Before You Start a CBD Brand, Read This
We Tranxact Ltd shed light on the crucial parts of starting a CBD brand, which every business must consider before getting on to the wagon. The highlights discussed include regulatory guidance, product sourcing and labelling.
CBD business is currently growing fast on the global market, and the industry is expected to hit £2 billion by 2025. About 4-6 million people had tried CBD oil or other cannabis product range in the UK estimated via two recent surveys. US surveys reveal that apprx 40% of US adults are interested in trying CBD products and the biggest growth coming from mature females, 60yrs +, which represents a shift across all generations.
We’re now seeing cannabidiol (CBD) being advertised on television and available in big retail stores.
Though CBD was once a niche product, it’s now reached the mainstream. Due to rapid growth, more and more entrepreneurs are creating brands around CBD. If that made you jump, don’t think it’s that simple to enter the market. There are some crucial factors, stages and other things to get straight.
Laws and Regulations are Important
Before building a brand or sourcing products, you must familiarise yourself with the laws regulating CBD oil and other cannabinoids. Failure to do this can land you and your business in serious troubles such as huge fines, criminal convictions or jail.
Though most European Union (EU) member states have legalized CBD, you still have to do some proper homework to determine if your products and activities comply with your jurisdiction laws.
Legal THC levels:
- US – 0.3%
- UK and Europe 0.2%
Types of CBD
- Hemp seed oil: Hemp seeds that are cold pressed. Contains no THC and cannabinoids
- Full Spectrum: Contains all the cannabinoids that are naturally occurring in the cannabis plant
- Broad Spectrum: Full spectrum but without the THC
- Isolate: Purest form of CBD. Comes in a white powder form, which is 99.9% pure CBD with no other ingredients
- Nono Spectrum: Water based compound made of shrunken CBD molecules
CBD Claims: What can and cannot be said
We see many CBD businesses making the mistake of promoting CBD products as a miracle cure for things like cancer, Alzheimers and other illnesses and diseases. You cannot make such claims unless they are backed by legitimate and reliable research. Any such claims made are illegal and will be asked to be removed from your card processor so be careful. Instead, simply sell on the quality of your CBD and its potential benefits of adding it to a wellness routine.
Business Set up
To avoid unnecessary startup hassles, you have to prepare all necessary legal documents before starting your business. Whether you’re partnering with other people or running your business, it’s mandatory to have a good Shareholders Articles of Association to create a model for business structures and areas such as decision making, responsibilities, funding, among others.
Functional administration structures are also important, especially during business expansion, bringing other partners and investors on board or when selling the business.
No doubt, every business should have a bank account, which CBD isn’t an exception. But the significant setback right now is that the banking industry is wary of opening accounts for CBD brands. Though legalised in most regions of the world, banking institutions still believe CBD can potentially be used for money laundering. Though this is not the case with cannabidiol (CBD) retailers, it may take a while before this barrier breaks down. However, some banks are supportive, its more so reputational damage being the main reason why banks may not be offering their banking services. General feedback from most of our customers suggest companies also register under a non-CBD related name while they trade under their CBD brand.
Your target audience should influence your brand’s image. Conducting market research will give insight into customers’ needs. This helps you make informed decisions when building your product lines and offerings.
Some viable CBD markets include fitness and beauty, sports, health and wellness as well as cosmetics. And don’t forget ethical branding is important as customers buy into brand ethics.
When you need a supplier for finished products, bulk ingredients, white label or private labels, or bulk CBD opportunities, know that several companies are available out there with different offerings. But each comes with pros and cons.
Branded CBD Products:
Most cannabidiol (CBD) brands are established businesses looking for retailers to build further their brand presence and generate more sales. This seems a viable option when entering the industry with little investment.
Low minimum order quantities (MOQ)
Low-profit margins and limited control.
White label products are formulated and produced by the manufacturing company while another company re-brand and repackage them. The white label model is widely used by startups and is estimated to represent about 90% of CBD business brands in Europe.
The transparency of a company offering white label must be critically analyzed. As long as they are willing to provide their certificate of analysis and 3rd party lab reports, they should also make provision for the entire cultivation and manufacturing process.
Unlike reselling other CBD brand products, white label products allow you to build your brand, and this gives you complete control over your business branding. With this model, you can also create a CBD range faster without much expense because white label suppliers usually have low MOQ.
Though white labelling gives you more flexibility and control over branding, still, the formulation and ingredients within your product can be sold to other brands. And this makes it hard for your products to stand out, especially in a competitive market.
In this case, your manufacturer will formulate custom products for you based on your requirements.
Unlike white labelling, you can determine the shape and form of the final product.
Private labelling is costly and often requires higher minimum order quantities (MOQ)
Labelling must comply with legal requirements. And this is the next stage after choosing your products from the right supplier. Within the EU, the safeness of ingredients is given a top priority. Either for food, cosmetics or vape, the legal requirements can be downright strict.
Going against truth in labelling, inconsistencies, and other lapses can result in huge fines and reparation work, especially with big high street retailers.
High converting and popular forms of advertising are off-limits for CBD oil and other cannabis produce promotion. For example, the biggest advertising platforms, Google and Facebook, restrict cannabis advertisers on their platform.
But this doesn’t mean CBD marketers can’t get their products into the hands of social media users. Regular content updates, product testimonials, organic likes, among others, are excellent ways for marketers to reach the masses on their social media pages.
Influencer marketing is also worth considering as these guys are an authority and have huge following which can help you push your product faster.
Facebook groups and subreddits work well for small budgets that can get the word out for your products
Distribution and Sales
It’s time to generate revenue! The standard sales channel for CBD is direct to customer (D2C) eCommerce and business to business (B2B) into retailers.
Market research helps you determine where most of the share lies. For example, D2C is a useful model for a small company with low retail connections. This helps to make the first couple of sales, gain traction and revenue before delving into retails channels.
To accelerate sales generation, you need a robust and reliable payment service provider. Companies like We Tranxact has solutions to address that.
Despite huge consumer footfall, some major retailers still need to invest in marketing for awareness creation to convert those customers into buyers while in-store. But retail stores trading specialist health food stand bigger chances of generating consistent bulk orders.
CBD Merchant Account
Customers now prefer to pay for services with their debit or credit cards either in retail stores or online. This can be linked to the increasing demand for cash-less transactions. By implementing card payments for your CBD business, you will see a jump in your business turnover.
But finding the right CBD merchant account provider can get complicated as there a lot of brokers out there. Reliable card payments and processing brokers should assist you with finding a card payment provider, the legal obligations, implementation, and other requirements.
We Tranxact Services on offer for CBD Business:
- CBD MOTO Account : Take payments over the phone
- CBD Merchant Account: The financial card processing agreement the merchant bank and your business
- CBD payment Gateway: The software responsible for capturing your customers card details and processing them securely
- CBD Subscription Payments: Set monthly recurring payments for guaranteed monthly income from your customers
- CBD Marketplace: Setup a CBD marketplace for cbd retailers
We Tranxact is a great resource for CBD oil businesses when it comes to accepting card payments, whether it be online or offline. We have a team of experienced consultants that have helped hundreds of CBD businesses since 2017. Our Founder and Director Rav Bains, who is an advocate for anything CBD related saw an opportunity whilst sourcing for a good quality CBD provider for his own personal fitness goals and activities. He soon realised that the cbd online retailers back then were not accepting card payments and he went on a mission to gain an understanding of the “high risk” attitude surrounding this incredible space and win over the banks we work with to ultimately spread the message of the great benefits of CBD.
We Tranxact can offer CBD merchant Accounts and CBD card machines to cbd retailers and we take it upon ourselves to be the leaders in what we do as we take our time to educate ourselves and our customers and this has proven to work very well for us.
If you’re interested in working with us to secure a card processing facility then please contact us on 0121 792 5367 or email firstname.lastname@example.org