Why knowing the best states for hemp-based CBD businesses is critical for your bottom line. There’s no doubt that CBD has become one of the most exciting business opportunities for entrepreneurs in the US. Since the federal legitimation of hemp-derived CBD in 2018, the industry has exploded and now hosts thousands of CBD businesses, with more to come.
However, while it has been pivotal, the legitimation of CBD at the federal level has not removed all the obstacles to a thriving CBD industry. The Farm Bill only removed hemp-derived CBD with less than 0.3% THC from the schedule of illegal substances. The FDA is still required to make regulations that govern how CBD may be processed, packaged, and sold to consumers.
In addition, states around the US ultimately have the final say on whether to accept the legitimation of CBD and how to groom the industry. As expected, states are approaching the situation differently, and in many cases, to the chagrin of US-based hemp manufacturers.
While some are pulling out the stops to ensure an encouraging environment for a flourishing CBD industry, others are being more laid back in their approach. To set a solid foundation for a thriving CBD business, it will be important to find out the best states for CBD and how they encourage business.
What determines an inviting CBD environment?
The first thing you should consider before setting up a CBD business is the big question of location. A good location, whether neighborhood-wise or state-wise, can be critical for business growth, regardless of industry.
But there’s a lot that goes into an inviting business environment, and this is even more so for the CBD industry. Here are some considerations to keep in mind:
Legal CBD under local law:
While the Farm Bill has made CBD legal at the federal level, states can decide how they want to respond. Some states, like South Dakota and Idaho, make CBD illegal either outright or impliedly.
Good local regulation:
A well-regulated statewide environment is important as it helps build consumer trust and confidence in the industry. While it’s practically impossible to find any US state where CBD manufacturers have the benefit of well-developed regulations, some are doing better than most. Watch out for states that have clear labeling requirements, farming and cultivation laws and other regulations.
A high number of users:
States that have a high CBD user population can also be a great base for business. They provide a larger market that can be a significant factor in ensuring mainstream awareness of the business’ products.
Relatively low saturation of competing businesses:
Droves of willing users are good, but CBD businesses also want an inverse number of competing businesses. With fewer competitors, it’s easier to snare a tidy market share and then build on that for future growth. However, this can also be a bit difficult to find in the CBD industry as entrepreneurs are typically attracted to the best states for CBD.
High or growing sales figures:
A decent spurt of local sales can be indicative of a fast-growing local market. If the state is already home to people that are used to spending on CBD products, it may mean an equally favorable outing for new CBD businesses.
These factors can all be critical to finding the perfect base for hemp manufacturers or retailers. However, the most important will obviously be favorable local laws and regulations.
Best States for CBD businesses in the US
Now that we understand some of what makes a state good for CBD business, let’s look into what states make the grade. We’ll look at this based on four primary factors which include local legitimation of CBD, environment for cultivation, sales records and consumer base.
For this one, we’ll take things in the reverse. Rather than focus on the states with the best legal environment (most states are pretty much similar here), we’ll list those states that have the worst.
South Dakota leads the line of states that are unfavorable to CBD. Under South Dakota law, hemp is absolutely illegal. There are no legal forms of hemp allowed, including CBD with less than 0.3 THC. As far as the state is concerned, the Farm Bill did not alter hemp’s legal status and as such, it remains illegal, alongside other strains of cannabis.
The second patently unfavorable state to CBD is Idaho, and this is a bit of a weird one. Under Idaho law, hemp is legal. But to pass the test of legality, all hemp cultivated or sold within the state must have absolutely 0% THC. It would be incredibly hard to find a hemp strain or a private label CBD product that has 0% THC.
Lastly, Mississippi also makes the list of unfavorable states, not because hemp is illegal there, but due to the utter lack of regulation. Although the state has set up a Hemp Cultivation Task Force to consider the regulation of hemp in the state, nothing is finalized as yet.
As far as cultivation goes, Colorado is far and away the best state for hemp growing. The state has an established hemp program with clearly defined rules and reliable enforcement. The Colorado Department of Agriculture runs the program and is very supportive to hemp farmers in the state.
Predictably, this has attracted scores of hemp growers to the state. Hemp acreage in the state has risen from 1,811 acres in 2014 to 87,008 as of October 2019. People looking to start a hemp business can do a lot worse than pick Colorado.
Another state that has been favorable to farmers is Oregon. The state has a pro-industry Department of Agriculture and this is encouraging growth in the local CBD industry. The state permits the sale of all hemp products, including food additives and edibles.
California currently sits at the top of the stack for states with the best CBD sales profile. In 2019 alone, the state recorded over $700 million in CBD sales, more than double the sales for any other state. Although the state does not rank as high for an enabling CBD regulatory environment, it compensates for this with its large population.
Second in the list for highest sales is Florida, which recorded $291 million in sales and they were followed by New York, with $215 million sales. You can see the rest of the list here.
Lastly, by consumers, the states with the most CBD users in the US, according to recent research, include the following:
- North Carolina
Taken these factors into consideration, hemp growers and private label CBD manufacturers can more properly tell the best states for CBD and where to set up their business.