/CBD (Cannabidiol) - An Awesome Business Opportunity, But Not An Easy One

April 2019 Tags : Digital Marketing, SEO

 

CBD Industry Growth Rates Make the Business Attractive For Marketers, But Advertising Restrictions Make Execution Challenging

 

 

Thanks to Mitch McConnels’s Farm Bill, production and interstate commerce of Hemp and Hemp-derived CBD (Cannabidiol) was legalized in December of 2018. For consumers, this means more options than ever for purchasing health-building CBD oil-related products online or in stores. For hemp growers, marketers and retailers it suggests a coming boom – one study estimates that the industry will grow from $500 million in 2018 to $22 billion over the next three years.

So if you’re an aspiring hempreneur, you’re definitely driving in the right direction. Just that this isn’t exactly a paved road. Or like Ricky Bobby said in the NASCAR-themed movie Talladega Nights, ‘hang on Baby Jesus, this is gonna be bumpy.” 

 

 

So What is CBD, Anyway?

Cannabis plants contain compounds called Cannabinoids, with two of the most prevalent being Tetrahydrocannabinol (THC) and Cannabidiol (CBD). THC induces psychoactive effects and is most commonly known as the drug that produces the marijuana ‘high’. Cannabidoil is a separate compound that does not produce a high but which is gaining popularity due to its perceived health benefits.

There are two kinds of Cannabis Sativa plants, marijuana, which has lots of both THC and CBD, and hemp which has a lot of CBD but very low concentrations of THC (< .3%). In 2018, the DEA formally recognized the distinction by removing hemp from the list of Schedule 1 drugs (although marijuana remains on that list).

Part of the reason for the DEA’s action was to acknowledge the growing focus on CBD for it’s health and wellness properties, which reportedly include easing pain, and anxiety, improving sleep, building the immune system, and more. While medical research on CBD is still in its infancy, it already has the pharmaceutical industry’s attention. In 2018, the U.S. Food and Drug Administration approved Epidiolex, a CBD-based drug designed to treat some forms of epilepsy. 

CBD and the Law

Also in 2018, Congress legalized the production and interstate commerce of hemp and hemp-derived CBD.  This has given rise to a growing cadre of CBD companies that are producing and selling CBD-related products as capsules, oils, creams, and, in the case of our client Mary’s Nutritional's totally awesome transdermal pens.

Party on.

Except the FDA isn’t quite ready for the party.

For a host of reasons including lack of medical research and CBD inclusion in the drug Epidiolex, the FDA says that: 

CBD can’t be added as a food supplement or marketed as a dietary supplement

CBD can’t be marketed with specific health or therapeutic claim or in a way that suggests it cures disease

CBD will continue to be regulated pursuant to the Federal Food, Drug, and Cosmetic Act (FDCA)

While Congress is pressuring the FDA to create a pathway to a concrete regulatory framework, it hasn’t happened yet CBD marketers are forced to proceed with caution.

The Marketing Approach

If you’re a marketer looking to join the ride, a lot of what you can and can’t do is scripted by the policies of major online platforms. Here’s what we’ve found:

Ecommerce Platforms:

Popular ecommerce platforms like Shopify don’t currently allow CBD sales for US-based marketers. However, open-source platforms such as Magento and Woocommerce (For WordPress) have no such restrictions. There are also a good number of credit card payment gateways that will work with CBD sellers, although the decision last week by credit card processing giant Elavon to discontinue working in the CBD space points to the volatility that CBD marketers should be prepared for.

Currently, Amazon does not allow CBD products to be sold in the Marketplace. However hemp products, such as hemp extract, hemp oil, and hemp seed oil are allowed, and these are often used to introduce consumers to hemp brands and their CBD products.

 

 

Online Advertising: 

Want to market CBD online? Google and Facebook/Instagram control approximately 60% of global ad sales and both prohibit CBD advertising in their terms of service. Most of the major platforms have CBD restrictions, so advertisers are left effectively working at the margins with programmatic display solutions such as Traffic Roots, Mantis Ad Network, Adistry and AdClick Media. These platforms connect CBD advertisers with CBD-friendly publishing sites, albeit with more audience targeting and messaging restrictions than are typical for mainstream advertisers. In such a fast-evolving landscape (where Facebook is rumored to be on the cusp of allowing CBD ads), paid online advertising plays can and should be approached with a creative, test-and-learn approach. 

Search Engine Optimization (SEO) & Content Marketing:

CBD-related terms generated nearly 1 million US searches last month. There are no search engine restricts on organic listings for this term, meaning that SEO is fertile ground for ecommerce site promotion. To harness SEO, CBD brands are utilizing carefully-written (good for search engines, ok with the lawyers), keyword-driven page titles, bending site content around popular hemp- and CBD-related themes, and securing backlinks through PR and third party site content placement.

Social Influencers:

Microinfluencers are helping CBD companies reach new audiences online and in social. Much like for the hospitality industry, influencers across fashion, lifestyle, and health and wellness are reviewing and recommending CBD products while providing links and user traffic to CBD websites. With the current regulations prohibiting the use of paid social media, social influencer marketing is a core part of CBD social strategy. 

 

Conclusion:

The CBD industry has a Wild West feel with marketers eager to bring products to market against the backdrop of fast-shifting regulatory compliance. At the speed at which change is happening, CBD marketers should be taking advantage of organic search and 3rd party influencer opportunities now and should be prepared to execute on paid advertising opportunities as they materialize in 2019.