The state became one of the country’s most active hemp beverage markets, but proposed legislation could dramatically change the landscape even if federal hemp rules shift.

North Carolina represents one of the more established hemp beverage markets in the country, largely because products entered mainstream channels early.

Unlike states where cannabis products are limited to licensed dispensaries, hemp beverages in North Carolina have developed in mainstream retail channels. Consumers can find them at bottle shops, restaurants, bars, specialty retailers, and other locations where they already shop for beverages.

A proposed bill moving through the North Carolina legislature could dramatically restrict or eliminate hemp-derived THC products in the state. Industry advocates argue that the legislation would remove a category that has already become part of everyday commerce.

For Reilly Dunn, founder of Groove Wagon, a North Carolina hemp beverage company and distributor, the fight is about creating a regulatory framework for a category that has already taken hold. Dunn has become one of the operators working to organize industry members, retailers, and consumers around a “regulate, don’t prohibit” approach.

A Market That Developed Outside the Dispensary Model

North Carolina’s hemp beverage market developed differently from states where THC products are limited to licensed dispensaries. By reaching consumers through familiar beverage channels, hemp-derived THC products became part of everyday social and retail settings rather than remaining limited to cannabis-focused stores.

“In terms of hemp THC drinks, North Carolina has historically had one of the most favorable atmospheres anywhere in the country,” Dunn said.

When Dunn launched Groove Wagon, he focused early on the on-premise market, where he saw strong demand for hemp beverages as an alternative to alcohol.

“It was immediately where we launched,” Dunn said, pointing to restaurants, bars, and other hospitality venues as key drivers of adoption.

The model also introduced hemp beverages to consumers who may not have considered themselves cannabis consumers. Instead, products were positioned alongside other alcohol alternatives, giving consumers another option for social occasions, dining, and the growing sober-curious movement.

According to Dunn, North Carolina’s retail and hospitality markets embraced the category quickly. He estimates hemp beverages are now available in more than 1,000 on-premise locations across the state, with offerings ranging from lower-dose beverages to THC spirits and cocktail alternatives.

The Industry Has Been Asking for Regulation

Despite the perception that hemp markets operate without rules, Dunn argues that responsible operators have been advocating for regulation for years.

“We’ve been screaming for 21 and up—testing, testing, testing. Don’t SpongeBob on the gummies,” he said.

The industry has generally supported measures such as age restrictions, product testing, and responsible packaging requirements.

Many operators are not arguing against regulation. They want regulations that establish consumer protections while allowing responsible businesses to continue operating.

After several years of growth, hemp beverage operators say North Carolina is no longer dealing with an emerging category. The products are already part of the state’s landscape, supported by retailers, hospitality venues, distributors, and consumers.

From Regulation Debate to Potential Ban

According to Dunn, North Carolina previously came close to passing what industry advocates considered a model hemp regulation bill. However, the legislation became tied to a broader debate over medical cannabis, and the effort ultimately stalled.

Now, operators are facing a different situation.

Dunn said a version of HB 328, which he described as originally focused on issues such as age restrictions and safety standards, was substantially rewritten into a much more restrictive proposal.

Industry advocates argue the revised bill would prohibit hemp-derived THC products under North Carolina law even if Congress delays the November changes or ultimately creates an exception for hemp beverages.

The Challenge of Rolling Back an Established Category

North Carolina’s market shows what happens when a hemp-derived THC category becomes established before lawmakers create a regulatory framework.

In regulated cannabis states, THC products typically exist within a licensed dispensary system. Access is controlled, and consumers generally enter the market through dedicated cannabis retailers.

North Carolina took a different path. Hemp beverages entered everyday commerce before comprehensive regulations were established, allowing consumers to discover THC beverages alongside functional drinks, non-alcoholic beverages, and wellness products.

Once a category reaches mainstream retail, removing it creates a different challenge than preventing it from entering the market in the first place. Businesses have already invested in manufacturing, distribution, retail relationships, and hospitality programs, while consumers have become familiar with the products.

Taking Distribution Into His Own Hands

After years of building Groove Wagon, Dunn recently launched a non-alcoholic beverage distribution company serving North and South Carolina to have more control over his supply chain. The company distributes hemp beverages and other non-alcoholic alternative beverages rather than alcohol products.

Dunn says traditional three-tier distributors can be costly for startups to manage. He said one partnership nearly pushed his company to the brink and forced him to find a better solution.

At the same time, uncertainty surrounding future hemp regulations has made some distributors and retailers more cautious about inventory commitments. Dunn believes larger retail chains are more likely to scale back orders as regulatory deadlines approach, while independent retailers and on-premise accounts have greater flexibility to adapt as the market changes.

What Comes Next

Despite competing for shelf space and retail accounts, Dunn said North Carolina’s hemp beverage industry has largely come together around the regulatory fight.

Companies that would normally compete are sharing information, coordinating advocacy efforts, and encouraging retailers, consumers, and hospitality businesses to contact lawmakers.

“It’s not about competing,” Dunn said. “The conversation is who is stepping up, who is sharing intel, and who is making it happen.”

The North Carolina General Assembly is scheduled to reconvene on July 27, when lawmakers could take up the revised bill. Because the Senate substantially rewrote the legislation, it must return to the House before it can move forward.

During the recess, Dunn said brands, distributors, retailers, and industry advocates are organizing a grassroots campaign in hopes of replacing the proposed ban with regulations such as a 21-and-over age requirement and product testing.

“Everybody wants 21-and-up,” Dunn said. “Everybody wants testing. Those are the things immediately required for safety in this market.”

For now, the industry’s focus is on convincing House lawmakers to replace a proposed ban with regulations they say will protect consumers while allowing the market to continue operating.