If you’re an entrepreneur looking for a new industry to enter, there’s a good chance that the CBD industry has crossed your mind. CBD is unquestionably the fastest growing supplement right now, and the CBD industry is expected to maintain a staggering compound annual growth rate over the next several years. The problem, though, is that the success of CBD also hasn’t escaped the attention of hundreds of other entrepreneurs just like you. A new CBD brand with a great marketing strategy can have great potential for success, but that doesn’t mean things will be easy for you. Are you really ready to try to complete with CBD stalwarts like OK CBD? These are just a few of the harsh realities currently facing the CBD industry. Consider them carefully before deciding whether launching a CBD brand is the right decision for you.
Vertical Integration Is Nearly Impossible
The idea of a vertically integrated CBD brand might appeal to you. If you could get the appropriate license and grow and extract your own hemp – perhaps you’d even tinker with the plant’s genetics a bit along the way – you’d end up with a completely unique product that would be impossible to duplicate. Unfortunately, though, full vertical integration in the CBD industry is probably unrealistic unless your budget is enormous.
With seeds for CBD-rich hemp plants costing $1 or more each, just planting a field of hemp may require an investment of thousands of dollars. Things only become more difficult from there; hemp requires extensive care throughout the growing process, and it’s usually harvested with manual tools rather than machines. Pollination or mold can ruin an entire crop – and even if you do manage to bring your crop to a successful harvest, the machines required to extract CBD oil from hemp using solvent-free carbon dioxide start at around $100,000 each.
Fortunately, there are CBD producers around the world who can supply your brand with finished products at fair prices. Those producers have relationships with experienced hemp farmers and never have to worry about shortages or poor harvests. The problem with getting your CBD products from an outside supplier, though, is that you’ll be selling a product that’s much the same as what your competitors are selling. How will you differentiate your brand?
You Can’t Market CBD Brands Through the Standard Online Channels
If you’re an experienced online entrepreneur, you’re probably used to following much the same pattern each time you launch a new company. You set up a landing page to advertise an offer, and you drive traffic to the landing page by bidding for keywords on Google and Facebook. If the offer converts, you drive more traffic to it and grow the business from there. If the offer doesn’t convert, you tweak it until it does convert. Google and Facebook, however, do not distinguish CBD products from other cannabis products – they’ve banned them all. The wide prohibition of online CBD advertising makes it difficult to drive paid traffic to a CBD website.
Since you can’t drive traffic to a CBD website through the standard advertising channels, your only real option is to publish helpful content on your site and hope that your articles show up in Google’s organic search results. That’s a very slow way to generate traffic; it can be months before your brand begins to earn any income at all. In the meantime, all of your competitors will be attempting to generate traffic in the exact same way – so it’s a constant challenge to generate content that’s more helpful, more interesting, and more shareable than what your competitors are producing.
CBD Has an Uncertain Legal Future
In the United States, the future of the CBD industry isn’t entirely assured. Although the CBD industry has grown rapidly over the past few years, it still essentially operates without federal regulation. The 2018 Farm Bill made industrial hemp legal to grow in the United States and removed hemp-derived products from the government’s list of controlled substances. However, the Food and Drug Administration still has the power to regulate foods, drugs, and dietary supplements. The agency simply hasn’t regulated CBD yet. The FDA website states that the agency is still gathering data and collecting comments from the public. Although CBD isn’t yet regulated in the United States, the FDA has sent several warning letters to companies adding CBD to foods or making medical claims about their products.
The CBD industry has become so large that the prospect of the FDA simply banning all CBD products seems remote. The agency has not yet determined how it will regulate the CBD industry, though, so CBD companies in the U.S. face an uncertain legal future – and the U.S. is just one nation. A CBD brand hoping for worldwide expansion will have to monitor the changing legal landscape around the world in order to maintain compliance.
The CBD Industry Is Incredibly Competitive
When experts say that industry will enjoy a compound annual growth rate exceeding 20 percent over the next several years, entrepreneurs around the world are going to stand up and take notice just as you have. Innumerable new CBD brands entered the market in 2019, and more still will launch in 2020. The level of competition is difficult for brands already in the market, and it’s only going to get harder for brands that haven’t launched yet.
The CBD industry is rapidly approaching a consolidation phase. New players with enormous budgets are entering the industry and securing distribution deals with major chains like GNC and Vitamin Shoppe. Smaller players will soon have no choice but to merge with or acquire other CBD brands to keep up. If you’re going to launch a CBD brand today, you can’t assume that customers are going to start beating down your door as soon as your website goes online. You need to have a firm marketing plan in place before you launch. You need to know your competition and understand that the correct online marketing strategy for a CBD brand differs from the strategies that work for brands in other industries.