Want to invest in the cannabis industry? Think hemp. While still illegal at the federal level, the future of industrial hemp in the United States looks promising from a business owner and investor perspective.
Americans purchased $668 million in hemp products in 2016, and that figure could climb to $2 billion by 2020 based on some projections. For a plant that is only allowed to be grown by universities for research purposes in 19 states according to the 2017 U.S. Hemp Crop Report from VoteHemp, those are impressive numbers which represent a big opportunity.
The biggest thing going for hemp is that it’s not actually a drug at all. While it was caught up in the war against drugs that began back in 1937, hemp was really just a falsely accused, innocent bystander. Legislation to remove hemp from the list of Schedule 1 drugs in the United States has failed multiple times in the past. However, the growing opportunity that hemp presents to the economy, combined with changing perceptions of hemp among Americans, gives many people hope that the current version of the Industrial Farming Act that was re-introduced to the House and Senate in August 2017 will pass in the near future.
Regardless of its legal status, 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 practically nonexistent 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 2017 U.S. Hemp Crop Report from VoteHemp, hemp is only allowed to be grown in 19 states, and only 34 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 all over the place today, but it’s likely those restrictions will loosen at the state level in the near future – and possibly at the federal level depending on the fate of the Industrial Farming Act.
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. However, the variety of products available to consumers in the U.S. is limited.
Innovation and product development could put a U.S. hemp business in a leadership position quickly. For example, hemp food 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 their local grocery store and purchase hemp snack foods. While that’s changing, as a recent deal between JD Farms and Whole Foods demonstrates, there is still a significant opportunity for businesses to expand their hemp product lines and footprints through innovation.
Demand and Penetration
As sales growth for hemp products in the United States shows, demand for hemp is rapidly growing. However, penetration of hemp products into U.S. households is still quite low. There is still a negative misperception about hemp among many Americans, and laws restrict access to hemp products for most consumers in the U.S.
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.
While food products and CBD products are two of the most popular and are getting the most buzz in the United States, there are opportunities far beyond those two categories. Marijuana gets all of the media attention and already has so many players vying for pieces of the market share pie. At the same time, hemp is sitting in the background, just waiting to disrupt so many categories when consumer perceptions and legislation change. It’s an opportunity waiting to be seized.
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.