Projections for the Cannabis Industry
The cannabis industry as a whole is one of the fastest-growing within the United States. Even through the COVID-19 pandemic, the U.S. has seen a skyrocket in the sales of various cannabis products, from cannabidiol (CBD) to tetrahydrocannabinol (THC).
According to BDS Analytics and Arcview Market Research, the CBD industry is expected to reach sales of $20 billion by 2024. This forecast was made through observations of current trends concerning products being sold and the general rise in the public interest.
“We’re witnessing CBD maturing from a cannabis sub-category into a full-blown industry of its own,” notes Roy Bingham, co-founder and CEO of BDS Analytics. “Our growth forecast for the CBD market, across all distribution channels, predicts a compound annual growth rate of 48% by 2024. This is a great opportunity for all involved, but it means the road ahead will include decisions that need to be informed by the best possible data.”
One of the biggest reasons for this optimism is the ever-changing perception surrounding the cannabis industry. What was once viewed as a dangerous drug is now being seen as a medically applicable substance.
CBD, in particular, has developed a notable foundation thanks to the fact that it’s non-psychoactive. Without the risk of a “high,” people who have no interest in traditional cannabis are looking towards this cannabinoid with much hope.
According to some recent polls released by Politico:
- While only 54% of Americans are familiar with CBD products, 15% of adults (one in seven) use these products regularly.
- 60% of those who use CBD regularly had searched for information online or in print prior to trying CBD for the first time.
- 21% (one in five) of adults ages 18 to 29 use CBD products whereas 11% (one in ten) of adults aged 65 or older do.
- CBD is more prevalent in the Western U.S. (22%) than it is in the South (12%) or Northeast (12%).
- Opposing political views are found to use CBD at similar rates. 13% of Republicans and 13% of Democrats take the substances. Whereas 19% of liberals and 14% of conservatives use CBD.
While these polls give a lot of insight as to who is using CBD the most, it also reveals the ever-changing attitude towards the cannabinoid. Despite many Republicans having strict opposition to cannabis, they take CBD at a similar rate to Democrats.
With this changing attitude, there’s naturally going to be a gradual increase in CBD sales. As of this time, the majority of CBD sales are online – accounting for at least 60% of the marketplace.
While this may be a factor of COVID-19 and the general increase in online shopping, it also helps that many businesses and blogs are providing information about CBD. As mentioned, only about half of Americans are familiar with what CBD is. That number will naturally increase and, when it does, we guarantee the majority of these people will be doing their research on the web.
Targeting Your Audience
The purpose of sharing these statistics is to give you a sense of who you’ll want to market towards. While you can opt to reach an audience of those already taking CBD – such as young adults living in the Western U.S. – it may benefit you to reach out to those who still don’t know much about CBD – such as older people in the Northeast or Southern U.S.
Your target audience will ultimately determine the type of products you develop. One of the most notable aspects of the CBD industry is how innovative entrepreneurs have become with their products. We’ve seen everything from CBD inhalers to CBD beard creams.
Still, the most common products people associate with this industry include:
- CBD Oils (Tinctures) – The biggest product currently on the market, many prefer using CBD oil as it provides a lot of bioavailability and gives users a lot of leeways when it comes to dosing.
- CBD Gummies – We’ve seen exponential growth in CBD gummies sales over the last few years and this is likely thanks to the fact that these provide users with a familiar way to take CBD.
- CBD Capsules – Another familiar way to consume CBD, capsules might be ideal if you’d like to mix CBD with other all-natural supplements.
- CBD Topicals – If you’re looking to market towards a beauty niche or simply want to help those specifically struggling with muscle pain, CBD topicals have been found to be extremely effective.
- CBD Vapes – While not every newcomer to CBD is going to favor vaping, these products have been found to be popular with younger people and those who use cannabis regularly.
The products you decide to sell will ultimately determine who your target audience is. If you’ve already decided on a niche market (i.e. athletes, older generations, etc.), you’ll want to consider what products they’ll be most interested in.
How to Start a CBD Business
As mentioned, there are no strict guidelines to starting a CBD home business. The majority of entrepreneurs we spoke with discussed how the lack of a blueprint forced them to become inventive and adaptable.
When you start garnering CBD business opportunities, it’s likely you’re going to run into a number of problems you weren’t initially expecting. While that may be unavoidable, there are a number of steps you can take to ensure you’re getting started on the best possible foot:
1.) Find Your Motivation
Before you do anything, it’s important to stop and consider: why do you want to sell CBD? If the answer is solely for profit, you’ll be better off in another industry. Obviously, everyone wants to make some money when they start a business. However, if your only motivation within the CBD industry is money, you’re likely to fall off.
The vast majority of successful CBD companies developed their brand out of inspiration to help others. They saw the potential this cannabinoid had and felt thousands of others could benefit from it too. This motivation was reflected in our interviews:
“I was personally passionate about CBD and wellness products in general,” Ken Lawson, CEO of FOCL, tells us. “I had used plant-based supplements over the years and when CBD hit my radar, I started doing a bunch of research and taking it myself. It really helped me with sleep at the time and, being as I was ready for a new venture, I decided to combine my great experience with wellness along with online businesses.”
“We felt that certain aspects of the health and wellness industry had failed too many people and we wanted to be part of the solution,” Martin A. Sumichrast and Scott R. Hoffman, members of cbdMD’s board of directors, detail. “We make and sell CBD, but we think of ourselves as consumer health advocates above anything else. One of our primary objectives is to help people make informed choices about self-care, fitness, and general well-being.”
Find your motivation. Have you used CBD? Has it helped you with an ailment no other medication could help with? What do you hope your CBD business can do for other people?
2.) Understand the Landscape
One of the biggest difficulties with the CBD industry is it remains unregulated. With that, lawmakers have been scrambling to set standards that ensure customer safety. These vary on a state-to-state level and you will need to research your state’s laws before diving into a business.
However, it’s just as important to remember that regulations are constantly changing. For example, when the CBD industry was still very much in its infancy, many out there were experimenting with different consumption methods. CBD-infused food and beverages started gaining popularity and the Food and Drug Administration (FDA) almost immediately shut this down.
While it’s impossible to detail all the problems you’ll come across, it could help to get some insight from others who have already been down the path.
“When we opened our manufacturing kitchen, I called the state of Vermont and I was like, ‘Hey I wanted to get inspected,’” Joe Pimental, CEO of Luce Farms, explains. “And they were like, ‘Yeah, go ahead, but we don’t know how to inspect you.’ It took them a year to figure out how to deal with our company.”
Beyond regulation, a lot of future entrepreneurs simply aren’t prepared for the demands a CBD business brings. Some of these difficulties can be predicted as other industries struggle with them as well.
“Every difficulty we’re experiencing, we expected,” Todd Smith, co-founder of Joy Organics, explains. “There’s a lot of challenges in the market right now. While a lot of the industry is suffering from supply-chain issues, we have none of those. But that was because we expected it. Part of our success has been that we are out in front anticipating problems.”
Beyond supply-chains, some companies have found marketing to be their biggest problem. Without the ability to freely market on social media platforms like any other industry, many within the CBD business have had to go down more difficult routes.
“Our business model has been maintaining rankings through Google SEO [search engine optimization],” notes Dareh Zadoorian, CEO of Cheef Botanicals. “So, the maintenance and the upkeep of the rankings is our biggest hurdle. We have to modify our strategy based on Google’s core updates – which are done a few times a year.”
When it comes to cannabis and CBD, you never really know what challenges tomorrow’s going to bring. You’ll have a step up from competitors if you’re able to face these challenges without being knocked down. Study the landscape and prepare for the worst possible outcome.
3.) Know the Necessary Capital
There’s a bit of debate on how much money you’ll need in order to start a CBD business. Some guestimate as low as $10,000 while others claim you’ll need at least $100,000.
Ultimately, your required capital will depend on which business model you go by. These are as follows:
- Private Label – When a product is developed by a third-party but sold under your brand’s name.
- White Label – A generic product sold to multiple retailers under multiple different brand names.
- Wholesale – Selling other brands’ products through your own retailer (whether online or in-store).
- Dropship – Advertising other’s brands through your own retail, but not responsible for distribution.
Certain business models will require more capital than others. For example, dropshipping is the most cost-effective as the majority of your finances will go towards marketing products of other companies.
However, no matter what business model you choose, it’s important for you to consider where this money is going to go. Todd Smith details some of the things CBD entrepreneurs need to keep in mind when deciding how to spend their capital:
“If somebody wants to start a business in this space and not be completely handicapped, I feel they need to have $25,000 or more. Here at Joy Organics, our minimum order for our private label partners is $2,500 – so, technically, somebody can have their own line of branded products for $2,500.
“Then they’re going to need a website. Certainly, they can do a low-budget website, but low-budget websites don’t convert because they just don’t look like trusted websites. So, I think if someone wants to do it right, they need to plan on spending upwards of $5,000 to really put together a website that makes them look like they’re a trusted brand.
“So, now you’re up to $7,500. And then there’s going to be odds and ends. Some people may want to spend their money on getting the trademark process started. If they do it with LegalZoom, that’s the least expensive way to do it. If they hire a trademark attorney, they could be into that for thousands of dollars. I don’t recommend anybody to do that initially.
“And the biggest money that they’re going to need to spend is on marketing. That would include some basic SEO [Search Engine Optimization] and – depending on what their niche is – how they’re going to attack that niche. Let’s say $10,000 for products and website and everything over that would be marketing.”
4.) Determine Your Brand
Once you have figured out your business model and the necessary capital you’ll need, it’s vital to determine what your niche market is. Admittedly, a good chunk of CBD companies advertise to anyone interested in alternative health. And while this can be effective, it also means there’s a lot of competition out there.
It’s much more beneficial to focus your CBD brand on a niche market where there’s less competition and more room for craftsmanship. Take Foria Wellness as an example. They advertise themselves as an “innovative health and sexual wellness company” that believes in the power of plant medicine.
By just taking one look at their website, you already know what they’re all about – using CBD to promote sexual health and positivity. This kind of marketing is obviously going to appeal to a certain group of people. And while many of Foria Wellness’s products are similar to those of their competition, this group of people is more likely to buy from them.
Some CBD companies put an emphasis on pet wellness whereas others target their products towards athletes. Regardless, it’s beneficial to determine your brand through a niche market. With that, your website can become a hub of information for new research and studies concerning CBD and that niche.
As more of the general population starts taking CBD, it’s likely there will be more subgroups of individuals interested in these products for a particular reason.
5.) Produce a High-Quality Website
As Todd Smith kindly informed, a high-quality website does more than advertise your products. It shows that your brand can be trusted and that it’s safe for people to consume your products.
In an industry as unregulated as CBD (not to mention the fact that it’s attached to a Schedule I substance), being transparent with customers about your products is essential. The right kind of website will not only reveal this transparency but give your customers an opportunity to learn more about the hemp plant as a whole.
There are a few different aspects to a website you’ll want to keep in mind when going about designing:
- Layout – Since so many different types of people are getting involved with CBD, an easy-to-use website is ideal. Not to mention, one that is mobile-friendly.
- Blog Articles – Knowing that a number of newcomers will be going onto your website, it’s almost required to have some information surrounding what CBD is and how it works in the body. A blog is perfect for this kind of information as it will allow you to update regularly as more research comes out concerning CBD.
- Certificate of Analysis – One of the staples of this industry is having a Certificate of Analysis (CoA) for your products. While this may be a given, it should be noted that customers much prefer having easy access to this information.
- Email Newsletter – A little added bonus, you’ll probably want to incorporate an email pop-up in order to promote newsletter marketing. While this isn’t essential, it can prove to be a great marketing strategy.
Of course, these are merely some of the basic requirements for a high-quality website. Since it’s likely most of the CBD you sell will be online, your website is going to define your brand. Make it attractive, easy-to-use, and loaded with information for newcomers.
More Than Money: Have the Right Motivation
The CBD industry is tougher than most industries. With that, it requires a certain passion not all entrepreneurs have ready-at-hand.
Being as CBD and cannabis are new and growing in popularity, it’s likely there are a ton of people out there thinking this is a perfect “get-rich” opportunity. However, if money is the only reason you want to get into CBD, it’s probably best you don’t get into this space.
Beyond the fact that this industry requires more out of entrepreneurs than other industries, the market is built on trust. Without regulations, CBD brands need to show they care about their customers’ health and wellness. And the thing is most CBD brands that are making money genuinely care.
Whether they’ve had their own life-changing experience with CBD or have experienced it through someone they care for, most entrepreneurs got into this space as the hemp plant was able to help them.
If you haven’t found yourself in this position, it’s likely going to reflect within your company. Your motivation for selling CBD is key to your success and, with that, we want to conclude that you need the right motivation for an industry like this.