CBD is dead. Long live CBD.

CBD market in Colombia

Clients repeatedly ask us for updated intel on current wholesale prices for CBD products such as crude oil, distillates and isolates. Although there isn’t a straight answer, or rather, a mature, unified liquid market, we point them to our favorite sources of information, such as Hemp Benchmarks. This market intelligence outfit, based out of Colorado, does a great job at making sense of prices across jurisdictions, mostly inside the U.S.

An entangled lifetime

The global cannabis sector can hardly be called global, given the numerous limitations to free trade imposed by conflicting legislation. Its biggest consequence is price disparity between jurisdictions. Quality standards, available stock and e-commerce roadblocks also impact this fragmented, immature market.

One thing is clear: the financial assumptions made in most business plans we see with regards to wholesale CBD-based revenue are way off. If you drafted projections 18 months ago for would-be investors, its likely that you set 10.000 USD / kilo of CBD broad spectrum distillate as your reference. In March 2020, the reference price for such a product is closer to 3,000 USD, at least in Colorado. And our Denver office reports prices are likely to get cheaper throughout the year.

Farewell CBD

Although every mall in the U.S. has as pop up stand selling branded CBD products of all sorts, and reported sales continue to rise, 2019’s developments beg the question: is CBD dead? We think the days of CBD as an ultra-high margin product with endless returns for investors, are behind us. The good news is we now have a more mature market, based on actual revenue rather than projections, with plenty of room for solid businesses to establish sustainable growth models. Yes, CBD has quickly become a commodity, and industry players need to adapt quickly to the new reality.

Investors with longer-term vision and a higher tolerance for risk are increasingly shifting towards other cannabinoids. 613 Partners is helping some of these clients make sense of published and upcoming research on CBG, CBC and CBN. We are sponsoring a breeding project in Spain to win the race for a stable, high yield CBG strain. In California, we are partnering with a team of young researchers to produce a high CBG strain that farmers can use without worrying of it going “hot”.

The real deal

Ultimately, we strongly believe that investment in research and innovation will separate winners and losers in the cannabis game. If you’re driving your company in autopilot, assuming that your wholesale CBD production-centered company will return mind-blowing profits without significant R&D, this may be the moment to rethink your strategy. Opportunities in cannabis are endless, but it’s going to take a little more than just riding the wave to get to the shore.

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