Move over cupcake shops, there’s a new start-up business topping the charts and it’s called hemp. This versatile plant has transformed into one of the fastest-growing industries in the nation with revenue estimated to reach $2.6 billion by 2022. It’s a potentially lucrative opportunity for farmers and other entrepreneurs who are taking the leap, but there are important things to consider.
Study your options
As with any business venture, it’s smart to take your time to determine how best to jump into the hemp industry. Thanks to the 2018 Farm Bill, which removed hemp from the federal Controlled Substances Act (CSA), this industry is experiencing explosive growth. CBD or cannabidiol, the non-psychoactive compound in cannabis, is being widely used as relief for various illnesses from post-traumatic stress disorder (PTSD) and epilepsy to sleep disorders.
Today, hemp is being manufactured into oils, capsules, vapes, infused beverages, edibles as well as paper products, soap cosmetics and recyclable fabrics that have spurred a number of new sustainable clothing lines. For farmers who are expanding their crops to include hemp, usually buyers will provide specifications for the type of hemp they want to purchase based on the type of products they plan to produce. Currently, the most demand for hemp is for CBD oils.
Prepare for funding challenges
While there are many business options to consider, funding sources are more limited. Currently, traditional banks aren’t offering loans but there are creative financing solutions available. There may be a shift on the horizon with the Secure And Fair Enforcement (SAFE) Banking Act, pending legislation that would provide a safe harbor for financial institutions to start working with hemp businesses.
While selling industrial hemp containing less than 0.3% THC is federally legal in the U.S., state and local laws vary significantly. It’s important to research and comply with the laws in your area. A key early step is to meet with a legal consultant as well as an insurance agent who can help ensure that you meet required standards and regulations.
One area that frequently causes concern for hemp business owners is labeling. Because hemp-derived CBD products still are not FDA-approved drugs or dietary supplements, it is illegal to label them as such. In 2016, the FDA purchased and tested 24 products labeled as hemp or labeled as a component of hemp called cannabidiol (CBD). Only two of the products tested met their label claim. It’s important to consult with the FDA website for the most up-to-date regulations on hemp labeling.
“The hemp industry is quickly evolving and expanding, so it’s important to understand how to navigate the unique risks of the industry from weather-related issues to equipment breakdowns and ensure that you are protected,” said Kurt Mansavage, Manager Agri-business Underwriting & Crop/Hail Services for Rural Mutual.
Rural Mutual Insurance Company added industrial hemp as a commodity that can be covered as part of our crop hail program. Our agents, based locally across the state, can help you find the right standard property and casualty coverage for your buildings, equipment and harvested product.
Market your product cautiously
With the influx of new hemp products hitting the market, pinpointing the right marketing message and approach should be a top priority. Until just recently, there have been a number of advertising restrictions. Just recently, Facebook relaxed its ban on CBD products and Google is now testing ads for topical hemp if they don’t specifically feature products. Social media continues to be tricky, but brand growth can be driven through social posts or paid ads that are positioned extremely carefully and don’t speak about specific product benefits. One of the most cost-efficient and effective marketing tools for hemp start-ups is still public relations which helps to build credible thought leadership content that helps brands stand out in a competitive marketplace.
The overall thing to remember in marketing is to be careful about any claims you make. Products cannot imply that they do things that they don’t deliver on. They can’t mislead people about the effects of hemp. Every state monitors these claims and violating standards can lead to fines or blacklisting by a media company.
Following these guidelines can help hemp businesses stay out of the weeds and make sure they make the most of this blossoming opportunity. For more information on appropriate commercial hemp insurance coverage, please contact your local Rural Mutual Insurance agent to customize a policy that’s right for your hemp business.