Calculating profitability of investment in CBD startups
CBD startups are booming. The name stands for cannabidiol, a compound found in marijuana, which is responsible for its calming effect. 

Hundreds of millions of dollars are being pumped into the infant industry of cannabis by-products. US retail sales went up to a whopping amount between $600 million and $2 billion in 2018, according to estimates by investment research firm Cowen.

You may be asking yourself questions such as “Can I make money selling CBD?” and “Is CBD oil legal?” Well, this article will help you get a clearer picture of the industry. 

We spoke with over a dozen CBD startups, both distributors and producers, and here’s what we found.

CBD startups to watch in 2020

CBD Legalization is Ramping Up

In 2015, the medical use of CBD oil had been legalized in 14 out of 50 US states, subject to certain restrictions. Fast forward to 2019 , recreational marijuana is legal in 11 states and Washington, DC, and medical cannabis in 33 states. 

This amounts to over 50% of the US where cannabis derivatives, such as CBD, can be sold and used. The stats show great prospects for CBD businesses just starting out or trying to scale their operations.

The reason why national laws are becoming more lenient is the science behind CBD products. CBD oil is processed from industrial hemp, a strain of the cannabis plant. 

The concentration of tetrahydrocannabinol, or THC – the psychoactive component in cannabis – is extremely low, way below 0.3%. This percentage makes the difference between legality and felony.

CBD Startups Operate In a Highly Regulated Industry

CBD products are believed to have beneficial effects on various illnesses, from insomnia and anxiety to epilepsy. They come in pills and gummies, creams, teas, coffees, or tinctures.

They also have various routes of administration: they can be swallowed, applied under the tongue (sublingual) or on the inside of the cheek; they can be inhaled; or they can be applied topically on the skin.

However, the industry is still subject to stringent regulations. CBD businesses – producers, promoters, and distributors – are not allowed to make mention of the health benefits that they can foster.

According to claims made by industry regulators, there is not enough research and data to confirm the benefits. 

The entire industry of CBD is in its infancy. That means we can’t be aware of any long-term side effects of using the product for lengthy periods of time.

It’s Better to Err on The Side of Caution

In addition to the social stigma surrounding cannabis-derived products, regulators are closely watching all related marketing communications.

At the same time, the industry legislation is constantly changing. This means that CBD businesses need to commit to a close relationship with the legal framework they operate in.

It’s imperative for CBD startups – both distributors and producers – to be cautious and creative in their marketing efforts. They need to come up with innovative ways to attract and convert more clients.

What we’ve found is that they can tremendously benefit from web or mobile apps that educate people on the various products available, and their positive effects.

If you’re at a loss for ways to market your CBD products while abiding by the law, there’s a surefire and inexpensive way to do that. By investing in your web SEO strategy or search engine optimisation, you can promote your offer without falling under the scope of advertising regulations.

Are you looking to invest in the CBD industry? Wesrom prides itself on having in-depth market knowledge. Get in touch to book an investment feasibility assessment.

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