DISTRIBUTION & SALES
THE CONSUMER HAS SPOKEN
Distribution and Sales of hemp extracts or products infused with hemp extracts like CBD, are perhaps one of the most unique areas of commerce. The entire landscape is changing so rapidly, by the time you read something about the current situation, it has already changed. Retailers, eCommerce platforms, banks, and social media marketing platforms are not completely sure of how to handle CBD products. It’s legal, but its legal framework and how everyone is expected to operate within that legal framework is not fully fleshed out.
While the FDA works to create guidelines and regulations, companies have had several challenges in getting their products to market. Challenges that any other legal product would not face. Banks were refusing to open accounts for hemp / CBD companies, and therefore payment processing had been unavailable or a challenge. Private companies popped up to fill this void and charged hefty fees. Luckily, the CBD margins could handle those fees. Social media marketing platforms will allow you to have a profile for your company, but they will not let you create marketing campaigns – although, recent reports of Facebook allowing ads for CBD topicals have surfaced.
Nevertheless, consumer interest and fortitude prevail. In spite of the unique challenges for Hemp extracts like CBD (and other cannabinoids, like CBG, CBN, etc.), consumers are finding their way to the products they want, and sales are happening in a big way.
A PROMISING STANCE
Impending FDA oversight is one of the hottest topics touching sales of consumer products containing cannabinoids. Most companies can't get these regulations fast enough, knowing that this framework will weed out operations that populate the marketplace with goods that compromise the integrity of the space. Here are some guiding principles from the FDA:
"The FDA continues to believe the drug approval process represents the best way to help ensure that safe and effective new medicines, including any drugs derived from cannabis, are available to patients in need of appropriate medical therapy. The Agency is committed to supporting the development of new drugs, including cannabis and cannabis-derived drugs, through the investigational new drug and drug approval process.
We are aware that there may be some products on the market that add CBD to a food or label CBD as a dietary supplement. Under federal law, it is currently illegal to market CBD this way.
The FDA is currently evaluating the regulatory frameworks that apply to certain cannabis-derived products that are intended for non-drug uses, including whether and/or how the FDA might consider updating its regulations, as well as whether potential legislation might be appropriate. The information we have underscores the need for further study and high quality, scientific information about the safety and potential uses of CBD.
The FDA is committed to sound, science-based policy. The FDA is raising these safety, marketing and labeling concerns with you now because we want you to know what we know." (https://www.fda.gov/consumers/consumer-updates/what-you-need-know-and-what-were-working-find-out-about-products-containing-cannabis-or-cannabis)
SEPTEMBER 26TH 2019
“Secure And Fair Enforcement Banking Act of 2019” or the
“SAFE Banking Act of 2019”
Although hemp is legal, a need was recognized for safe harbor provisions to be specified in the SAFE Banking Act of 2019 that would directly apply to hemp and products with hemp-derived cannabinoids. This act passed in the House of Representatives with a 321-103 vote and now heads to the Senate. The bipartisan support in the House makes the act's prospects in the Senate hopeful, and there are reports of the Senate voting by the end of the year.
Here is some of the language addressing hemp in the act:
SEC. 11. BANKING SERVICES FOR HEMP BUSINESSES.
(a) FINDINGS.—The Congress finds that—
(1) the Agriculture Improvement Act of 2018
(Public Law 115–334) legalized hemp by removing it from the definition of ‘‘marihuana’’ under the Controlled Substances Act;
(2) despite the legalization of hemp, some hemp businesses (including producers, manufacturers, and retailers) continue to have difficulty gaining access to banking products and services; and (3) businesses involved in the sale of hemp-derived cannabidiol (‘‘CBD’’) products are particularly affected, due to confusion about their legal status.
(b) FEDERAL BANKING REGULATOR HEMP BANKING GUIDANCE.
—Not later than the end of the 90-day period beginning on the date of enactment of this Act, the Federal banking regulators shall jointly issue guidance to financial institutions—(1) confirming the legality of hemp, hemp-derived CBD products, and other hemp-derived cannabinoid products, and the legality of engaging in financial services with businesses selling hemp, hemp-derived CBD products, and other hemp-derived cannabinoid products, after the enactment of the Agriculture Improvement Act of 2018; and (2) to provide recommended best practices for financial institutions to follow when providing financial services and merchant processing services to businesses involved in the sale of hemp, hemp-derived CBD products, and other hemp-derived cannabinoid products.
(c) FINANCIAL INSTITUTION DEFINED.—In this section, the term ‘‘financial institution’’ means any person providing financial services.
(Full text here: https://www.congress.gov/116/bills/hr1595/BILLS-116hr1595rfs.pdf )
BDS Analytics reports CBD sales in 2018 as $1.9 billion. That number has already risen to over $5 billion in 2019 according to a report issued by The Brightfield Group, and is projected to reach over $20 billion by 2024. CBD is a freight train, and it is only one of over 100 cannabinoids in Hemp. Others are just beginning to be explored.
Another exciting projection is the increased CBD footprint in big box and large chain retailers. In 2017, two-thirds of CBD sales were online. These distribution channels are expected to account for 57% of revenues in 2019, according to Brightfield. As these behemoths continue to enter the space, they will provide for an enormous amount of growth – not only in sales, but in mainstream acceptance of CBD through the normalization of it.