Cannabis Company Buys Colorado Brewery and Its CBD Beer Formula

For the past three years, Mason Hembree has been working on a difficult balancing act. He's a craft beer brewer who feels more at home in the cannabis industry, a Libertarian iconoclast who is nevertheless trying to work within the system, and the owner of a tiny company who wants to play ball with the big boys.

Now, Hembree, who co-founded Dad & Dudes Breweria in Aurora in 2010, may have finally found the perfect nexus of those things. In late February, Hembree and his father, Thomas, sold their brewery to San Diego-based Cannabiniers, a company with big plans for growth.

The Hembrees also sold their unique intellectual property: the first and only federally-approved formula for brewing beer with CBD (a non-psychoactive hemp extract), as well as their patent-pending process for infusing that CBD into beer in a cost-effective way.

"We are a group of rebels who have this great experiment going and now we have new allies who understand our intention. We are happy they saw the value in it," says Mason, who will continue to run the brewery. "Even though on paper, it is an acquisition, we really view it more as a merger."

"It's a no-brainer," adds Cannabiniers vice president Kevin Love. "They have this formula that no one else has, and they really opened our eyes to how we could get behind it with the mass of our organization."

Cannabiniers is a beverage marketing company that bought San Diego's Helm's Brewing, a traditional craft brewery, in early 2018 and then launched Two Roots Brewing, which makes non-alcoholic beers infused with THC, which is stuff in cannabis that does get you high. The company is currently in negotiations to purchase at least three other breweries around the country, Love says, including two with large brewing capacities.

The eventual goal is to sell Two Roots in every state that allows marijuana sales, but also to run traditional beer breweries and to make non-alcoholic beer.

"We are following consumer trends in adult beverages. We had those three verticals, and hadn't planned to get into THC beer with alcohol," Love says. But since CBD doesn't have psychotropic effects and is often used by people for its health benefits, Love says there are "no adverse complications" there. And with Dad & Dudes TTB approval and pending patent, the opportunity was just too good to ignore.

Back in September 2016, Dad & Dude's became the first — and only — brewery in the country to gain approval from the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) for a CBD-infused beer. The bureaucratic process took about a year, because the TTB required a thorough analysis of the beer's ingredients and its recipe before it would grant formula approval.

The beer itself, George Washington's Secret Stash, made quite an impression, drawing long lines at the Great American Beer Festival, and Hembree announced plans to distribute it in other states. (It was named for Washington because the first president had grown hemp for its textile uses.)

But in December 2014, the U.S. Drug Enforcement Administration surprised the CBD and hemp industries by declaring that it still considered cannabidiol (CBD's full name) and hemp extract — even if non-psychoactive — to be Schedule 1 substances, just like marijuana. As a result, the TTB asked Dad & Dude's to surrender its formula.

Hembree refused to do that and hired the same law firm that has been representing the Hemp Industries Association in an ongoing federal lawsuit against the DEA that came about as a result of the agency's December decision. He did stop brewing the beer, however.

Last December, Congress passed the 2018 Farm Bill, which removed hemp from the Controlled Substances Act  (where it had been classified, along with marijuana, since 1937), something that made it legal for farms to grow it as a crop and for states to regulate its cultivation and sale. But its future, along with CBD's, is still uncertain, as other federal agencies, including the Food and Drug Administration, have raised concerns.

Hembree, however, wasn't waiting around. Last July 4, after an eighteen-month hiatus, Dad & Dude's quietly began brewing George Washington's Secret Stash again, using its patent-pending and TTB-approved process. "We are announcing this now because we believe the dam is breaking for antiquated cannabis laws," Hembree said at the time. The beer, an IPA, is infused with 4.2 milligrams of CBD per pint.

Over the past year, several small breweries across the country have brewed CBD-infused beers without formula approval from the TTB — and received letters telling them to stop. Some of these cases, in Florida and California, in particular, received media attention. Since Dad & Dudes does have formula approval, however, the federal agency can't exactly tell them the same thing.

"They [Dads & Dudes] are the only ones who are allowed to do it," Love says. "It's a huge opportunity and the intellectual property is going to be well protected for the next few years, I would imagine."

He also notes that Cannabiniers will rely on the Hembrees and their staff to keep pushing things. "They are the DNA of Dad & Dudes, literally, and their greatest asset. It was their ability to be brave and go out and get approval from TTB, and to fight to maintain it...that got that organization to where they are today."

Both Hembree and Love say they don't plan to make an immediate changes but that the eventual goal is to scale up production of Dad & Dudes CBD beers, perhaps at the one of the breweries that Cannabiniers is currently in negotiations with. "We plan to move with diligence and thoughtfulness," Love says.