One way many entrepreneurs have entered the CBD industry is through white/private label companies. Though these are great for cutting costs for new businesses, they do take away from the personality of a brand.
“[The CBD industry] has become very competitive,” Lawson details. “[CBD] came, sort of like a Gold Rush, and the market got saturated fast. Largely due to these white label companies.”
A white/private label company is a CBD business that provides products (i.e. CBD oils, CBD topicals, etc.) to various brands within the industry. Since the white label company is producing the product, they are the ones responsible for many of the regulations surrounding this industry. This includes regulation fees, extraction costs, and testings.
Since the 2018 Farm Bill, white label companies have appeared all over the market. For people who develop their CBD business through a white label company, the cost and barrier to entry are greatly reduced.
For example, testing for pesticides alone can cost upwards of $40,000 a month. This doesn’t even include all of the testings we’re used to seeing within a Certificate of Analysis. Even still, investing in the CBD industry through white labels is expensive.
“There’s two huge manufacturing companies out of Colorado that white label probably 80% of products,” Franny explains. “They have a $20,000 minimum per product you wanna launch. So, that takes most of your entrepreneurs — your working class American — out of the picture. Because if you want to have 10 products in your product line, you’re looking at a $200,000 investment right off the top.”
Most people just don’t have this kind of capital. And, for those that do, a white label company can very much appear to be a friend. But as Lawson suggests, there are some downsides to working through a white/private label.
CIS is a leading provider of Metered Dose Inhalers parts for CBD companies looking to expand their products.
“These manufacturers made it really easy for anybody to get in,” he explains. “And a lot of people got in. So, I think there’s going to be a big shake out over the next couple of years. Especially, as regulations kick in.”