While still relatively new to the mainstream, cannabidiol, more commonly known as CBD, is becoming a household name. The purported therapeutic and health benefits of CBD — one of many compounds found in cannabis and hemp plants — have created a buzz. CBD oil has entered the marketplace in the form of tinctures, infused edibles, topicals and more.
The CBD industry’s potential has prompted many people to explore launching a CBD business. However, the industry is not without its challenges, especially surrounding the evolving legal landscape.
We’ll explain the CBD industry and the steps you need to take when starting your own CBD business.
Starting a business based on CBD will entail the following actions:
Countless unique opportunities are emerging for new CBD businesses. Starting any business requires hard work and effort; however, entrepreneurs starting CBD businesses also face the uncertainty of a shifting regulatory landscape. Still, in a fledgling industry projected to undergo explosive growth, today’s heavy lifting might be well worth the trouble tomorrow.
Cory Slovik, owner of Core Roots CBD, started his company after experiencing firsthand the healing properties of the cannabinoid.
“I used to be a pro snowboarder … and I was always sore, my muscles were constantly in agonizing pain. I tried CBD, and it helped me tremendously,” Slovik shared. “Then, years later, cannabis … started coming to the forefront, and there was research and data backing up everything I felt on the mountain.”
Realizing a business opportunity and a way to help others treat their pain, Slovik soon launched Core Roots CBD. He says starting a CBD company is like any other business — plus a bunch of added steps.
“It’s like any other business; there are steps and procedures you need to go through, like getting insurance and writing a business plan,” Slovik explained. “But in this space, you have got to double- and triple-check everything, know your market and jump through regulatory hoops.”
CBD is one of more than 100 cannabinoids, or compounds found throughout cannabis and hemp plants. The most famous cannabinoid is undoubtedly tetrahydrocannabinol (THC), which is responsible for the intoxication associated with the consumption of cannabis. CBD, however, does not produce an intoxicating effect; instead, it offers potential therapeutic and health benefits, though research into its potential medical applications is ongoing.
CBD products are generally created in several steps:
CBD is found in both cannabis and hemp plants. CBD oil can be extracted from either plant and used to create products. However, there is a key difference between hemp CBD oil and CBD products derived from cannabis: THC.
Hemp and cannabis are closely related; in fact, industrial hemp is actually Cannabis sativa L. The difference in name is primarily a function of a legal definition setting the threshold for THC content. A hemp plant’s flowers contain little to no THC, whereas the flowers of a cannabis plant (commonly referred to as marijuana) contain much higher THC levels.
The federal government considers marijuana a Schedule I drug under the Controlled Substances Act, making it illegal for interstate commerce — even as dozens of states legalize it for adult use. In contrast, industrial hemp was recently removed from the Controlled Substances Act altogether, opening the way for its cultivation and harvest in the U.S. for the first time since 1937.
Legislation to move marijuana from a Schedule I to Schedule III classification has been introduced to Congress several times since 1972 but has yet to pass a vote.
If you’ve done any research into the CBD market already, you’ve likely encountered the terms “full-spectrum” or “isolate.”
The 2018 Farm Bill federally legalized industrial hemp and, by extension, hemp extract products like CBD oils. However, entrepreneurs must be aware of significant regulatory considerations surrounding the industrial hemp industry.
The 2018 Farm Bill essentially removed CBD from the federal Controlled Substances Act and the oversight of the Drug Enforcement Agency. Instead, it placed governance of the hemp industry and CBD oil in the hands of the FDA.
The FDA is still devising regulations, which leaves the CBD industry in a gray area. So far, the federal agency has signaled that marketing CBD as having health benefits will not be tolerated. It has also initiated a crackdown against CBD-infused foods and beverages in some instances.
Further complicating the regulatory landscape is the 2017 approval of the CBD-based pharmaceutical Epidolex, an epilepsy medication approved by the FDA. Since CBD is a primary ingredient in an FDA-approved drug, using it in food products without FDA approval could be illegal.
Clearer guidance is sorely needed for CBD businesses to operate in compliance with federal regulations. In 2023, the FDA issued a statement that a new regulatory pathway for CBD products must be established because current frameworks are too limiting. The regulatory body indicated it will work with Congress to establish an appropriate regulatory strategy moving forward.
“I think the FDA does have to step in, and they will,” said Slovik. “I expect a lot of changes to labels; we’re seeing a lot of businesses out there now using the term ‘hemp extract’ instead of CBD, or they’re not thinking of health benefits so much. Many companies are doing different things, but no one really knows [what the regulations will be] until it happens.”
It is crucial to understand your legal obligations and play it safe in this highly scrutinized industry. While CBD businesses everywhere await more explicit regulatory guidance, consider the following:
Marketing and selling CBD products is tricky. While the passage of the 2018 Farm Bill liberalized the industry a little (CVS and Walgreens now carry CBD products, for example), selling CBD products on major online platforms like Amazon or eBay is still challenging. Likewise, social media advertising is virtually nonexistent; paid ads for CBD products risk account suspensions or bans. All your growth must be driven through organic content that falls under the guidelines of each platform.
“In today’s day and age, if someone is looking to sell a product, the normal avenues are Amazon, eBay, Alibaba or paid ads on social media,” Slovik explained. “In this industry, it’s way, way, way different. You can’t do any of those things.”
To successfully advertise and sell your CBD products, you must be creative. Consider the following:
The key to gaining a competitive advantage with staying power in the CBD industry is to develop a high-quality product that will withstand the coming scrutiny of regulators and educated consumers. According to Slovik, if you want to differentiate yourself from other CBD businesses, you must provide third-party lab testing results — through creative means like QR codes — to validate your product’s quality.
“We want to be more transparent by putting QR codes on all our bottles, so anyone in the store can use their phone to get lab results right then and there,” Slovik shared.
In addition, Slovik said pursuing certifications like USDA Organic, Good Manufacturing Practices and FDA facility registrations are critical moves to instill confidence in consumers about the quality of the products they buy.
Overall, Slovik said, the formula for success is simple, even if the process is complicated.
“I would recommend double-, triple-checking everything. Know there will be changes. Research as much as you can, and recognize what the future opportunities are by thinking outside the box,” Slovik advised.
The CBD and cannabis industry faces unique challenges that other industries don’t. Most relate to the regulatory environment; as federal agencies like the FDA detail specific rules and guidelines, things should stabilize. For now, though, if you want to start a CBD business, you must be aware of these significant considerations:
These challenges will likely be cleared up as more concrete regulations appear. However, in the meantime, CBD businesses must remain adaptable and well-informed. Changes in the industry come daily, so preparing backup plans could save you a lot of time and money should the worst come to pass.
Industry analysts predict the U.S. CBD market will reach $22.05 billion in sales by 2030. This would be a major surge from $7.7 billion in 2023 and represent a compound annual growth rate of 16.2 percent.
Needless to say, society is growing more open-minded and accepting of CBD. Many individuals are turning to it for pain relief, stress management, better sleep and more; many gas stations, restaurants, and local CVS stores now sell CBD products.
The CBD market will likely experience the following trends in the near future:
The CBD industry is introducing new products all the time. If you want to start a CBD business, you’ll have a wide range of product types to consider selling. Here are the most popular types of CBD on the market right now:
Additionally, CBD isn’t just for humans. Animals also experience calming effects when given small doses, and many businesses offer CBD products for pets like dogs or cats.
The growth opportunity in the CBD industry is unparalleled. The cannabis industry is one of the fastest-growing in the nation, and CBD is one of the quickest-growing sectors of that industry. If you want to start a CBD business, you’re not alone.
“This industry has been more or less illegal for the past century,” said Slovik. “At this point, there’s major, major momentum. Many people are trying to break in, so don’t follow the herd. You want to be a leader.”
A combination of due diligence and creativity will set your business up for success in the CBD industry. Now is the time to get in on the ground floor and build a company that will last. However, you must differentiate yourself with a quality product that stands out from the crowd.
Natalie Hamingson contributed to this article. Source interviews were conducted for a previous version of this article.