How to Start and Market a Hemp-derived Cannabis Brand
✅ 5 Key Takeaways
- The hemp-derived cannabis industry in the U.S. is booming, with a market size exceeding $7 billion.
- Popular uses include wellness, skincare, anxiety relief, sleep support, and pain management.
- The 2018 Farm Bill legalized hemp-derived products with less than 0.3% THC, opening doors to a wider market.
- FDA regulations prohibit health claims without scientific backing and restrict labeling and supplement promotion.
- Success lies in adapting to regulations, building a loyal customer base, and staying ahead of industry trends.
The hemp-derived THC business and cannabis market in the United States has experienced a massive boost in the past years. This niche product has grown into a huge industry estimated at over $7 billion and counting. The demand for hemp-derived THC and hemp-derived CBD products continues to soar. People are now looking for hemp-derived products for their different needs, including skincare, mental and physical wellness, relief from anxiety, and sleep support.
However, the rapid industry growth is hindered by several complexities. First, the industry is riddled with strict advertising and marketing regulations, complicating business operations. These regulations vary from state to state, and the Food and Drug Administration (FDA) has its own rules on top of the already-complicated state laws. Suppose you are a hemp-derived THC business owner aiming to expand your business and market. In that case, you must comply with the existing laws about selling and advertising your products. The success of your business depends on your understanding of the market, the creation of high-quality products, and the navigation of the regulatory landscape.
Now that we have laid out the context of the current cannabis industry landscape, it's time to get back to the drawing board to build and improve your hemp-derived cannabis business. Whether you're new in the game or an existing business that needs upgrading, this article will help you grow your business, seize the market, and comply with the strict regulations.
Understanding the Hemp-Derived THC Cannabis Market
Before we discuss the business aspects, we should lay some ground rules and define hemp-derived cannabis.
The United States defines hemp-derived cannabis as products that are sourced from the hemp plant with less than 0.3% THC (tetrahydrocannabinol) when dry. This should not be confused with marijuana, which is still illegal at the Federal level based on the FDA. Hemp-derived products and their other derivatives are considered legal in the country, even at the federal level, because of the 2018 Farm Bill.
The 2018 Farm Bill has provided a legal classification and difference between hemp and marijuana. With this, hemp has been removed from the Controlled Substances Act. This legal move has changed the cannabis landscape and opened opportunities for hemp-derived products to reach new customers.
Types of Hemp-Derived Products:
Includes beverages, edibles, vapes, flower, supplements, capsules, tinctures, and topicals.
The Bill has increased the access and availability of hemp-derived products, increasing the number of people embracing and using them for general wellness, sleep support, skin care, pain relief, and anxiety management. The hemp-derived product market is filled with unique and effective products, such as gummies, capsules, flower, vapes, tinctures, and even topicals, that can be consumed differently.
However, with opportunity comes responsibility: ensuring your business remains compliant is critical to long-term success.
Legal Requirements to Start a Hemp Derived Business
Starting a hemp derived business is different from starting any other business because there are stricter rules and regulations. Your business needs to be compliant to ensure its longevity and success.
Federal Law and Regulations
The Farm Bill of 2018 has helped the hemp-derived industry thrive, but the FDA still regulates CBD and all other hemp-derived products. The FDA oversees whether the product follows its rules, especially regarding marketing, labeling, and health claims.
One thing you must always remember when marketing your products is not to make any health claims that are not backed up by data or science. For example, you cannot say that hemp-derived products can cure diabetes and other illnesses when there's not enough evidence to support your statement.
It is also not advisable to promote your hemp-derived products as dietary supplements unless you have processed the necessary documents for registration. The FDA is also strict about packaging and labeling your hemp-derived products, highlighting that all ingredients must be provided and disclosed.
State Laws
The restrictions on hemp-derived THC products vary from state to state, creating confusion for business owners. If you are planning to start your cannabis business, please research your local laws to ensure compliance. For example, the state of California recently banned hemp derived THC products which are consumables (food, beverages, and dietary supplements ) and have any detectable level of THC. The state of Florida currently allows the sale of hemp derived THC products but requires specific labeling and registration. These are just examples of the complicated and unique laws per state.
Business Registration Guide
Like any other business, you need to process and secure documents and permits to operate.
The first step is to form a legal entity. Most hemp-derived and cannabis businesses register as Limited Liability Companies (LLCs) to protect them from liabilities.
Once the legal entity has been formed, obtaining an Employer Identification Number (EIN) for all tax-related concerns is time. When establishing brand names for your products avoid anything that is trademarked or closely resembles trademarked goods.
Please do some research to see if your state requires the seller's permit application. If so, send an application since your state collects sales tax. In addition, some states require businesses to secure a unique hemp retailer or manufacturer license.
In addition to these, the FDA has additional rules about labeling. Please also ensure that your facilities and products are subjected to third-party lab testing and have child-resistant packaging if necessary.
💡 Pro Tip
Before finalizing your business name and branding, do a comprehensive trademark search and domain availability check. This saves time and protects you from costly rebranding later on.
Common Pitfalls to Avoid in the Hemp-Derived Cannabis Industry
Making Unproven Health Claims
Do not advertise your products as curing or treating illnesses unless claims are FDA-approved and scientifically supported.Incorrect or Incomplete Labeling
Ensure product labels include THC/CBD content, serving size, batch number and required disclaimers to comply with FDA regulations.Selling to Minors
Never market or sell hemp-derived products to underage individuals, it’s both illegal and unethical.Selling in Prohibited States
Research and respect state-specific laws; selling in states with bans on hemp products can result in legal penalties.
Advertising and Marketing Your Cannabis Business
Create Your Unique Hemp Brand Identity
Just like any business or service, your cannabis business and hemp-derived products should have a unique brand identity. The brand identity will help your business stand out in a crowded market.
When brainstorming for a business name, ensure that the name is memorable and compliant with the strict rules and regulations. Before deciding on a name, research to avoid conflicts with name duplication and trademark issues. Do not choose any name that resembles a trademarked brand or you will risk litigation. In addition, use short and punchy names, and do not include health claims in your business name (for example, End Cancer CBD).
When developing your hemp-derived business's visual identity, consult with professionals to create designs, logos, color schemes, and packaging art that align with your business brand. Your visual identity is crucial for brand recall.
Lastly, be transparent and honest with your consumers to build trust. You can publish your third-party lab results, where you source your raw materials and manufacturing process to give your customers an idea.
Decide your product line
Now that you have decided on the name and brand identity, it is time to pick your product line. What will you be selling? What are the needs of your market? What are the hemp-derived products that are differentiated from the crowded marketplace.
You can choose hemp-derived products that cater to general wellness, anxiety and stress relief, and pain management, as these are the types of products which have large user bases.
Subject your products to third-party testing to ensure potency and avoid contaminants. This will also provide safety and trust to your consumers. In addition, some of the best-selling hemp-derived products in the market today are drinks, soft gels, gummies, tinctures, and topicals. You should take advantage of this trend when picking your product line.
Building a Sales and Distribution Strategy
Now that you have a product line, how do you want to sell your products? Here are some of your options:
Direct-to-consumer (DTC) vs. Partner Channels
As a business owner, selling directly to consumers will give you the maximum control, whether online or in a physical store. However, you should not disregard working and partnering with clinics, wellness hubs, and dispensaries because these facilities will increase your business's network. Investing in an eCommerce storefront is necessary since many of your consumers will be online. Work with you in a reputable fulfillment network so your customers receive their products on time.
Marketing your cannabis brand
Advertising and marketing your cannabis and hemp-derived products is like navigating a complicated network of strict rules and regulations. Several advertising channels have special restrictions on the content you can advertise and market. Social media tech giants, such as Google and Facebook, heavily restrict cannabis-related advertisements. On top of this, state regulations and federal law continue to pose significant challenges, making advertising cannabis-related products tedious work.
Direct mail marketing, SEO strategies, and in-person events are some of the most effective ways to market your business while remaining compliant with the web of restrictions surrounding the industry. This article covers the effective and compliant advertising and marketing strategies you can employ.
💡 Pro Tip
Use SEO and content marketing to build long-term brand visibility—it’s one of the few compliant channels that consistently drives organic growth. For more immediate reach, consider cannabis direct mail services like Canna Direct Mail, which specialize in compliant, targeted campaigns that land directly in the hands of your ideal customers.
Tools & Resources for Running Your Cannabis Business
A cannabis business is just like any other business; you need to have the right infrastructure and tools to keep your system running. When it comes to banking, people always opt for banks and credit unions, which many industries use. It is also advisable to use cannabis payment gateways that are trusted and recommended by other cannabis businesses. Investing in inventory management software is needed to track the real-time stocks and seed-to-sale traceability.
Conclusion
The regulatory landscape of the cannabis industry is a complicated web of restrictions left and right. However, this should not discourage you from starting your cannabis business. The current market is full of opportunities you can take advantage of if you know how to play by the rules.
When setting up your cannabis business, always prioritize compliance with the rules. Knowing the industry's rules and restrictions will get you far. Thinking of creative and compliant ways to market and advertise your business is a sure way to put your hemp-derived products in the hands of your customers. Creating a strong brand identity can ensure long-term success, especially if you build your brand with quality and transparency. The success of your cannabis business will rely on you building your reputation, rewarding loyal customers, and adapting to the industry's ever-changing rules.
Frequently Asked Questions (FAQs)
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The federal law considers hemp-derived cannabis products legal, but you cannot sell to all U.S. states since the states have varying rules when it comes to cannabis. Do some research and check your local laws before selling cannabis products.
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Yes. To start a CBD business, several states must form a legal entity (LL) and secure a license (e.g., retailer, manufacturer, etc.).
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Google and Facebook do not allow direct advertisement of cannabis-related products. However, some limited advertising is permitted only through certified partners.
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The demand is high for skincare topicals, hemp products that can aid in sleep, infused gummies, CBD tinctures, and beverages.
