The Factors That Determine CBD Product Pricing
The 2018 Farm Bill made industrial hemp, and thus hemp-derived CBD, legal to produce in all 50 states. Now CBD oil is growing to be big business. Cannabidiol (CBD) oil is all the rage these days, with products now being sold online, in big-box retailers, and health stores throughout the U.S. But has that helped prices and how much does CBD oil cost?
A key issue curious shoppers new to CBD are experiencing is that the costs might be causing them to ask themselves what factors go into determining prices. A 1 ounce, or 30 milliliters, a bottle of CBD oil could cost anywhere in the range of around $30 to over $200, leaving many wondering if they are getting the best value. So what factors go into determining CBD pricing and, perhaps most importantly, how much does CBD oil really cost?
This answer is kind of complicated. CBD can be expensive to produce without the lacking of added costs with multiple formulas available. Another factor involved is the potency of a bottle. Potency can greatly affect the price, even if it equals the size of a cheaper bottle, with less CBD overall. Here’s an insiders outlook on what to consider when purchasing
CBD and how much you should expect to spend.
Insider Opinion
How Much Does CBD Oil Cost the Consumer?
According to Bill Ferrall, a CBD product manufacturer at BenefiCBD, CBD as a bulk commodity ranges from $3 to $15 per gram, or a fraction of a cent to 1.5 cents per milligram. This could mean that a 1,000-milligram bottle of CBD tincture could contain $3 to $25 worth of CBD, but that wouldn’t account for production costs, materials, or labor.
Although there are companies performing all production work in-house, many CBD companies choose to “white label,” which is when a larger manufacturer makes their products for them. The CBD companies then must market and ship their products.
Ferrall informs of new product line costs being around $25,000 to launch, plus a per-unit cost between $2.50 and $12.50.
‘’Due to broad range, it’s hard to make a general statement about what is a ‘reasonable’ price to pay for a CBD product,” Ferrall said. “That said, when examining a cost analysis from a production perspective, you look at labor, materials, packaging, labels, potency/purity testing, marketing, and shipping/distribution.
“In most other industries, the labor, materials, and profit are often divided into three equal portions. Given the exposure to this industry with regard to legal, regulatory, and testing standards, it stands to reason that the profit margin must be higher to accommodate potential risk. The markup may be closer to 400% rather than the 40% seen in many other packaged goods.”
Significant markups may also occur on the retail side. This is because cannabis dispensaries are not allowed write-offs on their business expenses per Section 280E of the Internal Revenue Code.
How to determine if you’re receiving a fair deal and the best CBD?
Bill Ferrall provides that when he’s trying to decide if a CBD product is a good deal, he first checks the source material. Is it grown organically or domestically? He also seeks out readily available certificates of analysis (COA).
A COA must be issued by a licensed laboratory that tests for potency and safety.
Ferrall also said that those products will probably cost at least $50 to $60 per 1,000-milligram bottle, which comes out to 5 cents per milligram or more. However, for most brands Weedmaps News looked at, 5 cents appeared as low end, with the majority costing between 10 to 15 cents per milligram of CBD rarely exceeding 20 cents per milligram.
In Summary
The cost of a CBD product is determined by the initial cost of 1mg CBD.
In addition to the quantity of Cannabidiol, several other key aspects define a quality product. Among those qualities are:
Spectrum, Source of the hemp, Extraction method, Presence of THC, Carrier Oil, Additional elements (like Terpenes, vitamins, etc.)
the product contains Certifications, Packaging materials, and quality. Despite all the characteristics listed, none play an essential role in deciding price without the key fundamental element: the amount of CBD within the product and its cost per 1mg CBD.
Thanks for reading our take on consumer pricing. We hope this will help you with the decision making for your next CBD product purchase.
If you have any additional questions or want to learn more be sure and contact us!
