Companies Were Big on CBD. Not Anymore.

Just below rows of energy and kombucha drinks at Westside Market, a deli in the Chelsea neighborhood of Manhattan, sit a few glass bottles of Vybes. The drink, which comes in flavors like strawberry lavender and blood orange lime, is made with cannabidiol, more commonly known as CBD.

But a lack of federal rules and a mishmash of state regulations have made it impossible for Vybes to be distributed by a national retailer, like Target or Walmart. That has hindered the potential growth for the drink, said Jonathan Eppers, who left the technology industry to create Vybes in 2018.

“For the first two years, we were riding a rocket ship,” Mr. Eppers said. “But the patchwork of laws and regulations around the space has made it tough to grow our business.”

A little more than six years ago, CBD, the nonintoxicating component that is derived from cannabis or hemp, was poised to be the next big “it” ingredient, part of a wave of beverages and foods that were promoted as having healthful benefits or providing relaxation. Start-ups flooded the market with products, many promising to soothe stressed-out and anxious consumers.

At its apex around 2018, CBD was everywhere, appearing in water, chocolate bars, tinctures, gummies and skin serums. Consumers could buy athleisure apparel infused with CBD oil and feed their nervous pups CBD chews and snacks. Big corporations even jumped in. Molson Coors teamed up with a Canadian cannabis firm to create a line of CBD-infused drinks. Constellation Brands, the maker of Modelo beer, made a $4 billion investment in a publicly traded cannabis company. Ben & Jerry’s began looking into creating CBD-infused ice cream.

In the last couple of years, however, the industry has stalled out. Molson Coors ended its joint venture, and Constellation has written down more than a $1 billion of its cannabis investments. Large companies have shelved plans for CBD products, and hundreds of start-ups have either shut down, shifted to other ingredients or simply tempered their growth projections.