AUSTIN, Texas – The Hemp Beverage Expo typically brings together brands, retailers, and investors to do business. But attendees at the June 17–18 event were more interested in devising a Plan B before a looming federal ban shuts down the industry.
The uncertainty surrounding the ban on hemp-derived cannabinoids, enshrined in law in November 2025 and set to take effect November 12, 2026, has forced companies to take a close look at the fundamentals of their businesses, from inventory levels and supply chain exposure to cash flow and operational flexibility. With pending “rescue” legislation still unresolved, operators are preparing for multiple outcomes, whether that means scaling up, adjusting strategy, or pivoting.
The mood at the expo was optimistic, but realistic. Most attendees said they believe the industry won’t disappear, even if the new law imposes a brief disruption in business. They also found it difficult to imagine Congress won’t amend or rescind the ban, at least where beverages are concerned, considering powerful lobbies are pushing them to do so. After all, industries like restaurants, grocery stores, retail giants like Target, and liquor and convenience stores all have made intoxicating hemp beverages staples on their shelves.
- With a possible November 12 federal disruption ahead, brands should stress-test cash flow, inventory, contracts, insurance, and supply-chain exposure now.
- A rushed inventory sell-off can damage margins and reset customer price expectations long after a disruption ends.
- Operators considering a pivot should start with customer data, channel fit, regulatory requirements, and realistic distribution economics.
- Clean books, updated entity structures, and early conversations with tax, legal, lenders, and investors can preserve options when conditions change.
Build the plan before the deadline
Gail Rand, chief executive officer at financial consultancy Grand Consulting, opened the panel discussion “Risk Management and Disaster Planning” with a call for disciplined capital allocation. She urged attendees to scrutinize where every dollar is spent, whether on inventory, new markets, or SKU launches.
On debt, her advice was to be transparent with lenders. When financial partners understand a business’s current plan and what a temporary pivot may look like, they’re more likely to help the company position to move quickly when the market reopens. Even if Congress drags its feet and the ban goes into effect, Rand is confident the hemp market will return.
Cash flow management, she said, is closely tied to cost management. No one knows exactly how much of a pre-November sales bump to expect, when it will plateau, or how long it will take to move inventory. She also warned that cutting costs alone won’t get a company to profitability, and spending carelessly will shrink the runway to survive until Congress rescinds or modifies the ban.
In addition, she pushed operators to assess their current sales channel mix and consumer base before committing to a pivot. Would a channel change require a complete brand overhaul and operational restructuring, or could the company shift seamlessly with minimal disruption?
On supply chain, Rand asked, “If you had to reformulate or change your delivery format in 90 days, where would the bottleneck be? Who in your supply chain would [be a roadblock]?” For operators planning to ride things out, they should audit every link in the chain to confirm they can meet a potential demand spike.
Drawing on her 13 years of consulting with cannabis businesses, Rand cautioned against heavy discounting as a way to move inventory before the ban takes effect. She warned price pressure has a way of triggering a race to the bottom, which hammers cash flow. Liquidating inventory for cash may make sense in some cases, but the tactic requires careful handling, especially because whatever price expectations companies set during a stressed market likely will be carried into the post-ban market by customers.
Brandon Barnes, founding partner at legal firm Barnes Beverage Group, underscored the point, noting distribution agreements in particular need a close review before November. Operators should know exactly what obligations they’re locked into even if sales stop.
Certified Public Account Scott Hammon, partner at financial services firm MGO, warned that when a market shifts, associates and competitors alike will act in their own interest, regardless of relationships. The ambiguous clause nobody worried about during good times has a way of becoming the center of a brutal dispute when cash is on the line.
Tax, debt, and recordkeeping risks to address now
Hammon also flagged two opportunities operators may be overlooking. The first is tax credits, at both the federal and state levels, depending on where a company is domiciled and where it has employees or facilities. At the federal level, a research-and-development tax credit is available. Companies often assume they’re too small or don’t have enough qualifying expenditures, but the process is relatively straightforward, and the qualifying payroll and procedures may be surprising. Whether a company is pivoting and needs cash to fund the transition, or is considering shutting down and settling with suppliers, employees, and investors, those credits can be a meaningful source of cash when businesses need it most.
The second is books and records. In a fast-growing industry, back-office fundamentals tend to get deprioritized. If records are in disarray and a company needs to raise money quickly, whether to fund a pivot or bridge a transitional period, messy books will slow everything down at exactly the wrong moment. Get the basic “blocking and tackling” done now, he said, while there’s still time to do it without pressure.
Hammon also flagged three additional tax considerations.
On state excise taxes, regulators have grown increasingly aggressive in layering on additional levies and changing how those taxes are structured. The situation varies by state, but companies with multistate exposure that haven’t been paying close attention often run into issues, he said.
He also urged operators to revisit their entity structure. With shutdown, hibernation, or a pivot all on the table, the question is whether the current structure provides maximum options across different scenarios.
Hammon’s third concern is debt forgiveness and the tax exposure of investors. For companies carrying debt where creditors are also equity investors, a shutdown could trigger unexpected tax consequences. Debt forgiveness creates taxable income for the investor even when there’s no actual gain, and prior losses may already have eliminated their basis. Companies hoping to work with investors again should ensure their investors are not blindsided by large, unexpected tax hits.
He closed by reminding everyone to have a plan and talk to their tax and legal professionals now, not in November. Play out the scenarios and let your advisors help you manage or mitigate the worst outcomes while there’s still time to act.
Barnes urged operators to review their insurance coverage before November. Directors and officers (D&O) insurance, which protects the personal assets of corporate leaders from claims of mismanagement or breach of duty, is worth a close look for any company facing potential fallout from a shutdown or pivot.
Three possible paths for hemp beverage brands
Barnes outlined three potential pivots for brands navigating a post-November landscape: a shift to non-alcoholic beverages with intoxicating but non-hemp ingredients, a move to alcohol, and hibernation. He noted other options exist, including licensing deals through state-regulated channels or shrinking operations to an intrastate model but set those aside as too nuanced for the panel discussion.
Pivot to non-hemp intoxicating beverages
Operators exploring this route are looking at ingredients such as kava and other novel mood-enhancing compounds. While this may offer the fastest path to market, questions remain about regulation, oversaturation, margins, and whether existing customers will follow the brand into a new category.
This option drew the most discussion. From a regulatory standpoint, attorney Barnes described the landscape as a gray area. Some ingredients carry self-affirmed “generally recognized as safe” (GRAS) status but lack full FDA approval, and state regulations range from active taxation and permitting to no framework at all.
Rand urged operators considering this path to start with their customer data. A pivot to a different intoxicating ingredient may or may not retain the existing customer base. She also raised the question of volume and margin: If distribution via established hemp channels is not an option, does a more premium, direct-to-consumer model still work economically? A group of liquor distributors in another panel discussion unanimously warned of an already crowded functional ingredient category and the challenges of breaking in for those considering pivoting in that direction.
Rand suggested thinking outside traditional distribution channels, such as festival or event-driven approaches, as an alternative to weather the storm.
Hammon said the functional-ingredient pivot is likely the easiest to execute from a tax and accounting standpoint. The regulatory environment for these ingredients is similar enough to intoxicating hemp that operators primarily would be dealing with a different set of state excise taxes rather than an entirely new compliance framework. Barnes added that staying as close as possible to FDA best practices for labeling would be advisable. If regulators come knocking, demonstrating good-faith compliance efforts matters.
Move into the alcohol market
Moving into alcohol would require navigating a far more established and complex regulatory system, including federal licensing, the three-tier distribution model, ownership restrictions, and intense competition for shelf space.
Barnes warned that the regulatory world operators would enter is far more complex than hemp’s. The three-tier system that sharply separates the industry into producers, distributors, and retailers; cross-tier ownership restrictions; and prohibitions on slotting fees define how the alcohol industry operates, and those aspects don’t shift easily. Federal licensing alone takes a surprising amount of time, Barnes noted, so the decision needs to be made early enough to get in the queue.
Rand added that the barrier to entry is high, competition is fierce, and shelf space is the central challenge once you’re in. Well-funded competitors with established distribution relationships make it difficult to break into the market. That said, she noted the exit opportunities in alcohol are lucrative because of how well-capitalized the space is.
On the tax side, Hammon boiled it down to two words: excise taxes. The rules around collection are specific and detailed — and easy to get wrong.
He summed up the options: “The alcohol pivot requires significant upfront planning before you can move, while a pivot to non-alcoholic beverages allows operators to act quickly, with no permits required, with direct-to-retail and [business-to-consumer] shipping available from day one.”
Reduce operations or hibernate
Some companies may choose to pause or scale back until there is more regulatory clarity. However, panelists warned that stepping away from the market risks losing momentum, retail relationships, and consumer awareness.
The panel agreed this option was not a great choice. Unanimously, they felt brands would lose momentum and brand awareness. Relaunching would be like starting over again.
The immediate priority: prepare for multiple outcomes
The energy at Hemp Beverage Expo was positive, nervous, and hyper-focused on preparing for what comes next while continuing to build for the future. Operators were in grit-and-grind mode, exploring expansion and partnership opportunities to keep the momentum going.
The biggest takeaway from the show was that companies need to start conversations now with stakeholders, teams, and supply chain partners so everyone understands the plan and is prepared for whatever happens on November 12.
