Am I Ready to Enter the CBD Industry? (Part 1)

Am I Ready to Enter the CBD Industry? (Part 1)

Many have touted the potential benefits of CBD, a component of both cannabis and hemp. New laws such as the 2018 Farm Bill are allowing for easier entry into the industry. In addition, both the FDA and the World Health Organization have cited a lack of evidence for addiction or abuse potential of pure CBD, as summarized by The U.S. Hemp Roundtable, a leading industry advocacy group whose goal is “the full and permanent legalization of hemp and hemp products.” The booming CBD marketplace may be easy to enter, but success is not quite so simple. Read on to learn what it takes to beat the competition, overcome the challenges, and market your brand in the CBD industry.

A Booming CBD Market

In May, the research firm BDS Analytics predicted that U.S. CBD product sales will drastically increase from $1.9 billion in 2018 to $20 billion by 2024, which is a compound annual growth rate of 49%. As cited in a Bloomberg article, New York-based investment bank Cowen & Co. predicted in February that the CBD market will be worth $16 billion by 2025, basing their findings in part on a study of 2500 people, 7% of whom had used CBD. U.S. consumer penetration for hemp-derived CBD products has reached 15%, and BDS Analytics predicted that most CBD product sales will soon occur in general retail stores, eventually surpassing sales at cannabis dispensaries.

The Changing Legal CBD Landscape

Many financial and lending institutions treat the CBD industry as high risk, potentially due to the confusing legal landscape. However, that may be changing. The U.S. Hemp Roundtable, the industry’s leading business advocate for the full and permanent legalization of hemp and hemp products, described the legal status of hemp in an article. Thanks to the December 2018 federal Farm Bill, hemp is no longer a controlled substance. Individual states may still prohibit hemp cultivation but not interstate hemp transportation. In addition, more recent TSA guidelines now allow hemp-derived CBD to be transported on airplanes, further legitimizing the industry.

Few Hurdles to Entry Means Stiff Competition

According to research firm Industry Research Biz, CBD oil production is mainly concentrated in Europe and North America, and there is an integrated industry chain, from industrial hemp down to actual sale of the oil. Manufacturers and distributers at various levels of this supply chain can directly sell CBD oil in various forms. From tinctures to capsules, topicals to edibles, there is lots of room for diversity in the CBD marketplace. Furthermore, sales cross over among different industries, from food to cosmetics to pharmaceuticals.