Why is CBD so darn expensive? The reasons range from expensive equipment for CBD extraction, to the high price of banking and insurance.
Why is CBD so darn expensive? We wanted to take a closer look at the high cost of CBD.
CBD is expensive! There’s no getting around the fact that when you buy CBD your pocket book’s going to take a bit of a hit.
On average, we see the price of CBD per milligram around $.15. If a standard 30-milliliter tincture contains 500 milligrams of CBD, you can expect to pay around $75.00, not including tax and possibly shipping for online shoppers.
That might be acceptable for some, but cash-strapped consumers may not have the disposable income to keep up with a consistent dosing regimen needed to manage their ailments. When this happens, patients may end up looking to inferior CBD products that can be incorrectly labeled, impure, or even unsafe rather than lab tested, high-quality CBD.
If you’re curious as to why CBD is so costly, read on because we’re going to breakdown the costs associated with CBD products, and provide tips on stretching your CBD dollar as far as possible.
EXPENSES BEGIN BEFORE THE FIRST HEMP SEED IS PLANTED
As with any agricultural farming, the first set of costs are the land and farming and cultivation costs such as; seeds, labor, cultivation equipment, state, city, and county licenses, etc.
With regards to farming hemp (and marijuana) there are additional reporting and testing costs over other agriculture due to the nature of what’s being planted and each state has their own set of requirements and costs. These costs can be as low as $25 in Vermont and as high as $500-$1000 depending on whether the license is for a grower or hander, plus a $5.00 per acre fee. To get a better idea of costs, we recently published an article overviewing the hemp market for Nevada, Vermont, Oregon, and Wisconsin.
Some states also have specific licenses or certification programs for hemp seed distributors and producers. Click to read each state’s hemp statutes.
THE HIGH COST OF HARVESTING AND EXTRACTION
Once the hemp plants reach maturity it’s time to harvest them. According to coolbean.info, the cost to harvest an acre of hemp in Minnesota will run between $300 to $600 per acre. This is down substantially from 2017 when the cost averaged between $970 to $2,500 per acre.
Once the harvest is complete, the hemp plant stem needs to have the various components separated with a machine called a decorticator. This machine can run upwards of $2 million.
After decortication, the next step will be to extract the cannabinoids, terpenes, flavonoids, etc. from the plant. The two most popular methods of extractions are through a Supercritical CO2 extraction or an ethanol extraction with CO2 extraction becoming the standard.
According to Cannabis Business Executive, a CO2 extraction machine can cost around $135,000 to $150,000 plus $20,000 to $35,000 for a rotary evaporator and centrifuge.
Of course these machine costs are in addition to the buildings, infrastructure, labor, and the raw materials for those not growing their own.
FROM EXTRACTION TO PACKAGING
Once the cannabinoids, terpenes, and other plant materials are extracted from the cannabis or hemp plant, there are still a number of steps needed before the CBD reaches store shelves.
What is initially extracted is a cannabis concentrate that has contains acids that need to be decarboxylated. The cost for a decarboxylation oven cost around $5,000 to $7,000 for ovens that have a capacity of 10 cubic feet and can go up to 38 cubic feet.
After the concentrate is decarboxylated, what’s left is full spectrum cannabinoid oil. Full of all the cannabis plants cannabinoids, including CBD, terpenes, and the plants chlorophyll, lipids and waxes. When it comes to the “entourage effect,” this is the best option.
However, not everyone wants the plant materials and/or the THC. Many patients prefer oil with higher concentrations of cannabidiol (CBD) and not concerned with plant properties or THC. To remove the plant properties, the CBD concentrate will first be winterized to isolate and remove the unwanted compounds, followed by distillation to further ‘clean’ the oil. If THC is being removed, the distilled concentrate will then go through a chromatography machine. Cost for the equipment to perform these functions can grow to the hundreds of thousands plus the labor to run them.
THIRD-PARTY LAB TESTING IS VITAL, BUT ADDS TO THE COST OF CBD
Once complete, the finished product now needs to be tested to prove product purity and concentration. There are a variety of tests available. Following are a list of services by a well known testing facility in Arizona.
- 10 cannabinoids ($50/bottle)
- Mold and fungus screening ($25/bottle)
- 19 Residual Solvents ($35/bottle)
- 41 Terpenes ($40/bottle)
- Moisture Content ($15/bottle)
- 4 Microbial Analyses ($40/each count)
- Custom Services
After testing, the CBD concentrates are bottled, packaged and prepared for delivery to their distributors to sell.
LEGAL EXPENSES, BANKING, & OTHER FACTORS INCREASE COST OF CBD
Obviously the largest costs come from the manufacturing side, but we can’t forget about the product distributors who have their own set of operating costs. Operating costs themselves are just a part of doing business. But operating costs for cannabis companies can be twice, even three times as much. In addition, due to the ‘gray’ area of cannabis and hemp laws, CBD companies must take extra precautions to insure they are protected. This, of course, adds to the cost of CBD.
Let’s take a look at the bare minimum of operating costs a CBD company is going to incur.
A general liability business insurance policy for cannabis companies can easily amount to $500 to $700 per month! This same insurance policy for a non-cannabis company would only be about $700 for a year!
Credit Card Processing
Credit card and banking options are very limited for cannabis companies. In order to accept credit cards for hemp purchases distributors need to sign up with merchants specializing in ‘high risk’ processing. Costs with these processors can be exorbitant. In some cases they can run hundreds of dollars per month.
If a high-risk domestic merchant cannot help, distributors are then forced to look off shore for credit card processing. These don’t come cheap. Off shore processors will normally require a business to incorporate in the country that processes the cards. Incorporating in the UK costs roughly $500 plus monthly fees that can also run in the hundreds per month. These are in addition to the higher-than-normal monthly processing fees for the service.
Bank accounts and business loans are not available to cannabis companies, which means they need to find unique, and sometimes costly, places to store their cash and have access to it for payroll and other business related expenses. Again, this often results in the opening of costly offshore accounts.
In-House Compliance Officers
Since the state level requirements for CBD derived from hemp and marijuana differ, CBD companies usually have someone in-house make sure the company is adhering to each state’s regulations. They also make sure all the products meet the specific states allowed THC percentage. In most cases, this is 0.3 percent THC or less. They also monitor the percentage of CBD contained in the products are inline with the product labels.
An article from ProjectCBD.org states that according to the FDA, 69 percent of CBD products are mislabeled. In-house compliance officers work to insure this doesn’t happen.
A company selling CBD better have an attorney. If not, they’re taking big risks. Attorneys will help insure companies are acting in compliance and keeping up with the ever-changing state laws on cannabis.
Countless stories have come to surface about CBD companies getting hassled by police, and in come cases even getting arrested! A good attorney can help insure business owners’ rights are not being violated and assist in navigating the gray areas of cannabis law. Attorneys will also help set up a legal corporation and the operating agreement of said corporation.
CBD AS A STATUS SYMBOL
Perception impacts price. Premium pricing techniques are often used when trying to reflect the exclusivity of a product. CBD is mix of both.
Let’s face it; there is a certain level of mystique and sexiness associated with CBD. The thought of consuming a product that borders on breaking the law presents a sense of danger and excitement. These factors absolutely have an affect on the price of a product, especially for a new product that can also heal! Companies know this and definitely price accordingly.
The good news is in time, when the ‘newness’ wears off and more companies come to market, prices should go down.
SAVING MONEY ON THE COST OF CBD
Regardless of where CBD prices are currently at, there are things consumers can do to stretch their dollar and reduce the cost of CBD.
The first thing a user can do is to try and cut back on their CBD daily doses. When it comes to CBD more is not better, less is best. The easiest way to cut back is to consume slightly less with each dose. For example, if you normally take 15mg of CBD twice per day, try decreasing each dose to 11 or 12 milligrams each time. This simple move will save roughly 5 milligrams of CBD each day. Our bet is your body will not even miss those 5mg. In case it does, you can always increase the dosage back to 15 mg.
Switch to a lower grade CBD. Experienced CBD users know the term full spectrum all too well. Full spectrum CBD oil is the preferred choice for many, but doesn’t mean it’s the only choice. CBD isolate is definitely a lower grade product, but it does work quite well. In fact, many of the ‘full spectrum’ products actually contain only a small amount of true full spectrum oil and are mixed with an isolate.
Lastly, there are a number of CBD companies that offer discounts to active military and veterans, the disabled and those with low income. We plan to collect some of the best assistance programs into an upcoming article. In the meantime, we recommend searching Google for “CBD assistance program” or check with your preferred CBD brand.
WHY IS CBD EXPENSIVE? SOME FINAL THOUGHTS
Most of you reading this know that both CBD and industrial hemp were officially legalized this past December under the 2018 Farm Bill.
With this legalization, we’re expecting sweeping reform to take place throughout the hemp industry. It’s safe to say that many companies are eagerly waiting to get in the CBD business. The floodgates will open. From banking and insurance companies to new hemp manufacturers, distributors and retailers, costs across the board should decrease.
Immense pressure is being put on the powers that be to provide federal regulations on CBD products that create quality standards industry-wide. That could get things moving towards lowering costs, too.