The cannabis industry has attracted many companies interested in meeting the rapidly growing demand for cannabidiol (CBD) products. CBD is a high-quality and versatile ingredient found in cannabis. Its auspicious health benefits have drawn a considerable market over the last couple of years.
However, the rising demand for CBD has come with a higher price for both manufacturers and consumers. But why is CBD so expensive? Is CBD worth the price?”
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Why CBD Is Expensive
To understand why CBD is so expensive, we’ll look into the real reasons, including farming challenges, the complex extraction process, lack of support, higher fees, and more.
CBD is a natural product that effectively treats discomforts such as insomnia, anxiety, body pain, and inflammation. (1) However, CBD has one downside related to cost. When selling CBD products, companies must sell them at higher prices to make profits.
So, why is CBD so pricey? Here are the seven real reasons.
Few Well-established Hemp Farms
CBD occurs naturally in hemp and marijuana, but hemp is the most preferred plant for CBD extraction. Both plants contain Tetrahydrocannabinol (THC) and CBD. THC is an active compound responsible for intoxicating effects.
Marijuana contains a higher amount of THC than hemp. And since THC might have legal implications in most states, farmers prefer growing hemp due to its high amount of CBD and less THC.
However, farmers have had less time to develop well-established hemp farms. Growing industrial hemp became legal across the U.S. with the passing of the Farm Bill of 2018. (2) As a result, there have only been a few years to develop and spread hemp farms.
Like every new product, hemp farming requires vast investments and skills to maximize productivity while minimizing production costs. In their efforts to develop well-established farms, hemp farmers sell their products at higher prices. The growing demand for CBD from the few hemp farms contributes to higher prices.
Hemp Growing Is Challenging
Farmers who have turned to growing hemp have faced several challenges related to planting, caring for, and harvesting the crop. Most of these farmers have transitioned from growing crops such as vegetables and fruits to industrial hemp. Unlike former fruits or vegetables, hemp is a more sensitive plant that requires advanced growing techniques.
While most cannabis plants grow freely as weed, hemp requires a lot of care and inspection. It should also be grown under strict conditions to produce the required quality of CBD. Farmers who are new to this crop may have to use trial-and-error planting methods. They must therefore invest heavily to minimize the chances of failure.
For instance, a legal amount of THC should naturally occur in a hemp plant. If the plants exceed the allowable amount, the plants end up becoming unusable and unsellable. Governmental regulations require such plants to be destroyed.
Losing the entire crop can result in significant losses. To avoid such losses, farmers tend to monitor the growth of hemp closely. They buy new equipment, establish new farming techniques and train their laborers to ensure they grow a quality crop.
Harvesting of hemp presents another challenge because it requires the use of a combine. Combine harvesters are expensive, and most farmers don’t own the machine. Without a combine harvester, hemp farmers harvest the crop manually, which is costly and time-consuming.
Lastly, the harvested hemp requires drying, which should be done under specific conditions. The sheltered setting must be large to ensure hemp dries in the proper conditions. This drying process is labor-intensive and time-consuming. As a result, farmers push all the time and expenses involved in hemp planting, harvesting, and drying to manufacturers of CBD products.
Sophisticated Extraction and Refinement Processes
Extracting and refining the final CBD is a delicate process involving highly sophisticated skills and equipment. The initial process of extracting CBD is challenging, time-consuming, and highly expensive. (3)
Processors use highly calibrated machines and either supercritical carbon dioxide (CO2) or ethanol. When looking for a more affordable extraction approach, processors tend to use ethanol. The use of ethanol allows processors to scale up production but provides a less expensive product.
On the other hand, extraction using supercritical CO2 is more expensive. However, the CO2 extraction method produces a significant amount of compounds from hemp. Additionally, the process guarantees high-quality CBD that comes at a higher price.
With the two extraction methods, processors end up with full-spectrum hemp extracts containing CBD, THC, minor cannabinoids, terpenes, and essential oils. While some companies use full-spectrum hemp extracts, most prefer using pure CBD in their products.
The THC content in the full-spectrum extracts can result in health and legal issues. To avoid these issues, companies go the extra mile to produce THC-free products. This involves a refinement process to remove all other compounds, resulting in a pure CBD.
Each process involved in the extraction and refinement of CBD is costly, time-consuming, and labor-intensive. All the expenses incurred reflect in the extracted CBD and its products.
Lack of Support From Financial Service Providers
While the CBD market is estimated to reach $47.22 billion in 2028, financial service providers remain skeptical of its growth. (4) This is despite the widespread popularity of CBD products.
The cannabis industry is considered risky, making it hard for financial institutions to support hemp companies. As a result, CBD companies experience trouble opening accounts, processing payments, and securing credit.
The few financial service providers willing to work with CBD companies charge higher rates for their services. The increased charges offset the risk of investing in the cannabis industry.
With such barriers to entry, running CBD companies tends to be more expensive. And since these companies want to make profits, they must sell their final product at higher prices.
Limited Marketing and Distribution Opportunities
Why is CBD so expensive? The lack of support from advertisers and distributors affects the price of the final products. Regulatory issues, bad actors, and misconceptions about CBD products lead to limited marketing and distribution opportunities.
Major social media sites, search engines, and terrestrial networks restrict or ban the advertising of CBD products. Such restrictions make it difficult for CBD companies to reach their target audiences. As a result, companies spend more money on labor-intensive marketing methods. With expensive marketing methods, companies tend to inflate the prices of their final products.
Major online platforms like Amazon and eBay and retail outlets such as health supplement stores limit or refuse to sell CBD. (5) They fear the bad actors, regulatory issues, and misconceptions related to hemp. With the distribution barrier, CBD companies don’t benefit from bulk buying from major retail chains. Companies like Shopify and Etsy have been more forward-thinking and are allowing CBD shops to sell on their platforms.
Bulk buying can cut the distribution and shipping costs of the final product. Unfortunately, CBD companies must sell their products at higher prices to profit.
Third-Party Lab Testing
For a CBD company to sell its products, it must ensure its CBD products are third-party tested. Independent third-party organizations are responsible for testing CBD products to identify the ingredients present. These organizations test for the presence of CBD, THC, and harmful elements such as heavy metals and pesticides.
Unlike first-party testing, third-party testing is authentic and reliable. Third-party organizations remain neutral in the CBD industry to establish trust. They ensure distributors and consumers access high-quality and safe products from CBD companies.
While lab testing benefits the consumer, it forces CBD companies to pay extra costs for their products to be third-party tested. Since no reputable CBD company can skip this step, they sell their products at higher prices.
Farmers and sellers of CBD incur significantly higher fees than others in different sectors. They face a lot of government influence and inspection to ensure their products are high-quality and safe. The government also strives to eliminate illegal CBD companies that counterfeit CBD.
The CBD industry requires government intervention to avoid shady farmers and distributors. Unfortunately, government intervention comes with higher regulatory fees. For instance, farmers must pay licensing fees every two years, which can be as high as $50 per acre. Additionally, Farmers have to pay higher taxes for hemp crops than they would for other crops.
The same applies to CBD companies which must pay higher licensing fees and taxes. The licensing fees and taxes for hemp crops and CBD products contribute to the overall higher prices.
Why is CBD so expensive? CBD is costly due to licensing fees, cultivation challenges, sophisticated extraction methods, and lack of support from financial institutions.
The above reasons for CBD’s higher prices should help you determine whether CBD is worth the price or not. Thankfully, CBD is still a young market, and the growing demand for CBD products explains why you should not fear joining the industry.