How to Start a CBD Business
The CBD sector of the cannabis and hemp industry is one of the fastest growing segments of the space. Here’s how you could start a CBD business and get involved.
- Cannabidiol (CBD), a compound found in hemp and cannabis plants, is becoming increasingly popular as a dietary supplement.
- The CBD industry is projected to hit $20 billion in sales by 2024.
- Hemp and hemp CBD are federally legal following the signing of the 2018 Farm Bill.
- The industry still faces challenges in advertising, banking and insurance.
Still relatively new to the mainstream, cannabidiol, more commonly known as CBD, is becoming a household name. The purported therapeutic and health benefits of CBD, one of many compounds found in cannabis and hemp plants, has created a buzz. CBD oil has entered the marketplace in the form of tinctures, infused edibles, topicals and more. The growth of CBD oil products has been so immense, in fact, that industry analyst BDS Analytics predicts the U.S. CBD market will reach $20 billion in sales by 2024.
The potential of the CBD industry has prompted many people to explore how they can launch a CBD business. The industry is not without its challenges, though, especially surrounding the evolving legal landscape, but the opportunity is significant.
If you’re considering getting involved in the CBD industry, you first need to understand more about cannabinoids and the products that utilize them.
What is CBD?
CBD is one of more than 100 cannabinoids, which are compounds found throughout the cannabis and hemp plants. The most famous cannabinoid is undoubtedly tetrahydrocannabinol (THC), which is responsible for the intoxication associated with the consumption of cannabis. CBD, however, does not produce an intoxicating effect; instead, it offers potential therapeutic and health benefits, though research into its potential medical applications is ongoing.
CBD products are generally created in several steps. First, the raw material needs to be cultivated and harvested. For example, if you plan on using industrial hemp to create your CBD products, you will either need to cultivate or purchase a large amount of the plant. From there, CBD oil is extracted from the plant using a variety of methods. Again, you can do this yourself or outsource the process to an extraction company. Once you have extracted the CBD oil, it can be sold as a concentrate or used to infuse a variety of products. Some of the most common CBD products on the market today include sublingual tinctures, infused edibles and topicals, like gels or creams.
Hemp CBD vs. cannabis CBD
CBD is found in both cannabis and hemp plants. CBD oil can be extracted from either plant and used to create CBD oil products. However, there is a key difference between hemp CBD oil and CBD products derived from cannabis: THC.
Industrial hemp contains less than 0.3% THC, and as such, it is considered legal under federal law to cultivate, harvest and process into finished products. Cannabis, on the other hand, contains more than 0.3% THC (often much higher levels) and remains federally illegal.
Hemp and cannabis are closely related; in fact, industrial hemp is actually Cannabis sativa L. The difference in name is mostly a function of a legal definition, which sets the threshold for THC content. The flowers of a hemp plant contain little to no THC, while the flowers of a cannabis plant (commonly referred to as marijuana) contain much higher levels of THC.
The federal government considers marijuana a Schedule I drug under the Controlled Substances Act, making it illegal for interstate commerce, even as dozens of states legalize it for adult use. Industrial hemp, on the other hand, was recently removed from the Controlled Substances Act altogether, opening the way for its cultivation and harvest in the U.S. for the first time since 1937.
Did you know? The key difference between hemp CBD oil and CBD products derived from cannabis is THC.
Full-spectrum CBD vs. CBD isolate
If you’ve done any research into the CBD market already, you’ve likely encountered the terms “full-spectrum” or “isolate.” Depending on the extraction methods used, the CBD oil obtained from the plant might contain other cannabinoids and compounds found in the source plant. This is what is known as full-spectrum CBD. Full-spectrum CBD not only contains other cannabinoids found in the source material, but compounds known as terpenes, which are responsible for creating the flavor profile, aroma and specific effects of the plant.
CBD isolate, as the name suggests, is a concentrate that only contains CBD and no other cannabinoids or terpenes. While the purity of CBD isolate might sound desirable, there is some evidence to suggest that full-spectrum CBD promotes an “entourage effect;” that is, the compounds in a full-spectrum hemp extract work together to promote more significant effects. The entourage effect is still under investigation by researchers studying CBD and other cannabinoids.
The CBD industry is projected to grow immensely
Industry analyst BDS Analytics predicts the U.S. CBD market will reach $20 billion in sales by 2024. This would be a major surge from $1.9 billion in 2018 (a 49% annual growth rate).
Needless to say, society is growing more open-minded and accepting of CBD. Many individuals are turning to it for pain relief, stress management, better sleep, and more; and many gas stations, restaurants, and local CVS stores now sell it.
Some trends the CBD market might experience in 2020 are increased potency of products, more brick-and-mortar CBD shops, more pharmaceutical CBD products, and more access to products online through CBD websites and e-commerce shops. In fact, CBD online sales currently account for 60% of the sales channels.
The CBD industry is introducing new products all the time. If you’re looking to start a CBD business, you will have a wide range of product types to consider selling. Here are the most popular types of CBD on the market right now:
- Sublingual tinctures: A sublingual tincture is CBD oil that generally comes in a small bottle with a dropper. Sublingual products are ingested by placing them under your tongue and allowing the oil to absorb.
- CBD edibles: CBD edibles are a rapidly growing sector of the industry, including baked goods, candies and foods. CBD edibles have faced significant regulatory scrutiny from the U.S. Food and Drug Administration (FDA) but remain as commonly found products.
- Vape concentrates: Vaporizer concentrates, such as CBD oils and waxes, are another common product. These can be used with an electronic device to vaporize and inhale the CBD product.
- CBD topicals: CBD topicals include gels, creams and sprays for aches and pains. These products are placed directly on the skin to target a localized region of the body.
- Capsules and pills: Many patients who experience seizures or digestive issues take CBD capsules or pills to treat their conditions.
Additionally, CBD isn’t just for humans. Animals also experience calming effects when given small doses, and many businesses offer CBD products for pets, like dogs or cats.
How to start a CBD business
There are countless unique opportunities for new businesses to sell CBD. Starting a CBD business includes all the hard work and effort of launching any other company in addition to the uncertainty of a shifting regulatory landscape (and all the issues that accompany it). However, in a fledgling industry projected to undergo explosive growth, the heavy lifting today might be well worth it tomorrow.
Cory Slovik, owner of Core Roots CBD, started his company after experiencing firsthand what he said were the healing properties of the cannabinoid.
“I used to be a pro snowboarder … and I was always sore, my muscles were constantly in agonizing pain. I tried CBD, and it helped me tremendously,” said Slovik. “Then, years later, cannabis … started coming to the forefront, and there was research and data backing up everything I felt on the mountain.”
Slovik soon launched Core Roots CBD, seeing a business opportunity and a way to help other people treat their pain. He said starting a CBD company is like any other business, plus a bunch of added steps.
“It’s like any other business; there are steps and procedures you need to go through like getting insurance and writing a business plan,” Slovik said. “But in this space, you have got to double- and triple-check everything, know your market and jump through regulatory hoops.”
[If you’re looking for more details on how to start a business and all the steps you need to take, see our step-by-step guide to get started.]
Understand your legal obligations
Just because the 2018 Farm Bill federally legalized industrial hemp and, by extension, hemp extract, like CBD oils, doesn’t mean there aren’t significant regulatory considerations surrounding the industrial hemp industry.
The 2018 Farm Bill essentially removed CBD from the federal Controlled Substances Act and the oversight of the Drug Enforcement Agency. Instead, it placed governance of the hemp industry and CBD oil in the hands of the FDA.
Currently, the FDA is still devising regulations, leaving the CBD industry in a sort of gray area. So far, the federal agency has signaled that marketing CBD as having health benefits will not be tolerated. It has also initiated a crackdown against CBD-infused foods and beverages in some instances.
Further complicating the regulatory landscape is the 2017 approval of the CBD-based pharmaceutical Epidolex, an epilepsy medication that was approved by the FDA. Since CBD is a main ingredient in an FDA-approved drug, using it in food products without FDA approval could be illegal. Clearer guidance is sorely needed for CBD businesses to operate in compliance with federal regulations.
“I think the FDA does have to step in, and they will,” said Slovik. “I expect a lot of changes to labels; we’re seeing a lot of businesses out there now using the term ‘hemp extract’ instead of CBD, or they’re not thinking of health benefits so much. Many companies are doing different things, but no one really knows [what the regulations will be] until it happens.”
Understanding your legal obligations and playing it safe is key in a highly scrutinized industry. While CBD businesses everywhere await clearer regulatory guidance, it is important not to craft your marketing strategy around the supposed benefits of CBD. It’s also important to stay apprised of new developments as the FDA moves forward on crafting new regulations.
Market and sell your products
Marketing and selling CBD products is tricky. While the passage of the 2018 Farm Bill liberalized the industry a little bit (CVS and Walgreen’s now carry CBD products, for example), it is still difficult to sell CBD products on major online platforms like Amazon or eBay. Likewise, social media advertising is virtually nonexistent; paid ads for CBD products risk account suspensions or bans. All your growth must be driven through organic content that falls under the guidelines of each platform.
“In today’s day and age, if someone is looking to sell a product, the normal avenues are Amazon, eBay, Alibaba or paid ads on social media,” Slovik said. “In this industry, it’s way, way, way different. You can’t do any of those things.”
To successfully advertise and sell your CBD products, you will have to be creative. Establishing your own e-commerce store or carrying your products in a brick-and-mortar location is a must. Marketing your product with an organic search strategy and customer loyalty programs is always safer than engaging in paid advertising. And, of course, every market is a bit different, so do your research and understand your local and state laws.
How to gain a competitive advantage
The key to gaining a competitive advantage with staying power in the CBD industry is to develop a high-quality product that will withstand the coming scrutiny of both regulators and educated consumers. If you want to differentiate yourself from other CBD businesses, it’s key to provide third-party lab testing results to validate the quality of your product, Slovik said.
“We want to be more transparent by putting QR codes on all our bottles so anyone in the store can use their phone to get lab results right then and there,” Slovik said.
In addition, Slovik said pursuing certifications like USDA organic, Good Manufacturing Practices and FDA facility registrations are important moves to instill confidence in consumers about the quality of the product they are buying.
Overall, Slovik said, the formula for success is simple, even if the process is complicated.
“I would recommend double-, triple-checking everything. Know there will be changes. Research as much as you can, and recognize what the future opportunities are by thinking outside the box,” he said.
Tip: If you want to differentiate yourself from other CBD businesses, it’s key to provide third-party lab testing results to validate the quality of your product.
Key challenges facing CBD businesses
The CBD and cannabis industry faces unique challenges that other industries don’t. Most of these challenges relate to the regulatory environment and, as federal agencies like the FDA detail specific rules and guidelines, things should stabilize. For now, though, if you want to start a CBD business, you should be aware of these major considerations:
- Banking: Access to reliable banking services can be complicated due to the fluctuating regulatory landscape. Many banks are hesitant to do business with CBD and cannabis companies, fearing significant risk or burdensome oversight. Frequently, CBD businesses are forced to switch banks or experience the abrupt closure of a merchant account, which can seriously disrupt operations.
- Insurance: Finding affordable insurance for a CBD business is another major challenge. Prices remain elevated despite the legalization of industrial hemp, Slovik said, as the industry takes time to catch up to the developments. Education remains a key obstacle.
- Payment processing: Similarly, payment processors present high fees and other challenges to CBD businesses. Slovik said Visa recently cut off all CBD businesses, leaving him capable of only accepting MasterCard and Discover for payments.
- Access to capital: Banks and other lenders are reluctant to fund CBD companies, viewing the industry as too risky without clear regulatory requirements. So far, the CBD industry has relied on bootstrapping, outside investors or alternative lenders to find the growth capital it needs.
Each of these challenges will likely be cleared up as more concrete regulation appears, but in the meantime, CBD businesses must remain adaptable and well-informed. Changes in the industry come on a day-to-day basis, so preparing backup plans ahead of time could save you a great deal of time and money should the worst come to pass.
CBD is a huge business opportunity, if it’s approached correctly
The growth opportunity in the CBD industry is unparalleled. The cannabis industry is one of the fastest growing in the nation, and CBD is one of the quickest growing sectors of that industry. Especially following the passage of the 2018 Farm Bill, hemp CBD products are proliferating at a fast rate. If you want to start a CBD business, you’re not alone.
“This industry has been more or less illegal for the past century,” said Slovik. “At this point, there’s major, major momentum. Many people are trying to break in, so don’t follow the herd. You want to be a leader.”
A combination of due diligence and creativity will set your business up for success in the CBD industry. Now is the time to get in on the ground floor and build a company that will last, but differentiate yourself with a quality product that stands out from the crowd.
Additional reporting by Sammi Caramela. Source interviews were conducted for a previous version of this article.
Low THC Oil – FAQ for General Public
Georgia’s medical marijuana law allows certain qualified persons to legally possess up to 20 fluid ounces of “low THC oil,” which is derived from the marijuana plant. It authorizes the Georgia Department of Public Health to issue a “Low THC Oil Registry Card” to qualified persons, which will prove that they are authorized to have the oil and protect them from arrest.
How does Georgia’s law compare to laws in other states which have adopted medical marijuana?
Georgia’s law is much more limited than some other states’ medical marijuana laws. For example, it does not legalize the sale or possession of marijuana in leaf form and it does not authorize the production or sale of food products infused with low THC oil or the ingestion of low THC oil through vapor. It does not authorize physicians to prescribe marijuana for medical use. It is intended solely to protect qualified persons from criminal prosecution for possessing low THC oil for medicinal purposes.
Who is eligible for the “Low THC Oil Registry Card”?
There are three categories of persons who may apply for the card:
- an adult who has one or more of the diseases specified in the law;
- legal guardians of an adult who has one or more of the diseases specified in the law;
- parents or legal guardians of a minor child who has one or more of the diseases specified in the law.
What conditions or diseases are covered by the law?
The law lists the following conditions and diseases which qualify for the Low THC Oil Registry:
- Cancer, when such diagnosis is end stage or the treatment produces related wasting illness or recalcitrant nausea and vomiting
- Amyotrophic lateral sclerosis, when such diagnosis is severe or end-stage
- Seizure disorders related to the diagnosis of epilepsy or trauma related head injuries
- Multiple sclerosis, when such diagnosis is severe or end-stage
- Crohn’s disease
- Mitochondrial disease
- Parkinson’s disease, when such diagnosis is severe or end-stage
- Sickle cell disease, when such diagnosis is severe or end-stage
- Tourette’s syndrome, when such syndrome is diagnosed as severe
- Autism spectrum disorder, when (a) patient is 18 years of age or more, or (b) patient is less than 18 years of age and diagnosed with severe autism
- Epidermolysis bullosa
- Alzheimer’s disease, when such disease is severe or end-stage
- AIDS when such syndrome is severe or end-stage
- Peripheral neuropathy, when symptoms are severe or end-stage
- Patient is in hospice program, either as inpatient or outpatient
- Intractable pain
- Post-traumatic stress disorder resulting from direct exposure to or witnessing of a trauma for a patient who is at least 18 years of age
What if more than one person is caring for the child or adult?
If there is more than one parent or legal guardian, then each may apply for a separate card.
How do I apply for the Low THC Registry Card?
The application is actually sent in by the physician who is treating the patient. There are two forms. First, there is a waiver form which must be signed by both the applicant and the physician. Second, there is a physician
certification form. The physician will keep the original waiver and certification form in the patient’s medical records. You may request a copy. The physician will electronically submit the information from these forms to the Georgia Department of Public Health, which will review the information and create a Low THC Oil Registry Card for qualified applicants.
Where will I get my Low THC Registry Card? Will it be mailed to me?
You will be notified when your card has been printed. A representative from DPH’s Office of Vital Records will contact you to establish which of 20 Public Health Offices across the state is most convenient for you to pick up your card. A representative from the Public Health Office selected will notify you when your card is available for pick-up.
How much does the card cost? How do I pay for it?
The fee for a Low THC Registry Card is $25 per new card, which is the standard fee used by the Office of Vital Records. You will be asked to pay for your card when you pick it up from the closest of the 20 Public Health Offices approved to distribute them.
How long is the card valid?
The card will be valid for two years from the date it is issued. The expiration date will be printed on the front of the card. After that time, you will need to again consult with your physician and request that they update and confirm your information into the registry. Please plan to allow 15 business days to process your information, print your card and have it ready for pick-up from the closest of the 20 Public Health Offices approved to distribute them to the address you list as your residence in the registry.
What happens if I lose my card?
If you lose your card, please contact the State Office of Vital Records at 404-679-4702 option 4. If your card has not expired, your physician will be contacted to confirm you are still under their care. Once confirmed, a replacement card will be provided to you. Please plan to allow 15 business days to process your information, print your card and have it ready for pick-up at your closest Public Health Office. Replacement cards will cost $25.
The information on my card is wrong or outdated. How do I correct it?
If the information on your card is wrong or outdated, please contact the State Office of Vital Records at 404-679-4702 option 4. Vital Records will verify the information provided by your physician on your order. If the information on the order is incorrect, you will need to contact your physician and ask that they update the information. At that time a new card will be issued.
Can I alter or laminate my card?
Cards can be laminated; however, a card is void if any changes are made to it.
Where can I buy low THC oil?
Under House Bill 324, the Georgia Access to Medical Cannabis Commission, which is administratively assigned to the Secretary of State’s Office, will oversee the growing, manufacturing, and dispensing of low THC oil in Georgia. The Georgia Department of Public Health does not prescribe or dispense low THC oil.
Is marijuana now legal? Where can I buy it?
No. The law only authorizes the legal possession of up to 20 fluid ounces of low THC oil by qualified persons. It does not make the sale or possession of all types of marijuana legal in Georgia. Possession of any form of marijuana by an unauthorized person is and remains a violation of state and federal law.
Can I now sell medical marijuana?
The Georgia Access to Medical Cannabis Commission will issue a limited number of licenses for the growing, manufacturing, and dispensing of low THC oil in Georgia. It is a violation of state and federal law for unauthorized persons to sell any form of marijuana.