The Difference Between White Label and Private Label CBD Products

,

If you have ever been to the supermarket and purchased “store brand” groceries, you are familiar with the white label model. With white label products, a single manufacturer sells the same goods to several different businesses. In turn, these businesses then rebrand the goods as their own before going to market with them.

Private labeling is another practice where businesses outsource manufacturing to a third party. However, in a private label arrangement, manufacturers develop a specific product strictly for a single party — as opposed to one product for many companies.

As the national CBD industry continues to normalize, it is taking notes from more mainstream industries regarding white labeling and private labeling. Importantly, both white labeling and private labeling break up the hemp CBD supply chain, allowing different businesses to handle only specific links along the way.

What are CBD White Label Products?

From seed to sale, the hemp CBD supply chain contains many complex steps. Whether it be growing hundreds of acres of hemp plants, or doing supercritical CO2 extractions, implementing each step in the supply chain can be extremely expensive. As such, while vertically integrated hemp CBD companies have the most potential profit, they also take the greatest financial risks.

According to Investopedia, “White labeling occurs when the manufacturer of an item uses the branding requested by the purchaser, or marketer, instead of its own. The end product appears as though it has been produced by the purchaser.” In the hemp space, white label manufacturers play an important role for companies that cannot afford every step in building a new CBD brand — such as growing their own hemp or doing their own extractions.

The white label model breaks up many of the steps in CBD product manufacturing and disseminates them among several businesses. To illustrate, a common model for white labeling in CBD is for a single business to cultivate hemp, extract CBD, and finally formulate gummies. Next, a different business entity purchases the premade CBD gummies and sells them as their own brand.
With the white label model, purchasers can get CBD products to market without having to invest money in a vast majority of the steps in the supply chain.

Private Label CBD Products

As seen with white labeling, private label CBD products are also manufactured by another business. However, private label CBD products are based on a singular formulation that is wholly unique to a specific brand. As a result, private label CBD companies have a trademark not only on their branding, but also on specific product formulations.

Today, private labeling is a common practice in the essential oils industry. With the private label model, wellness brands work with manufacturers to develop specific essential oil blends. Once the two parties have created a sellable product, the wellness brand gets a trademark on the essential oil and goes to market with it. The relationship continues as the manufacturer continues to produce the essential oil.

The private label model allows new companies to enter the CBD space with a totally unique product – while also circumventing the need to grow and process their own CBD. Because these arrangements are often done under a contract between a manufacturer and buyer, the buyer also has more input into the development of a satisfactory CBD formulation.

With private label CBD products, purchasers can get unique CBD formulations to market without having to invest large sums of money in cultivation, extraction, etc.

CBD White Label vs. CBD Private Label

The pros and cons of white label and private label CBD products can be viewed from the perspective of either a business or a consumer. When it comes to end-users, product quality is almost always the most important factor for CBD products. Yet, businesses must consider both profitability and logistics in assessing CBD white label and private label business models.

The differentiating factor between white label and private label CBD products is product formulation. According to the white label model, several different CBD companies could sell products with identical formulas at the same time. Conversely, in the private label model, the CBD product formulation is unique to a specific brand.

CBD White Label Pros

White label hemp products have several advantages for CBD businesses. These include:

  • Easy market entry
  • Low overhead
  • Less employees
  • Manufacturing expertise
  • Compliance guidance

In the end, all of the factors that help reduce production costs for CBD companies are reflected in the final price point at which CBD white label products are sold. As such, this practice also helps end consumers get white label CBD products at a more affordable price point.

CBD Private Label Pros

Private labeling offers many of the perks of outsourcing manufacturing seen with white labeling, while still allowing companies to provide unique CBD products for their customers.

Private labeling has several advantages for CBD businesses. These include:

  • Product and brand are identical
  • Control over manufacturing
  • Flexibility with product formulation
  • Cater to customers
  • Brand loyalty

Private labeling is much more likely to drive customer loyalty than white labeling. Simply because, consumers can easily purchase white label products from other companies if they see fit.

Benefits of Working with White Label CBD Companies

Hemp farmers can benefit greatly by partnering with the right CBD white label services.

As mentioned throughout this article, white labeling allows businesses to split up the hemp CBD supply chain into digestible and affordable parts. While this division of overhead cost and labor is greatly beneficial for CBD brands, it is also extremely helpful for hemp farmers. Just as CBD brands can circumvent cultivation and extraction with white label partnerships, hemp farmers can avoid many of the business headaches that come with the CBD industry.

Commercial hemp farming is a massive undertaking in itself. To consistently grow high-quality CBD crops, farmers must account for irrigation, fertigation, IPM, labor, genetics, weather, compliance, and much, much more. Therefore, it is not surprising that many hemp farmers today don’t want to worry about business-centric tasks like branding, marketing, and retail sales.

Unfortunately, many new hemp farms have gone out of business simply because people have attempted to “wear too many hats” on the job. Conversely, white labeling allows hemp farmers to focus on what they do best – grow hemp.

The final thing to consider is that established white label manufacturers can make great partners for hemp farmers. Because white label manufacturers make CBD products for an array of customers, they have more market versatility than most hemp companies.

Contact Us

High Grade Hemp Seed has helped countless farmers understand their options for doing business in the CBD white label market. We are happy to share our expertise with you.

Please contact us to schedule a call.

/by

From Seed to Shelf: How the Hemp Supply Chain Works

, ,

The hemp space represents one of the most exciting, yet most volatile facets of legal cannabis. While hemp was federally legalized in 2018, certain cannabinoids such as CBD remain in a legal “gray area.” Therefore, CBD companies are operating without clear direction from the FDA. In like fashion, the industrial hemp space struggles to find its footing while we wait for hemp-derived materials to gain mainstream acceptance.

With the hemp industry constantly in flux, consumers are ultimately the ones who suffer. As there is little consistency with Good Manufacturing Practices (GMP) in hemp, poor quality hemp products pervade the marketplace.

To help you avoid such problems, we’re here to show you exactly where hemp products come from. Ideally, by learning about the hemp supply chain, you can make informed purchasing decisions.

What is the Hemp Supply Chain?

Whether it be CBD products or textiles made from hemp, the supply chain is similar. A supply chain is defined as “the entire process of making and selling commercial goods, including every stage from the supply of materials and the manufacture of goods through to their distribution and sale.” The hemp supply chain is comprised of all the people, activities, information, and resources that come between planting a seed (or plant start) and the final sale of a hemp product.

The hemp supply chain can be traced through the cultivation, processing, and sale of any hemp product on the market today. If you enjoy CBD gummies as a way to relax at the end of the day, you can trace their production through the supply chain. Similarly, lumber products, animal bedding, and textiles made from industrial hemp have undergone their own journey through the supply chain.

Handling the Product from Farm to Consumer

The hemp industry as we know it was born in a legal grey area. Today, it is often overlooked that the 2014 Farm Bill legalized hemp cultivation for “research purposes.” This legal loophole gave rise to the CBD industry in the United States. The industry as we know it today is largely built on this random patchwork of businesses that operated without regulation. While hemp was officially legalized with the 2018 Farm Bill, we are still waiting on official guidance from FDA for a national CBD industry.

The confusing history of legal hemp in the United States further speaks to the necessity of understanding the hemp supply chain.

Hemp must be grown and processed in compliance with both state laws. This means meeting requirements for THC levels and product purity. Yet, this process gets easily confused in different state markets. To illustrate, it is legal to sell full-spectrum CBD extracts in Colorado – as long as they contain less than 0.3% THC. However, full-spectrum CBD extracts are illegal in Idaho because they contain trace amounts of THC.

Thankfully, production standards are rising as hemp continues to gain momentum in the mainstream. A common practice among state regulators is to visit hemp farms and test for THC potency. In other regions, flowers and plant materials are tested for impurities such as mold and pesticides.

While GMPs are on the rise across the hemp industry, there is still a good deal of shady operators in the industry today. The internet is awash with stories of people purchasing fake, or even poisonous, CBD products. Therefore, it is always a good idea to carefully research where your hemp products come from.

 

Hemp Supply Chain Inputs

Inputs represent the beginning of the supply chain. Concerning hemp, inputs are associated with farm work, including the labor, materials, info, and time needed to grow crops. In essence, hemp supply chain inputs bring crops from the seed phase (or plant start) to harvest. This phase of the supply chain also includes the technology and equipment required to grow hemp on a commercial scale.

Hemp supply chain inputs include:

Importantly, the quality standards of hemp begin at the hemp farm. The sort of care and attention farmers give their crops will be reflected in the overall quality of a finished product. This notion rings true for CBD products as well as materials made from industrial hemp.

Understanding the Hemp Supply Chain

The rest of the hemp supply chain process includes the steps required to take a hemp product to market. After raw plant material leaves a hemp farm, it often exchanges hands many times before finally being processed and sold.

Primary businesses in the hemp supply chain include:

  • Transportation businesses
  • 3rd party testing labs
  • Storage companies
  • Extraction labs
  • Edibles manufacturers
  • Vape companies
  • Textiles producers
  • Paper manufacturers
  • Sales teams

While many hemp businesses operate within a single step of the supply chain, this is not always the case. This notion leads us to the topic of vertical integration.

Vertically integrated hemp businesses handle their own products from the time seeds are planted in the ground until the products are finally sold. For example, a vertically integrated CBD edibles company would grow their own hemp, extract cannabinoids, infuse edibles, package goods, and finally sell the product. Even more, they would have a marketing team to develop their brand and salespeople to get their product to market.

The hemp supply chain is generally not vertically integrated. Coupled with a lack of centralized quality control from the USDA or FDA, the number of different parties involved in the hemp supply chain can cause big problems for the consumer. Namely, because all it takes is one weak link in the chain and the consumer gets a poor product.

Seed-to-Sale Control Over Hemp Products

The hemp supply chain is a highly complex orchestration that involves many moving parts. The fact that the hemp industry is brand new and loosely regulated by individual states leaves room for poor business practices — even deceitful behavior. To circumvent many of the systemic issues with the hemp supply chain, forward-looking hemp companies are turning to vertical integration.

By controlling their products entirely from “seed to shelf,” hemp companies ensure that their customers get the best quality possible. Even more, this practice allows hemp companies to self-regulate quality control more efficiently without full guidance from the FDA and USDA.

Summary

Whether you are interested in CBD flowers or materials made from industrial hemp, the modern hemp industry is extremely intricate. In the end, going with a trusted, vertically integrated hemp brand is the best way to ensure you get your hands on high-quality products.

At High Grade Hemp Seed, we are diligent about working with hemp farmers who share our vision for quality and sustainability in the industry. We are proud to say that we sell hemp seeds to several vertically integrated hemp businesses and we are part of a growing hemp eco-system with Santa Fe Farms.

/by

How to Sell Hemp Biomass: Hemp Selling Tips for Farmers

, ,

Whether you are growing hemp flowers for cannabinoids, or industrial hemp for stalks, being able to sell your harvest is critical for success. In both the CBD hemp and industrial hemp verticals, selling your hemp as biomass is a great way to turn a profit early in the hemp supply chain. By selling in bulk, you can avoid many of the expenses and headaches that come with vertical integration or product development.

When it comes to selling your crop, you’ve got a range of options, from working with a hemp broker, to selling directly to wholesale hemp buyers, or even taking your crop to a tradeshow. Let’s look at the most common ways to sell hemp, and the steps you should take to ensure that you get the best price possible.

What is Hemp Biomass?

Because hemp is such a diverse plant, people have created a number of terms to describe its many applications. The primary differentiating factor for hemp is hemp grown for CBD and industrial hemp. Importantly, CBD hemp is grown for its cannabinoid and terpene rich flowers. Conversely, industrial hemp is cultivated for the strong fibers found within the plants’ stalks. Within these two key categories are other subcategories used to describe different hemp biomass uses.

“Hemp biomass” is a term used to describe hemp plant material at the time of harvest. Within the primary categories of CBD hemp and industrial hemp, the term hemp biomass has multiple meanings.

In commercial CBD hemp production, farmers use the term biomass to describe all the plant material that is harvested and sold. Generally speaking, CBD biomass is grown and sold to be used in CBD extracts. As such, it contains a good deal of stems and fan leaves – as opposed to just flowers.

With industrial hemp cultivation, biomass also refers to all the plant material that is processed and sold. However, industrial hemp biomass refers to the material found in the hemp stalk, such as bast and hurd. Industrial hemp is sold in bulk biomass, where manufacturers then turn different parts of the plant into textiles and other materials.

With both CBD hemp and industrial hemp, the weight of your biomass is used to determine the size of your harvest. When you sell either type of biomass, you will bargain the deal based on the average cost of biomass per in your chosen hemp vertical. CBD biomass is sold by the pound, while industrial hemp biomass is often sold by the ton.

Selling CBD Hemp Biomass vs Industrial Hemp Biomass

There are many differences between selling CBD hemp biomass and industrial hemp biomass.

The customers you will be dealing with in the hemp CBD vertical work within the health and wellness industry. As such, you can expect your prospective clients to be interested in such things as cannabinoid levels, product purity, testing results, and terpene profiles. In essence, these customers are concerned about purchasing hemp that can safely be manufactured into consumable products.

Clients in the industrial hemp vertical have much different business focuses than those in the CBD hemp space. Industrial hemp buyers are looking for specific data related to fiber strength, bast percentage, and retting practices. Even more, they will likely be looking for biomass to be manufactured into a specific product, such as hemp fabric.

Determine the Price of Your Hemp Biomass

You would never sell your truck or a piece of expensive farm equipment without having at least a ballpark idea of how much it was worth, right? The same goes for your hemp crop. Before you start looking for hemp buyers, you need to understand how much your hemp is worth so that you can negotiate the best price for it.

Many factors will affect the value of your biomass, but the major factor is the amount of CBD or CBG your biomass contains. If you grow low-quality hemp plants with, say, less than 10% CBD, then you won’t be able to ask for a high price per pound. On the other hand, biomass with a high percentage of CBD or CBG will be able to garner top dollar.

For industrial hemp, factors that influence the value of biomass include the percentage of bast versus hurd. Hemp bast is the prized, stringlike fiber found on the interior of the stalk. Bast is used to make many of the materials that drive the industrial hemp market, including paper, wood, and clothing. Hurd is the material on the exterior of the hemp stalk that resembles wood chips after it is processed. It is less valuable than bast and is often used to make things like animal bedding and hempcrete.

 

Pre-Selling Your Hemp Harvest

For many hemp farmers, it’s a good idea to try and pre-sell your hemp harvest before your crop is mature. In fact, it is in your best interest to have a secure contract in place before you ever put seed in the ground. Searching for biomass purchasers early will give you time to do your research on potential buyers, negotiate a fair price, and review the contract before signing. Alternatively, if you wait until your hemp is harvested, you’ll have a short window to unload your crop. You’ll also be competing with other farmers who weren’t able to pre-sell their crop. Biomass buyers will have the upper hand in negotiations.

At the same time, if you decide to pre-sell your crop, make sure you review the contract carefully. Your crop may have to meet certain CBD or CBG percentage standards to qualify for your agreed-upon price. If you are growing industrial hemp, buyers of hemp biomass will expect a certain quality of fibers. You’ll want to understand what happens if you aren’t able to meet the terms of the contract. Will you get a lower price, or will the buyer be able to walk away?

Hire a Hemp Broker

Perhaps the easiest answer to the question of where to sell hemp is to use a hemp broker. A good hemp broker is someone who is highly knowledgeable of the hemp industry, has many contacts in the field, and is a great communicator. A licensed hemp broker will essentially connect you to a buyer and facilitate the sale of your crop. Generally, you can find both CBD hemp brokers and industrial hemp brokers.

In a best-case scenario, a hemp broker will find a buyer for your crop and negotiate a great rate for your hemp. In exchange, the broker will take a commission on the sale, typically around 10% of the sale, though rates can go much higher.

For some farmers, especially first-time hemp farmers without many contacts in the field, a hemp broker can be an excellent option, alleviating the need for a farmer to find and negotiate with a buyer on their own. The broker may also get a higher purchase price than a farmer could achieve on their own, helping to cover their fee.

However, working with a hemp broker might not always be your best option. For example, a hemp broker’s commission can take a notable chunk out of your earnings, especially if your profit margins are thin. Next, for every great hemp broker, there are many less experienced and less scrupulous individuals hawking their services. So before signing on with a hemp broker, be sure to thoroughly vet them.

Sell Directly to a Customer

Farmers who have a lot of contacts in the hemp field and want to earn more by cutting out the middleman may prefer to sell their hemp biomass directly to a customer, typically a processor or extractor. This will require more legwork and a willingness to spend time negotiating on your own behalf. It may also be a good idea to retain an attorney to review any contract you and your buyer draw up together.

Selling directly to a customer can help you maximize your profit, but it will also require more effort on your part. Certain hemp biomass buyers, especially wholesale hemp buyers, may be hesitant to work with a new and unproven farmer or a farmer without an adequate amount of biomass to sell. If you have a knack for sales, it might also be worth visiting hemp trade shows to expand your network of potential buyers.

Sign a Profit-Sharing Agreement

Farmers planting hemp for the first time may struggle with all the costs associated with switching to a new crop. High-quality hemp seeds aren’t cheap, and farmers may have to invest in new equipment, a new irrigation system, and more.

One way to mitigate all the startup costs of planting hemp is to sign a profit-sharing agreement with a biomass purchaser. With this agreement, the buyer covers the upfront costs of growing and harvesting the hemp. Those costs are then recouped through the profit of the crop, and the farmer and purchaser share the additional profits. A profit-sharing agreement may also appeal to farmers who want to quickly grow their hemp operation but don’t have the capital to expand at the pace they want.

It may take some work to find a buyer willing to put up the money for your hemp operation, but if you need fast capital, this could be the right option for you.

Hemp Futures Contracts

Farming always carries some degree of risk. One way farmers seek to mitigate that risk is to sign a futures contract with buyers. This contract is typically signed before a hemp crop is planted and specifies the price per pound the buyer agrees to pay for the crop. Usually, the price offered in a futures contract is less than what the farmer could get on the open market, but it offers the farmer both stability and predictability. Also, crop prices can fluctuate. If there is a glut in the market and crop prices fall, the futures contract can protect the farmer from a volatile market.

Just make sure you review the futures contract carefully and work with a company with a proven history in paying for their contracts.

Other Places to Find Hemp Buyers

These days, farmers may need to get creative when it comes to finding the right buyer for their hemp biomass. A younger generation of farmers are setting up social media accounts on Facebook, Instagram, and LinkedIn where they can connect with buyers and hemp brokers and begin building a valuable network within the industry. Other farmers are experimenting with selling their hemp biomass through online marketplaces.

Do Your Homework on Your Buyer

No matter where you find your hemp buyer, make sure to research them, review your contract carefully, and get your money before you put your biomass on a truck and send it off. The biomass market is still new and, like any new market, there are people trying to take advantage of the unwary. This notion applies to both CBD hemp and industrial hemp.

The hemp market is still maturing, but that doesn’t mean that there are not secure and reputable companies supporting the hemp supply chain. Let us help you navigate that path and don’t forget that a profitable hemp crop starts with high-quality seeds. Contact us today to learn more about our different hemp seed strains.

/by