The growth of the legal hemp industry has spun a new market with less legal bottlenecks. Short for Cannabidiol, CBD is a byproduct of the industrial cannabis plant that does not contain the THC, the cannabis property that gets consumers high.
With a reported growth projection of $22 billion by 2022, the CBD industry is too big to sniff at. Everyone is interested in taking a bite of it.
Analysts have called it the next gold rush, and it’s proving to be one. And the government is not looking away from it. In fact, in America, like in many other advanced countries, the government is deeply interested in the CBD industry.
With the US government highly invested in the control of the CBD industry, expect to see policies impact its growth over time. Preparing towards these impacts can help the true entrepreneur better navigate the challenges the CBD industry will pose and build a thriving business out of it.
1. Distribution
Even though the 2018 Farm Bill passed by President Trump legalizes the use and sale of CBD across all 50 states, the distribution of cannabis products is still under serious restrictions. FDA Commissioner Scott Gottlieb, M.D., on signing of the Agriculture Improvement Act and the agency’s regulation of products containing cannabis and cannabis-derived compounds says, “It’s unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived. The reason is that CBD and THC are active ingredients in FDA-approved drugs and have been subjected to substantial clinical investigations before being marketed as foods or dietary supplements. Under the FD&C Act, it’s illegal to introduce drug ingredients like these into the food supply or to market them as dietary supplements. This is a requirement that we apply across the board to food products that contain substances that are active ingredients in any drug.”
It’s also necessary to look at current state and local laws in order not to infringe any before embarking on sales and distribution of CBD. It was reported that even after signing of the Farm Bill Law, local and state police in Oklahoma, Idaho and Wyoming have seized hemp shipments and charged the drivers for state law marijuana crimes.
2. Production
Though the law stipulated punishment for violations of federal hemp law (including such activities as cultivating without a license or the production of cannabis that contains more than 0.3 percent THC).
A big relief to farmers, however, is that the law treats hemp like other agricultural commodities in many ways. The Farm Bill has several provisions such as the changes made to the existing provisions of agricultural law in order to include hemp.
Section 11101 includes protection of hemp farmers under the Federal Crop Insurance Act. This states that farmers will be assisted if, in the normal course of agricultural production, they suffer crop losses or termination. As farmers battle with the climate changes and also go through the risks involved in getting used to this potentially “new” product, these protections will be of immense benefit.
3. Processing
Before the passage of the bill, it was not an easy task for hemp cultivators to access processors because farmers were prohibited to travel beyond their home states due to the legislation on interstate travel. Growers in a state like North Dakota with a few numbers of licensed processors can now travel and access processors in a state like Oregon with more than 170 licensed processors.
Shawn Hauser, chair of the hemp and cannabinoid group at Denver’s Vicente Sederberg law firm says, “There’s express protection in the final language prohibiting interference with interstate transport, regardless of what kind of plan states choose to adopt.” The new provisions in the bill are supposed to allow states to adopt whatever plans they want to regulate hemp but expressly forbids any state from disrupting the transportation of hemp across its lines.
4. Balance of trade
For the year 2018, U.S. imported goods worth $493, 489.9 million from China while it exported $111,158.4 million worth of goods to the country. In the case of Canada, imports stood at $294,734.1 million while exports were $276,431.5 million.
The Hemp Crop Report says that In 2018, 77,000 acres of hemp were cultivated. Another report from the Federation of American Scientists says that in 2017, the number of hemp import from China and Canada totaled $67.3 million, down from a record high of $78.1 million in 2015.
Since Canada and China are the two leading exporters of hemp to the U.S, it’s expected that from 2019, there will be a significant tilt in the balance of trade between the U.S. and the two countries, given the increasing rate of cultivation of hemp in the U.S.
5. Marketing
It’s tough enough to market a business without as many restrictions as one in the cannabis industry. The Food and Drug Administration (FDA) is not really helping matters. According to a report by Associated Press, some hemp advocates are working round the clock to get the FDA to change its view of CBD being considered a drug ingredient and the illegality of adding it to food or health products without approval from the agency.
FDA Commissioner Scott Gottlieb says, “Selling unapproved products with unsubstantiated therapeutic claims is not only a violation of the law but also can put patients at risk, as these products have not been proven to be safe or effective,”
6. Advertising
Perhaps, the biggest hurdle to growing a CBD brand is getting the biggest media networks to accept your ads.The fact that Facebook and Google aren’t so high on cannabis,does not mean that there are no other ad-tech players.
Apart from the ad-tech players, other channels such as writing blog posts and honing conversion funnels can be effectively used to reach consumers. Fleur Marche´is an online, curated CBD boutique focused on rebranding and repositioning cannabis as a wellness tool for the Goop customer and beyond.
7. Securing Funding
The good news is that CBD is awash with funding. With the Farm Bill, hemp farmers will be able to buy crop insurance, apply for loans and grants, and write off their business expenses on their taxes like any other farmer.
Heavenly Rx says it’s investing $30.6 million in Blühen, this will give Blühen the leverage to expand its research and engineering teams as well as focus on the development and expansion of its retail operations. Blühen is a leading biomass friendly as well as a technologically advanced hemp processing and extraction company that prides at been GMP and EU GMP certified with farming and distribution partners across the southeastern United States.
Photo Credit: oron3 Flickr via Compfight cc
