CBD (cannabidiol) is one of the fastest-growing product segments in the health and wellness supplement industry. It’s available in the form of oils, gummies, capsules, topicals, vapes, chocolates, and even beverages.
From CBD-infused beer to bath bombs, you can find all kinds of unique products on the market. The global CBD industry is expected to grow at a CAGR of more than 15% in the next few years.
So, lots of opportunities for entrepreneurs to dabble and earn from this fast-growing industry. A CBD wholesale business can be a good choice for people who don’t want to deal with the headaches of the B2C industry.
Just look at Wholesale Colorado Botanicals CBD and how well it’s grown in the last 5 years. So, if you are interested, read this article to find out the 6 steps to building a wholesale CBD business from scratch.
Why does a CBD wholesale business make more sense?
Why CBD wholesale over retail? Well, that’s because CBD is everywhere these days. Making space for a new brand is getting tougher than ever, with newcomers popping up every other day thanks to white-labeling services offered by third-party bulk manufacturers.
To create a difference, you’ll need to spend heavily on advertising, branding, marketing, distribution channels, and whatnot. On the other hand, as a wholesaler, you don’t have to deal with such excruciating tasks. Let’s go through the benefits of CBD wholesale over retail.
Better Profit Margins
As a wholesaler, you buy products in bulk from manufacturers, which drives down your per-unit cost and increases the per-unit margin when you sell it to online or brick-and-mortar stores. Retailers often sell the product at 2 to 3 times the markup price, so there’s enough cushion for you to grab the difference as a margin.
High-Growth Industry
The CBD industry is growing at a very fast rate, and it’s not limited to just the US now. Europe, Asia, and Latin America are all seeing huge surges in demand for alternative wellness products. You can target international markets as well because retailers, dispensaries, and wellness brands are always in search of trustworthy suppliers.
Recurring Revenue
Once you have tied up with stores and sites with lots of traffic, you are set for months. Retailers don’t change their suppliers quickly, so you’ll get monthly or weekly restocking orders. It’s just like how a subscription works and results in uninterrupted cash flow. Just tie up with 2-3 stores in every high-density area, and your business will flourish.
Steps to Building a Wholesale CBD Business from Scratch
Since the USA is the biggest CBD market right now, these steps will mimic the steps needed to build the CBD business in US states. But the general framework will be similar for other countries as well; still, read your local laws properly.
1. Research State Laws
While CBD is legal federally, the local state laws might change at any time. With Republicans in power now, there’s a possibility that many CBD-legal states will see a major shift in policy around formulations used to make CBD products and cannabinoid types and concentrations allowed in them.
So research the local state laws properly to avoid any trouble with authorities. Get all the necessary licenses and clearances for the state’s hemp authority.
2. Register your business
First and foremost, register your business as an LLC. This is the cheapest approach and protects personal assets and the corporation. Then, apply for a hemp processor/wholesale license with the respective state’s agriculture department.
This typically costs $500-$1000. Every state has an official website with the charges explained; you can visit them for reference.
3. Tie Up With Reliable Supplier
As a middleman, your job is to pick up quality products from manufacturers and distribute them to retailers. So ensure that your supplier, be it any hemp farm or bulk manufacturer, does all the testing properly.
The product should come with the latest and detailed Certificates of Analysis proving that the product is free from pesticides and heavy metals and has the appropriate amount of cannabinoids.
4. Work on your branding
Yes, even when you are operating in a B2B space, you have to give a distinguishing factor to your services. Develop a well-detailed website with all kinds of details about CBD types, product categories, strength options, and the minimum order quantity you are planning to offer.
Reach out to potential clients via LinkedIn and visit CBD expo trade shows to expand your reach.
5. Develop Proper Logistics
Once you’ve tied up with clients, you’ll need to supply them with products regularly. Hence, it’s important to pick a reliable shipper. USPS and FedEx both offset CBD shipping, so you can start with them.
You may also find local state logistic services, but clear the terms beforehand before signing the contract. Clear your payment terms, and try not to go beyond 30-day payment cycles.
6. Stay Compliant & Take Feedback
Take regular monthly surveys from your clients to understand the changing customer demands and what products sell best. This will help you to keep inventory sorted. Try to expand into categories like CBD shots and pet treats to further increase your revenue potential. Also, don’t forget to renew your licenses yearly and watch out for any changes in local state laws or FDA regulations.
Our Final Thoughts
To sum it up, the wholesale CBD business can be a good opportunity for individuals to participate and benefit from the growing alternative wellness industry. The only major entry barrier is that you’ll need a high initial investment to buy inventory in bulk.
Plus, payment cycles are a bit long in B2B business, so your cash flows might be under pressure for some time. However, once you are established, a B2B CBD business can pull in great recurring revenue.
Just stick to the basics, follow all rules, get a license, and sell quality stuff, and you’ll do well. For reference, look at how Colorado Botanicals became a top brand in the last few years.
