Catching up on the State of the Hemp, CBD and Cannabis Industry
Introduction to the Cannabis Industry
As of 2019, about half of the United States has fully legalized or decriminalized cannabis. Recently updated laws and state regulations for the plant indicate that cannabis could become federally legal within the next few years. Social attitudes show even more promising projections, with voters’ opinions that have already reached the tipping point for full legalization.
For entrepreneurs, this period of time is even more important than the period that will come after full legalization. Developing a cannabis business plan should happen ahead of the legalization boom to ensure a solid brand in the industry. To get started, take a look at the current state of legalization, social attitudes, and market trends.
What’s Legal in the Cannabis Industry and What Isn’t?
The cannabis industry is experiencing immense growth in the United States, though many of the laws and regulations remain in a grey area. To understand the industry at a whole, it’s important to comprehend the legal landscape of cannabis, hemp and CBD.
Federally, cannabis is illegal. It is currently classified as a Schedule I substance, which means the government has determined it to have a high potential for abuse. Under this classification, it is not acceptable for recreational or medical use. However, in the past several decades, new state laws conflict directly with these federal regulations. Many states have discovered the medicinal properties of the plant and legalized the flower or concentrates to treat a variety of conditions, such as chronic pain, inflammation, migraines, anxiety, and more. Others have gone a step further to legalize adult use and establish a retail industry where cannabis can be purchased at dispensaries or delivered to people’s homes.
Cannabis is illegal in Alabama, Idaho, Kansas, Kentucky, Mississippi, Nebraska, North Carolina, South Dakota, Tennessee, Wisconsin, and Wyoming. Even though these states have not legalized adult or medical use, some have implemented reduced criminalization for users caught in possession of cannabis.
The District of Columbia and 11 states have fully legalized the plant for medicinal and recreational use. These include Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, Washington, most recently Illinois. Keep in mind that even though these states are considered fully legalized, some still have specific restrictions in place, such as no current system for legal retail sales.
The remaining states in the U.S. allow for the limited use of medical cannabis, and some have also decriminalized the substance so users in possession do not face jail time. Illinois is the most recent and second largest state to legalize adult use of cannabis. The state’s new retail sales and tax system will kick off on January 1, 2020, which includes expunging criminal records related to cannabis and enforcing redevelopment initiatives for impoverished communities that were directly affected by its prior criminalization.
New Jersey and New York have been tailing behind Illinois with bills that many residents are hopeful to see signed into law as soon as possible. In New Jersey, a move to expunge people convicted of cannabis possession is expected to be implemented soon, and adult use legalization will be on the state’s 2020 ballot after failing to be addressed by lawmakers in 2019. New York was trying to pass similar initiatives for 2019, but failed to find the full support to do so. Though a decriminalization bill was signed into law, the state will have to wait a little longer to see what happens with full legalization for adult use.
When cannabis was classified as a Schedule I substance by the U.S. government, this was mainly due to its potential to produce THC. THC is only one of many compounds that the plant can produce, but it’s the psychoactive compound that causes people to get high after they’ve smoked or consumed a cannabis product.
The cannabis plant is able to be cultivated without THC, and in this case it’s referred to as hemp. In this version of the plant, it only contains trace amounts of THC and can’t get you high. This big difference flew under the radar for quite some time, but hemp was finally made legal in 2018 thanks to the Farm Bill.
Before this legislation, hemp was only allowed to be cultivated and researched under small pilot programs. The Farm Bill allowed for broad cultivation, distribution across state lines, and no restrictions on the sales of hemp-derived products.
CBD, or cannabidiol, is another compound found in the cannabis plant. Unlike THC, it doesn’t get you high, but it’s been known to provide positive mental and physical effects for pain management, stress and anxiety, insomnia, and more. CBD can be derived from cannabis plants or hemp plants, but through the Farm Bill it’s only legal if it’s derived through hemp that contains no more than 0.3% of THC.
Though many users love to tout the supposed benefits of CBD, there still hasn’t been much research into its long-term effects. Therefore, the FDA has made it illegal for any CBD products to be marketed as having therapeutic benefits or as dietary supplements unless they have undergone the proper FDA approval process.
Because CBD is only federally legal through the Farm Bill, it resides in a grey area similar to cannabis where it’s difficult for companies to understand exactly how their products can be marketed, packaged, and sold. Currently, there are 17 states with CBD laws that might further help entrepreneurs to understand what they can say about their products and how they can go about receiving specific approvals.
What Are the Current Social Attitudes About the Cannabis Industry?
Society’s attitudes about cannabis are important to pay attention to for both legal and marketing perspectives. These attitudes end up influencing legislation over time and allow businesses to understand the types of products that will be more popular as the industry matures. Though similar, these attitudes differ across cannabis, hemp and CBD.
How Pro-Legalization Attitudes in the U.S. Have Changed Over Time
- 1990 16% 16%
- 2000 31% 31%
- 2010 32% 32%
- 2019 62% 62%
Pro-Legalization Attitudes in the U.S. by Generation
- Millennials 74% 74%
- Gen X 63% 63%
- Baby Boomer 54% 54%
- Silent Generation 39% 39%
Attitudes Toward Cannabis
As of 2019, about 62% of Americans say that cannabis should be legalized. Diving into historic and generational attitudes shows that this belief has grown substantially over time. In 2000, about 64% of Americans actually wanted cannabis to remain illegal, showing a complete reversal of attitudes in the span of two decades. Millennials are leading the charge for legalization, with 74% in support, and the percentage of support gets smaller and smaller with older generations. Since the statistics for public support trend upwards, it shows that support will only continue to grow until cannabis is finally made federally legal.
In a recent study of residents across the country, insights showed that people are most interested in the health benefits of cannabis and how it might be able to replace other pharmaceutical remedies. New users are often seeking substantial information about the products to help them make the decision of what they need and how they need it.
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Attitudes Toward Hemp
Since hemp contains no psychoactive ingredient, attitudes toward it have usually been positive or neutral among the broader community. Whether people know it or not, hemp has been used for years in food, health products, personal care, clothing and fabric, construction, and agriculture. America is the largest importer of hemp, spending nearly $500 million annually on the plant and its products from other countries. Now that hemp is legal and broadly unrestricted for growth and distribution, it is expected that the industry could reach $1.9 billion in sales by 2022.
Attitudes Toward CBD
Ten years ago, no one was really talking about CBD. There were probably only a small set of people who knew its full name, cannabidiol. Nowadays, it’s practically a household name. CBD companies promise solutions for better sleep, pain management, skin care, and more, making it seem like a miraculous cure-all. Consumers are interested in its benefits that seem to be similar to marijuana without the side effects of getting high. Many of CBD’s current users are quick to stand by these claims, despite much research. Google search trends for CBD and its derivative products have grown steadily since 2016 to reach peak popularity in 2019.
So far, research has shown promising results when CBD is used for arthritis and seizures. However, research elsewhere is currently undeveloped or inconclusive. Though it seems that consumers are heavily interested in CBD and even swayed by its claims, many others are wary about the lack of research thus far. Only 34% of people in a national survey claimed that they had confidence in the safety of CBD products, and an even fewer 19% said they could distinguish safe and effective CBD products.
Though CBD is legal and growing in popularity, it will take more time for the industry to mature and the government to catch up in terms of standardized regulations for all CBD companies. In the meantime, marketing CBD products means leaning in to the curiosity of potential users as well as being transparent and straightforward about its claimed efficacy.
What Does the Cannabis Market Look Like for Entrepreneurs?
It’s no secret that cannabis, hemp, and CBD markets are already cash cows for the economy and poised for even more business growth. Because each separate industry has its own set of legal implications, business can expect different revenue projections.
For the commercial cannabis market, legal states are already expected to rake in a total of $12 billion by the end of 2019 (including both recreational sales and medical marijuana). These sales are projected to rise to $30 billion by 2023, though this number could change if federal legalization were to happen in the next few years.
The hemp industry is also growing quickly and expected to reach total revenues of $1.9 billion by 2022. The sectors that could see the biggest portion of this growth will be supplements and industrial applications for hemp.
Because of CBD’s growing popularity and its potential to relieve a variety of medical issues, it’s also expected to bring in a huge chunk of change through its retail sales. By 2025, the CBD market has the opportunity to bring in $16 billion in revenue.
Roadblocks to Advertising and Marketing
The revenue projections alone have many entrepreneurs wondering about getting into the industry and building up a profitable business. However, the legal landscape of the market has imposed some restrictions on advertising and marketing that present hurdles for many businesses. Any successful cannabis company will need to understand these regulations and the strategies they can use to overcome them.
Because cannabis is federally illegal, businesses aren’t able to advertise on social media platforms or through Google. Words like “cannabis” and “marijuana” are quick to be flagged by each platform if you’re trying to set up a paid ad. On the other hand, hemp advertising is widely allowed and some instances of CBD, as well as ancillary products and services related to cannabis.
When it comes to traditional methods, companies will face similar roadblocks. The FCC will not allow broadcast commercials for cannabis or cannabis products, and some states have strict guidelines for print and billboard advertising as well.
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New Products and Solutions
Despite the industry’s challenges, there seems to be more hope than dismay for new business owners. New companies are joining the market every month, bringing their own unique products and solutions to fruition.
Consumers are eager to try different strains of cannabis and different methods of using cannabis, such as cannabis-infused ingestibles. Vapes, edibles and beverages are some of the top products gaining popularity in the market. As legalization becomes a bigger reality for more states and the country as a whole, new investment opportunities are also becoming easier for cannabis companies to receive. In 2018 alone, investment in the industry had already grown 600% over investments in 2017.
One aspect to keep an eye on is tech as a player in the overall industry. Aside from advertising, another big hurdle for companies is aligning with banking and credit card processing companies. Many financial institutions refuse to work within the legal cannabis industry because they fear for illegal transactions that could occur. Blockchain could serve to solve this issue for the cannabis industry by ensuring a real-time record of each transaction that could then be distributed to credit card companies, banks, and regulatory agencies.
Beyond organizing POS transactions through blockchain, other big data solutions are being developed within the industry to ensure that everything from cultivation, seed-to-sale, patient experience, and health records are being organized into easy processes. Companies like Strainprint are capturing customer data to develop better recommendations for current and future patients regarding what type of cannabis products they should be using and how much depending on what they’d like to treat.
Despite a lack of nationwide standards and regulations, legal states have diligently grown the industry to be heavily regulated and poised for rapid growth. Newcomers to the market have a responsibility to understand the latest trends and industry best practices in order to stay ahead of the curve.
How can I get started in the cannabis industry?
So you want to join the cannabis industry. The promise of a new business frontier and lucrative growth is compelling, but there’s still a lot of work you’ll need to put into your company before you can take the leap. Even if you understand the industry and you have a great product or service, your marketing strategy needs to take on a steadfast vision and confidence that’s different from many other industries.
Create a Unique Brand
The industry has already matured enough to move past all the stereotypical imagery that usually comes with marijuana. Weed logos, Rastafarian colors, and ‘70s visuals feel tired and overused, and consumers are beginning to expect more out of the brands they choose.
When users walk into a dispensary, they don’t really want to feel like they’re walking into a head shop. Instead, they’re looking to connect with an experience that’s been specifically designed for them at the brand level. In a market where most companies are offering variations of the same product (or in this case, strains), you’ll need to set yourself apart with the experience that you can offer to the customer.
Your brand promise should be conveyed in every touch point with your consumer or client, and this is tied to your mission and vision. What are you offering that addresses a pain point? What makes your band different from others? What types of customers are you trying to reach? Think outside the box to develop a logo, packaging, web design, and messaging that remains consistent whether a consumer is looking at your Facebook or shopping in a physical store.
Marketing in Compliance
Though paid advertising has its own hurdles, it’s still possible to advertise using creative approaches. If you have a solid brand identity, customers will be able to resonate with your marketing above and beyond your initial offering. Try marketing based on the specific moods you’re selling to a customer, or what you expect them to feel when they enter your brand experience.
Outside of paid advertising, there’s also plenty of marketing strategies you can implement to reach your customers organically. One of the best ways is through an SEO strategy. Customers in the space are actively seeking more information and accuracy about products, so you can tailor your content to answer the questions they’re asking. Start with keyword research to see the terms that are most searched, and then tie it back to the solution you provide as a company.
While traditional advertising channels like print can also be just as limiting as digital ads, your state’s laws may have more leniency. An integrated campaign that uses organic and paid strategies will help build brand awareness to begin leading customers to convert on your site or in store.
The cannabis industry is a beast to navigate, and it will likely remain that way for years to come, even after full legalization. The beauty is that this means it is continually growing and making way for new entrepreneurs to enter the market and solve unique problems. If you’re looking to start your own business, contact k2forma today to consult on the best ways to market online or within your state. Our experience in grassroots branding and omnichannel campaigns means that we can help you discover your brand vision and make sure your messaging is delivered to the audience that will benefit the most.
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