacardi, Diageo, Constellation Brands, Beam Suntory. Diageo is based in France, and the word is the Europeans are a step behind us and skittish about cannabinoids in their portfolio. The Japanese, who own the Beam portfolio in Kentucky including Maker's Mark, had their former Suntory CEO resign suddenly about a month ago after police in Japan raided his house and found CBD products containing THC. In Japan, THC possession is still punishable by up to seven years in prison. We have a long way to go. Bryan Fields: My first thought is I'm just grateful it's not death — because in some countries that could be punishable by death. But maybe there's an opportunity here — if the president wants US manufacturing onshoring, couldn't this help farmers and incentivize domestic manufacturing? Jim Higdon: Here you go again, applying logic to a situation that doesn't warrant it. I sit here trying so hard to understand it, and then I realize that's not how it works. The posture of spirits manufacturers toward us in Kentucky is not productive — they still think we operate in a loophole and want to close it, meaning shut us down completely. $30 billion is a nice-sized loophole, and one they're more than welcome to participate in. Bryan Fields: Have you had conversations with spirits manufacturers about partnership opportunities instead of fighting? Jim Higdon: DISCUS, the Distilled Spirits Council, is the trade association for the industry. They've issued two press releases this summer, both using 'applaud' in the headline — applauding the Andy Harris language and applauding the Mitch McConnell language to, in their words, close the loophole. That posture hasn't changed. Overtures continue to be made so they understand the economics of our industry and how they could diversify their portfolios, but the trade organization can only do what its board tells it, and the board is comprised of conglomerates who want us shut down. Bryan Fields: If they're anti-hemp, does that make them by default pro-legal cannabis? Jim Higdon: No, no, no, no, no. They hate it worse. They see hemp and marijuana industries as two parts of a whole, not two different things — hemp is the camel's nose under the tent. Bryan Fields: For me personally, I might grab a beverage and later a joint, replacing bourbon with a beverage. I wonder if they see it that way. Jim Higdon: I think — and this is checkable — liquor, beer, and wine sales are generally down in regulated cannabis markets even without beverages, and the beverage category just burns them up inside because we're competing for both head space and shelf space. Bryan Fields: It's probably frightening for them to see this replacement opportunity growing at an exponential rate with minimal marketing resources and fragmented investment behind it, compared to a Budweiser or a major bourbon brand. Jim Higdon: Yeah, the marketplace is speaking, and speaking fast, and they know they can't compete in the marketplace — which is why they've gone to the government to try to shut it down. Bryan Fields: Do you think conversations are happening now between spirits companies and hemp brands about bringing hemp into their portfolios? Jim Higdon: Those conversations can't happen fast enough, and to the extent they're happening now, they seem very introductory and low-level — not executive to executive, more like business development people sniffing around. Bryan Fields: It must be hard to put a valuation multiple on a company that might not exist in six months depending on rulings, especially while growing exponentially. Jim Higdon: There's no way to get a fair valuation under the current pressure — the only valuation one would get would be predatory, so there's no point contemplating it. The only answer is to break through this wall and win, and then we can have real conversations about valuation. Bryan Fields: Give us an update on California, then walk us through Texas — where things stand and what you expect. Jim Higdon: To put a bow on California — two bills passed that we don't like, AB8 and SB 378. AB8 will take three years to implement. SB 378 is an anti-direct-to-consumer bill, supposed to be implemented next July. Both seem to violate constitutional rights, and we're asking Governor Newsom for a veto, which seems very unlikely. If it's signed, we'll have to contemplate our choices. Bryan Fields: Why the opposition to direct-to-consumer sales? Jim Higdon: It's perceived as competitive to brick-and-mortar dispensaries by unionized dispensary workers, even though our data shows our California customers are far from dispensaries — in outer suburbs and rural areas without dispensary access — ordering edibles and sleep gummies not sold in dispensaries. That's not a concern for the unionized workers who represent dispensary employees; they just want to shut us down. A ban on direct-to-consumer sales is a ban on the 21st century. If we're talking about a one-plant solution, it has to be conceived consumer-first, which has to include homegrow to some degree — nobody in business wants to think about homegrow, but you can't have a consumer-first one-plant solution that makes homegrow illegal. And if you have homegrow, you need direct-to-consumer sales too, because that's how people expect to have things delivered to their door. Bryan Fields: What about illegal products — vapes, Chinese-sourced grows — and the media messaging around them? How do we keep that from distracting from the positive developments while still being clear about the differences? Jim Higdon: Cornbread Hemp doesn't deal in vape or smokable products at all. Finding regulatory solutions to prevent Chinese vape imports of dubious origin and ingredients is important, but I don't have a working policy or manufacturing solution there. The recent reports on Chinese Communist Party-linked semi-legal grows in places like Maine and Oklahoma seem to largely be an outgrowth of unregulated medical marijuana markets, not hemp markets — clearly still a problem that needs addressing. It appears the Chinese might be running some kind of opium-war-style effort against the American people, possibly seeing legal cannabis as a way to weaken America from the inside. I don't believe legal cannabis weakens America — I believe it strengthens America — but that's just a different way of seeing the world. Bryan Fields: I imagine that media conflation makes it hard for constituents to distinguish hemp from illegal cannabis, and they call their politicians fearing 'Chinese' involvement, which then becomes your problem to untangle too. Jim Higdon: One thing we can do, being vertically integrated and farming our own crop, is being very forward about highlighting our farmers, our farm workers, and what we're doing in the field. We're growing 60 acres of USDA-certified organic cannabis that's defined as hemp federally — sun-grown, rain-fed, in living soil, outdoors in Kentucky. Showing that helps demonstrate we're doing things the right way, even if we can't make others do the same. Bryan Fields: Are there other states we should watch — influential or up-and-coming in this process? Jim Higdon: New York is always weird and a mess. Florida is weird and a mess. Ohio — we're looking at that; I think Ohio pumped the brakes waiting to see what happened in Texas. Ohio is a weird situation because Republicans in charge didn't want a medical program, much less adult-use, but ballot measures got both passed anyway, even though leadership in the state capital doesn't want either to exist. Now the hemp industry comes along wanting basic regulations, and leaders realize they can't shove hemp products into cannabis dispensaries because that would violate the dormant commerce clause. With Texas doing what it did, Ohio is pumping the brakes, and if they don't bring anything to a vote in October, they'll adjourn until February, pushing things to next year. Bryan Fields: Why would leadership resist cannabinoid products if the people clearly want them? Jim Higdon: Logic doesn't always apply. A lot of older Republicans are still fighting Vietnam-era culture wars where marijuana is bad because 'hippies.' The governor of Ohio is a teetotaler — doesn't even drink — and probably would outlaw drinking too if he could. It's about the personalities in control, and right now in Ohio there are a lot of people who just don't enjoy themselves much. Bryan Fields: Maybe someone should tell them hemp could help with his alcohol battle. So what about Texas — can you walk us through the current status? Jim Higdon: In Texas, the lieutenant governor controls the Senate as its president. Dan Patrick forced hemp/THC prohibition through the Texas Senate. Meanwhile the Texas House was deliberating a reasonable regulatory bill — not perfect, but thoughtful — for the hemp market in the biggest state without a marijuana program, where the only cannabinoid access for millions of veterans is through hemp, not regulated cannabis, which doesn't exist there. Before the House bill could pass, the lieutenant governor forced the prohibition bill through the House to the governor's desk. After seeing polling from Trump's pollster Tony Fabrizio showing it was an 80-20 issue in favor of hemp in Texas, the governor vetoed the prohibition bill and kicked it to a special session. That session got consumed by a redistricting fight — Democrats left the state to block it — and by the time redistricting got done, there wasn't time to deal with hemp. The second special session ended with no hemp bill. Then the governor issued an executive order: 21-plus age gating, some label and testing standards — which may eliminate the THCA flower market, may not — but everything else continues in Texas under a regulated 21-and-over approach via executive authority, without a bill. There's no legislative session in Texas for another two years. Bryan Fields: So how does this circle back to rescheduling? Does rescheduling help or hinder hemp industry progress, given hemp already operates somewhat outside that framework? Jim Higdon: The hemp industry would be agnostic to rescheduling in a straightforward sense — it won't impact our business directly. What it will do is provide tax relief to operators in the regulated marijuana space by getting rid of 280E. Some of the people upset with us might be less hostile once they get that relief, so rescheduling helps us indirectly, but directly it doesn't affect us at all. Nothing really changes for us until we get to a descheduling conversation, where we can have a real one-plant conversation. Ideally rescheduling is a stepping stone to descheduling, but given that we don't operate with logic, and our opponents want to kill us at every opportunity, they probably don't want either of these steps to happen. The only way to think about this is how to speak power to power in a way that demonstrates power in a nonviolent way while still communicating a demand for respect and attention. The hemp industry is doing that by showing we have friends in every corner of America and we're at a market size where you can't put it back in the bottle. It's unfortunate full-strength cannabis hasn't achieved the same leverage point on rescheduling — but the president will only act when he decides to, not before. We've heard enough rumors about timing to know the next rumor doesn't mean anything until it actually happens. Bryan Fields: At this point, staying optimistic is hard until it actually happens. Jim Higdon: There'll be plenty to talk about after it happens. The challenge is a lot of people are burning their credibility clinging to the notion that one person is going to do one thing that makes their lives better, and so far that hasn't happened. Bryan Fields: Switching gears — tell us about the sponsorship with University of Louisville Athletics. How did that come about? Jim Higdon: My business partner and cousin, Eric Zipperly, our CEO, has been having discussions with a number of athletic organizations in-state and elsewhere. Some didn't work out, but the UofL partnership did — University of Louisville had the nerve to pull the trigger when others found reasons to say no. Bryan Fields: Can you explain what the partnership actually is? Jim Higdon: Cornbread Hemp has what we think is the first-ever sponsorship of a Division I college athletics program by a THC seltzer brand. We have in-stadium advertising for our Cornbread Hemp THC seltzer at University of Louisville football, volleyball, and men's and women's basketball, through a three-year deal. Bryan Fields: Can people actually buy the products in the stadium? Jim Higdon: No — the Kentucky legislature banned on-premise sales of THC beverages this past session. To get beverages sold in the stadium, we'd need to go back to the legislature in Frankfort and get that right returned to us. Bryan Fields: Are there creative workarounds, like tailgate activations right outside the stadium? Jim Higdon: It seems possible, and positioning-wise it makes a lot of sense from a marketing standpoint — reinforcing the branding, growing market share among a demographic that's been hard for cannabis brands to reach, and giving people the chance to try it. But completing that virtuous circle really requires on-premise sales, which we're still working on. Bryan Fields: Has there been any pushback from Louisville about overconsumption or impairment concerns? Jim Higdon: No, we haven't heard any of that. Bryan Fields: What about your bourbon industry friends — any reaction to losing that marketing real estate to you? Jim Higdon: We've heard from other stakeholders working with us in other situations that the bourbon industry has expressed negative feedback about us, but we haven't heard that directly from our University of Louisville partners. If that feedback has been sent their way, they haven't shared it with us. Bryan Fields: Are there other partnerships like this you're pursuing to normalize the category further? Jim Higdon: Hope springs eternal. The next stage is finding stadium venues where we can sponsor teams and sell on-premise, even outside Kentucky. We also found a real winner in the Kentucky State Fair — 600,000 people over 11 days — where we were set up right in the middle of it all with cold, delicious THC seltzers on a hot, sunny day, and it was a big hit. It goes a long way toward normalizing the category and the brand. Bryan Fields: Being readily available right next to everything else really reduces the stigma and the intimidation people might associate with having to show ID or go through security just to buy a product. Appreciate you taking the time, Jim — look forward to talking again soon. Jim Higdon: Bryan, I really appreciate it. Your production value on these is fantastic — the way you cut this up, seeing how you used the last one — you did a great job. Thrilled to come back and talk to you again. Let's keep this going. Bryan Fields: Thanks for the kind words, talk to you soon. See you guys.