Can California CBD Retailers Carve a Lasting Competitive Advantage?

CBD business operators currently have a sizeable economic advantage when it comes to their high-THC cannabis/extract counterparts. Thanks to the 2018 Farm Bill, their operations are legal, (in many jurisdictions) lightly taxed, and available through online sales.

But what will it mean for the CBD side of things when/if marijuana products of all (or at least higher) THC levels becomes legal? Specifically, we’re talking about legalization of recreational marijuana. Here in California, as well as in 17 other states, Washington, D.C. and Guam, that’s already the reality. Yet CBD businesses continue not only to operate, but to thrive.

Our CBD business lawyers recognize the retail landscape may inevitably shift once recreational marijuana becomes legal, but we also believe in the strong likelihood the two can co-exist. Not everyone wants high-THC products – specifically in the realm of pet products, beauty topicals,  and cosmetics. Plus, there are a fair number of people who aren’t heavy users of THC, but may still want to indulge occasionally in a way that is safe.

Recent analysis reveal that the legal recreational marijuana market dwarfs the CBD market – $50 billion to $8 billion. Still, neither sector’s size is anything to sneeze at.

In shops that sell high-THC cannabis products, CBD product sales have fallen in recent years (at least so far as California goes). But it’s our theory that when adult use recreational marijuana becomes legal, there will be an increase in sales for both – particularly in mature markets.

The question is how the merge will occur: Will we be more likely to see low-THC products in marijuana stores primarily selling high-THC products – or visa versa. Even if high-THC retailers are the ones to thrive, it’s likely to be CBD retailers who excel in digital sales.

Beyond this: What will be the role of any dispensary when/if marijuana becomes legal at the federal level? Would anyone go to a dispensary if they could purchase quality CBD or cannabis at a gas station? It’s true that cannabis-specific retailing is hyper-centralized as a result of regulation, but our thinking is that there would still be a need for CBD and cannabis dispensaries – just as sales of alcohol have continued at liquor stores and wineries.

Cannabis companies of all stripes may want to start thinking of ways to protect their future by investing in brand development. This approach would include:

• Diversifying product offerings.
• Carving a name for yourself in the customer service sphere.
• Providing valuable education to new and existing customers.
• Offer a premium quality product.

Think about it like pizza. It’s easy enough to make, and you can find a pizza joint in virtually any city in America – not to mention in the grocer’s freezer section. But quality pizza? Wood-fired pizza? Premium ingredients? An Italian dining experience? These are all things that people seek out – and it’s how some restaurants have managed to differentiate themselves, even in crowded markets. You build up your brand value, brand loyalty, and brand base. This is true for both CBD and high-THC retailers.

Every step of the way, it will be crucial for companies to consider the legality of their branding, their business practices, and their growth. Our dedicated Los Angeles CBD lawyers are here to help.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 714-937-2050.

Additional Resources:

As more states legalize marijuana, CBD retailers face an identity crisis, April 29, 2022, By Kristen Nichols, Hemp Editor, Marijuana Business Daily