CBD Market Update: Why is CBD So Expensive?

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CBD oil can be expensive, especially if you’re going to buy from reputable suppliers. But when you’re buying something like CBD oil, it’s still best for you to purchase from the right suppliers than to risk anything at all. Because of its demand and limited supply as of the moment, it should come as no surprise why it’s on the pricier side. For many, its efficacy is undeniable, hence the continuous demand despite its cost.

 

As is the case with any other medicine or product, big-name companies could also be taking advantage of its current demand to price CBD products a little bit higher than usual. After all, there’s money in this market. However, there are ways to bring this cost down without sacrificing the quality. One of the reputable CBD manufacturers, R+R Medicinals, seeks to revolutionize the prices of CBD. By selling to more individuals directly, prices could be driven lower. But at the moment, it’s also important for buyers to understand the process behind the CBD products they purchase on the shelves in order to know why the prices, in general, are quite high.

 

That said, this article seeks to answer the question, “Why is CBD so expensive?” Let’s take a look.

 

  1. There Are Legal Expenses To Pay For

 

The use of medical marijuana is currently a hot topic in many different states. Some have legalized its use, while others are still in the process of considering their legal implications and effects during discussions about legislation. For states that have legalized marijuana and other hemp products, legal requirements are strict. Dispensaries that are allowed to operate have to go through numerous permits, fees, and practices for them to be able to do business.

 

These legal expenses have to be factored when pricing the products they sell. After all, these are costs that dispensaries also have to earn back. For other products, these legal expenses may not be as high or as numerous, hence the cheaper cost. For CBD products, these are inherent parts of costing that cannot just be set aside.

 

  1. The Laws On Supply & Demand

 

Laws on supply and demand also have a lot to do with the rising prices of CBD products. Since its legality, more and more individuals have chosen to use CBD, thus the high demand. However, the supply remains low, and there are only a few dispensaries in operation. As mentioned earlier, some numerous legal permits and expenses have to be complied with. This results in dispensaries sprouting up, though not all of them may be reputable. With the low supply and the high demand, prices of CBD products will naturally go up.

 

On the side of demand, more individuals are looking for natural remedies for whatever health problems they’re experiencing. For the very reason that it’s a natural remedy, the interest to try CBD products as an alternative form of medicine has spiked. On the side of supply, right before its legality, hemp farming and culture were still illegal. Hence, hemp farms have to first go through a lot for them to be considered legal. Due to the high demand, it can be quite hard for these farms and suppliers to catch up.

 

  1. The Cost Of Extraction Is High

 

Another factor that makes CBD very expensive is due to the harvest and extraction process. The steps that are necessary to produce the by-products of hemp are long and tedious. Moreover, these are also specialized. Keep in mind the very foundation of CBD products: they are extracted to remove the addictive component of hemp, tetrahydrocannabinol (THC). CBD products that are on the market today are without THC, which makes them safe to use and not addictive. But to achieve this, a thorough extraction process has to be put in place.

 

Here are three of the common extraction processes involved in CBD products:

 

  • Liquid Solvents Extraction: This process is a chemical procedure also known as liquid-liquid extraction. Here, compounds and metal complexes are separated. The deciding factor is the solubility of each immiscible liquid. In CBD, butane, alcohol or ethanol is run through the hemp plant. This is the process necessarily done to remove the cannabinoids and other flavors, such that these can be transferred into its liquid form. Through evaporation, the liquid leaves only the concentrated particles of the hemp plant, which then is the CBD oil as you know it to be.

 

  • Oil Extraction: The oil extraction process in CBD is also known as steam distillation. Steam moves to the flask containing the plant, which separates the oil vapors containing the CBD. Like in your chemistry experiments, these vapors are collected to be condensed with oil and water. Distillation is applied thereafter in order to have oil extraction. The by-product is the CBD oil that’s also further processed to create all the other CBD products that you purchase from the shelves.

 

  • Carbon Dioxide (CO2) Extraction. Out of all the three forms of extraction, this is the most expensive. The machine involved in CO2 extraction is also the priciest. However, reputable CBD manufacturers choose to use this means of extraction because of the better results that it produces. Hence, it can give out more quality products to its buyers. CO2 extraction results in the purest and highest quality of CBD products. The impurities are little to none at all.

 

At present, because this technology is still relatively in its infancy, there’s a limited number of equipment and processors that are capable of extracting the hemp biomass. This lack of processors and the complicated process of extraction itself is one of the reasons behind why the processing procedures start off quite expensive. However, these processes cannot be skipped. Especially so that in most cases, CBD products are used for health reasons, such as the most common one, which is CBD for anxiety. To ensure that the processes stay safe, these are a necessary requirement.

 

  1. Third-Party Testing Has To Be Complied With

 

Before the CBD products reach the shelves of dispensaries, it also has to go through the process of third-party testing. This refers to the process of testing the product, to prove its purity and concentration. Going through this third-party laboratory testing helps ensure that the products that reach your hands aren’t substandard. However, the downside is that third-party testing can be quite expensive.

 

Here’s a sample breakdown of the testing costs, per bottle:

 

  • Testing for microbial analysis, 40 US dollars
  • Testing for cannabinoids, 50 US dollars
  • Testing for moisture content, 15 US dollars

 

For lab testing alone, you can see the total has reached 100 dollars per bottle. This list still isn’t that comprehensive and is only a sample estimate. The more tests that have to be done, the more expensive the cost is. But this is also a necessary cost to ensure that you’re taking in safe CBD products.

 

  1. The Market Is Relatively New

 

Another one of the driving forces as to why CBD is so expensive stems from the very reason that its market is still in its infancy. Take a look at mobile phones, for instance. Upon its initial release, the prices are quite high. This also applies to the initial release of any new commodity. When more sellers and manufacturers produce the same kind of product (only with a different price), the price drops. This is because the market starts to get more normalized. Products are more widely accepted, and there is less scrutiny and doubt about the industry.

 

With CBD, the market is relatively new. Despite having more of the younger generations turning to marijuana and hemp products, its infancy still cannot be denied, especially in states where the legality of hemp-related products has only been recent. With a new market, it’s also moving into a very volatile economy. CBD manufacturers who are brave enough to take on the challenge of selling these products aren’t as certain as other commodity sellers that they’ll be able to clear out their shelves before the expiry dates arrive. Hence, the need to price the items higher. That way, manufacturers and sellers are more assured of making a profit, despite moving at a volatile economy. As the CBD market starts to become older and more stable, so will the prices of these goods follow.

 

  1. The Agricultural Costs Are Expensive

 

The CBD products that you purchase today all come from one source: the hemp plant. But this isn’t just any agricultural plant that you can grow anywhere. In fact, hemp farms are very strictly regulated. Hence, the costs start to pile up and be expensive even before the very first seeds are planted on these farms. These compounding costs are due to the equipment used, the labor required in farming, and even the permits and licenses needed to be maintained by these farms.

 

Also, sourcing out these hemp plants is difficult. To create CBD products, the seeds need to be chosen very carefully. They have to comply with the most minimal amount of THC to ensure that the products they’ll create are free of this addictive component. This very particular and detailed process of choosing the products make CBD a complicated and expensive commodity to create.

 

  1. The After-Manufacturing Costs Are Also High

 

Manufacturers and distributors of CBD products are constantly on the hunt for ways to create CBD products that are cheaper without sacrificing its quality. However, this is a challenge for them to achieve, even today. While the manufacturing costs are high, the processes relating to after-manufacturing just make it even higher as they are just as expensive. However, these are processes that cannot be put aside when it comes to achieving the best quality CBD products.

 

A few of these processes include:

 

  • In-House Compliance: This is a necessary check to ensure that even when CBD products are already on the shelves, the best ones are those being sold, or that they aren’t mislabeled. The last thing you would want is to purchase a CBD product that isn’t what you thought it was. Companies have a regulatory compliance officer who performs this task, therefore further adding to the cost.

 

  • Operating Costs: This is the cost necessary to operate the distributing plant or store. This includes the salaries of salespeople, rent or mortgage, and utility bills.

 

  • Credit Card Processing Costs: This is one of the struggles commonly faced by all CBD distributors. Banking options are limited because this is still a product that’s considered a high risk. Hence, CBD distributors have to pay more in fees to banks to comply with their regulatory requirements.

 

  • High Insurance Costs: You know the drill with business insurance policies: the more volatile, complicated, dangerous, or controversial the products, the more insurance needed. This means higher premiums on business insurance alone, compared with other goods and commodities. In the same manner that banks consider CBD products as high risk, insurance companies have also followed suit.

 

  1. The Packaging Is Very Well-Thought Of

 

In any business, product packaging is very important. This is one of the very first and most effective aspects of marketing. Once your products are on the shelves, it has to be attractive enough for buyers to want to purchase them. The more attractive your packaging is, the higher the chances that potential customers will actually select your CBD products and buy them. Even if they don’t buy these products outright, the packaging itself might let them consider buying them in the future, or generate enough curiosity about what you’re selling.

 

With CBD products, the challenge is even greater. It goes beyond more than just the aesthetics. Aside from well-thought-of packaging, it has to comply with the very basic requirement of preserving the quality of the CBD products. When you put products on the shelves for months until its expiration date, the packaging has a very important role in ensuring that its quality is well preserved, lest the purity of the CBD is going to be affected. Attractive and functional packaging also contributes to the high cost of CBD products.

 

Conclusion

 

CBD is quite in demand for many because of its ease of use. You can easily incorporate it into your daily routine as CBD can be added into cream, food, and even your snacks. Moreover, it doesn’t have the psychoactive component that negatively induces dependency. This makes CBD currently in high demand. Many more individuals are drawn towards this more natural means of healing or managing their health concerns. The problem, however, lies in the supply as it’s still quite limited, not to mention all the other challenges that the industry has to face due to the infancy of the acceptance of hemp and marijuana-related products in society. However, the health benefits of CBD are promising. For many, this is why its expensive price tag is worth it.

 

 

 

Jacob Maslow is a native New Yorker with  five children. He left his payroll manager position after finding that his true passion was in writing, and has never looked back.

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