May 21, 2021
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When the U.S. Department of Agriculture (USDA) first released its interim final rules for the U.S. Domestic Hemp Production Program in October 2019, interest in the hemp industry skyrocketed. By January 2020, the USDA had already approved 13 state and tribal hemp plans with dozens more in review that would be approved in the following months.
As you can imagine, many investors and businesses saw the potential of the industry at the time and aggressively entered the hemp marketplace. Based on data from the Cannabiz Media License Database, the number of active hemp licenses at the end of 2019 was almost more than the number of active cannabis licenses in the United States.
Fast forward to 2021, and farmers are facing significant oversupply issues and falling prices. Still, the industry holds significant potential and continues to appeal to investors and businesses. Following are some of the key factors that continue to attract people to the industry.
The hemp industry is a perfect example of an industry that is waiting for businesses to take the leadership position in a wide variety of categories. There are some brands that have gained widespread recognition that challengers should target with competitive attacks, but there are also categories that have yet to establish clear brand leaders. That equates to significant opportunities for businesses to gain market share.
It’s estimated that more than 50,000 products can be made from hemp. In the United States, food products and CBD brands are two of the fastest growing categories within the hemp market. Demand for hemp products is also growing quickly in other parts of the world – in both established hemp markets and untapped markets – and expansion opportunities abound.
Innovation and product development could put a U.S. hemp business in an industry leadership position quickly because there is a significant opportunity for businesses to expand their hemp product lines and footprints through innovation. Already, a variety of innovative hemp technologies have debuted, which will help drive the industry forward.
Demand for hemp products continues to grow in the United States. However, penetration of hemp products into U.S. households is low. There is still confusion and a negative misperception about hemp among many Americans, which means there is room for savvy businesses to learn about consumers’ needs, particularly what consumers want from CBD brands, and carve out dominant positions in the marketplace.
Bottom-line, there is a big gap in the hemp market that is waiting to be filled by businesses and strategic investors. Growing demand and limited penetration equals big opportunity for the right people and companies.
State and federal rules related to the hemp market and hemp products are still evolving. It’s safe to assume key industry stakeholders will have opportunities to provide their opinions and recommendations in the coming months and years. For investors and businesses that want to help shape the industry and its regulatory framework, now is the time to get in and actively participate.
When the 2018 Farm Bill was passed, the doors to the hemp industry opened and the release of the USDA’s interim final rules in 2019 opened those doors even wider. While there are still rules, restrictions, and challenges at the federal and state levels that keep those doors from opening all the way in 2021, the good news is they’re open just wide enough for savvy entrepreneurs and investors to enter and profit.
Originally published 2/20/18. Updated 5/21/21.
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