Want to invest in the cannabis industry? Think hemp. With the passing of the 2018 Farm Bill that legalized industrial hemp, the future of the hemp industry looks promising from a business owner and investor perspective.
Americans purchased $1 billion in hemp products in 2018 (up from $668 billion just two years ago in 2016), and that figure could climb to $2.6 billion by 2022 according to New Frontier Data’s The Global State of Hemp: 2019 Industry Outlook report.
The 2018 Farm Bill wasn’t passed until December 2018, so it’s safe to assume both crops and retail sales will grow quickly in 2019. Already, the number of acres of hemp grown in the United States tripled between 2017 and 2018 growing from 25,713 acres in 19 states in 2017 to 78,176 acres across 23 states in 2018.
Many investors and businesses are aggressively entering the hemp marketplace, particularly food manufacturers that are trying to jump on the health food, nutraceutical trend led by kale, chia seeds, and similar superfoods. Following are some of the key reasons why hemp is so attractive and in many ways is more appealing than marijuana for investors and businesses.
Supply Chain Development
The hemp market is growing exponentially in the United States, which means companies that get in early will have to build the infrastructure for the supply chain. Yes, this takes time and money, but it’s also a big opportunity to have a voice in building the best supply chain for a business. For investors who want a say in how the hemp supply chain will operate, now is the time to enter the industry.
Until the infrastructure is built, hemp-related businesses will have to bootstrap to survive and thrive in the short-term. However, the up-front cost might be worth it for savvy startups that understand the far-reaching long-term benefits of helping to develop the entire supply chain for a nascent commercial industry.
The first to market has a unique opportunity to own that market, and once a brand owns a market, it can be very difficult for later entrants to compete on equal footing. The hemp industry is a perfect example of an industry that is waiting for businesses to be first to market in a wide variety of categories.
Keep in mind, according to the 2018 U.S. Hemp Crop Report from VoteHemp, hemp is only allowed to be grown in 23 states, and only 41 states have enacted some form of hemp legislation. Laws vary from state-to-state with some not allowing commercial sales, some not allowing interstate commerce, and so on.
In other words, restrictions related to commercial activity are still common despite the passing of the 2018 Farm Bill. However, all signs point to increased commercial activity in the hemp industry, so it’s time for investors to think about being first to market and owning a space in that market.
Innovation and Expansion
It’s estimated that more than 50,000 products can be made from hemp. In the United States, food and CDB products 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.
Innovation and product development could put a U.S. hemp business in an industry leadership position quickly. For example, hemp food products and CBD products are skyrocketing in popularity in the U.S., but there are not many choices available on store shelves. In other words, few people can walk into a local grocery store or pharmacy and purchase hemp snack foods or CBD products.
While that’s changing (both CVS and Walgreens announced in March that they’ll carry CBD products in some stores), there is still a significant opportunity for businesses to expand their hemp product lines and footprints through innovation.
Demand and Penetration
As sales increase for hemp products in the United States shows, demand for hemp is growing rapidly. However, penetration of hemp products into U.S. households is still quite low. There is still confusion and a negative misperception about hemp among many Americans.
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.
Key Takeaways about the Hemp Opportunity
Hemp food products and CBD products are getting the most buzz in the United States these days, but there are business opportunities far beyond those two categories.
When the 2018 Farm Bill was passed, the doors to the hemp industry opened. While there are still rules and restrictions at the federal and state levels that keep those doors from opening all the way, 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 4/5/19.
Susan Gunelius, Lead Analyst for Cannabiz Media and author of Marijuana Licensing Reference Guide: 2017 Edition, is also President & CEO of KeySplash Creative, Inc., a marketing communications company offering, copywriting, content marketing, email marketing, social media marketing, and strategic branding services. She spent the first half of her 25-year career directing marketing programs for AT&T and HSBC. Today, her clients include household brands like Citigroup, Cox Communications, Intuit, and more as well as small businesses around the world. Susan has written 11 marketing-related books, including the highly popular Content Marketing for Dummies, 30-Minute Social Media Marketing, Kick-ass Copywriting in 10 Easy Steps, The Ultimate Guide to Email Marketing, and she is a popular marketing and branding keynote speaker. She is also a Certified Career Coach and Founder and Editor in Chief of Women on Business, an award-winning blog for business women. Susan holds a B.S. in marketing and an M.B.A in management and strategy.