As the hemp industry grows, so is the selling of CBD oil – non-psychoactive cannabis, with low tetrahydrocannabinol, or THC so it can't get people high – but that could open the door to unscrupulous businesses wanting to make a quick buck.
Oversaturation of the Market
The CBD business has been exponentially growing and is forecast to become $22 billion industry by 2022.
Founder and CEO of Greenseed Cannabis Company Rick Martinez says companies are being started by many different types of people.
“The barrier to entry is so low that literally anybody and their uncle can jump into the business,” says Martinez. “One can almost, I’m kidding you not, can start an e-commerce site and start selling CBD almost overnight. So, it’s super simple to get in and that’s a good thing and it’s a very dangerous thing as well.”
CBD Expo Tour founder Celeste Miranda says the rapid growth does lead to concern of the CBD industry will experience the issues craft beer producers have struggled with the past few years after the explosion of local breweries opening up.
“Even as the Farm Bill passes recently and the farmers are stepping into it. You know there’s going to be a bigger supply. Oversaturation? Absolutely,” says Miranda. “So many factors come in at that point then. Things like marketing, branding, do you have all your checkpoints in place to be company that survives.”
However, Martinez says while CBD sales and retail could see oversaturation, other parts of the still have a lot of untapped potential.
“One of the things I highlighted in the talk is the ancillary piece, which is growing exponentially. So I mentioned in the room is there any accountants in the room, there’s opportunity and some people actually raised their hands,” says Martinez. So saturation there? Probably haven’t even gotten there.”
One clear message those already in the CBD businesses: be informed about cannabidiol and the products currently on the market.
Martinez has been working with cannabis for about four years and says those in it for the money could do more damage than good.
“It’s putting a negative light on an industry that is coming out of the darkness. And I don’t think that, this is not a blanket statement, but it’s not good for the entirety of the industry to have people who know nothing about it jumping in,” says Martinez.
He says this industry relies on trust and the need for those interested in starting a CBD business to educate themselves and operate within the law. CBD Nationwide co-founder Katie Devoe agrees.
“When we are able to educate the consumers and educate the masses about what’s going on in this industry, it gives it more credibility and legitimizes it that much more for all of our regulators and for new states coming on board taking on CBD as a product they are open to,” says Devoe.
She adds that to survive in this market that’s becoming increasingly competitive, new companies need to find a unique product to sell.
“Differentiators are really what are going to make a difference for a brand or business to not just be another tincture on the market or not just to be another balm out there to heal a skin condition,” says Devoe. “What’s going to take you further?”
Even though federal law now allows the growing of hemp, people who make products from it say they’re not getting the support they need from banks.
Those in the business of selling products that can be made from hemp, such as CBD oil, are increasingly using the internet to reach new customers all over the country. But finding a bank that will process payments and deposit money has been a challenge, as some financial institutions still view the industry as risky.
Devoe has been selling CBD products for about 10 years. She co-founded Paradise, a CBD candies brand, and more recently Sacred Biology, a CBD beauty care line.
“And without the big banks backing the industry, it’s been such a challenge because people are having to go to overseas companies, having to pay really high interest rates to even have that accessible,” says Devoe.
Devoe says smaller banks are starting to come on board, but for the time being she advises CBD businesses selling online to have backup payment options.