Innovation & Startup: Investing in the CBD business: the pros and cons

Cannabidiol (CBD), a non-psychotropic molecule extracted from industrial hemp, is one of those ‘star’ products that arouses consumer enthusiasm. CBD-based products with a THC content of less than 0.2% may be legally marketed in France. Should we seize this opportunity and invest in the CBD business? It all depends on your risk aversion. explanation…

#1 What are the opportunities in the CBD market?

After a long hesitation, serial entrepreneurs and small project leaders invested in the CBD market during the pandemic break. According to the figures communicated by the interprofessional hemp workers (Interchanv), the number of brick-and-mortar stores offering cannabidiol-based products has risen from 400 in 2020 to more than 2,000 in 2022. Why such enthusiasm for a sometimes controversial molecule? Multiple answers:

  • No shortage of questions† Indeed, according to the figures communicated by the media LSA Conso, the CBD market would be supported by more than 7 million consumers. This is more than 10% of the national population and 16% of European demand. So the first advantage: the outlets are impressive.
  • Raw materials and finished products are available at attractive prices† France concentrates more than 50% of European hemp production, far ahead of the Netherlands and Italy. In fact, it is the third largest producer in the world, after China and Canada. Result: the cost of wholesale CBD is competitive, transportation costs are low (no imports) and stock outs are rare.
  • It is estimated that online stores specializing in CBD products have a margin of between 15% and 35%.
  • The image of CBD is improving† The molecule no longer suffers (as much) from its relationship with THC, a psychotropic substance derived from cannabis. For example, in March 2022, Monoprix launched ‘CBD-based products’ areas in the ‘beauty’ and ‘parapharmacy’ sections of 250 stores in major cities.
  • Numerous studies have shown the effectiveness of CBD in reducing stress and anxiety (relaxing effect), relieving pain (analgesic effect) and reducing inflammation (anti-inflammatory effect).
  • CBD-based products are diverse and varied, increasing the average basket of consumers and offering each target the products that best meet their needs: flowers, leaves, resins, oils, herbal teas, desserts, e-liquids, etc.
  • Finally, the World Health Organization (WHO) issued a statement explaining that CBD” appears to have no potential for abuse or adverse health effects

#2 Threats to the CBD Market

As we have seen, the odds are tempting. But before you get in, be aware of the risks. Summary:

  • The CBD market suffers from legal uncertainty† While CBD-based products are now allowed (under certain conditions), they were banned shortly after a ministerial decree published on December 31, 2022. Furious but united, professionals in the sector immediately seized the Council of State who temporarily lifted this ban. weeks later. The verbatim use of the preliminary relief judge raised the hopes of the profession, but doubts remain about the final decision of the highest governing body.
  • The market is far from saturated, but competition is getting fierce
  • Faced with legal uncertainty and misconceptions about cannabidiol, banks and other credit institutions are reluctant to fund projects, no matter how profitable they are. Therefore, entrepreneurs usually have to opt for self-financing or approach European banks, with all the additional costs, administrative delays and even traveling abroad.

As you will have noticed, the CBD market presents a rather unique profile: if all the economic signals are green, there is a lot of legal uncertainty. It is therefore up to you to make your trade-offs based on your risk aversion.

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