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  • Sarah Beatty, APR

CBD Business Challenges Can Try Your Soul and Your Bottom Line

IS SELLING ACROSS STATE LINES WORTH THE GAMBLE?


Despite recent actions taken by the Food and Drug Administration (FDA) signaling the agency is on the lookout for companies pushing the legal limits, the allure of selling to customers across state lines is clearly a gamble many are willing to take.

Not all eCommerce CBD companies are selling through their own websites, some are using third-party platforms to reach buyers. A recent Washington Post investigation found that Amazon, which currently prohibits the sale of CBD products, is failing to keep sellers from working around the ban. A simple search for “CBD oil” on Amazon turns up thousands of results with many products described as containing “hemp oil,” which may or may not contain CBD.



CONSUMER TRUST IS EVERYTHING

In these pre-regulation times for nationally legal CBD sales, a let-the-buyer-beware climate has developed and is threatening to scare off doubtful and disappointed customers. Tests have shown that some producers are pushing products that do not contain the ingredients listed on their packaging, and others are making claims for health and cosmetic benefits that have not been scientifically proven. Unreliable CBD products can taint the entire industry and erode trust that will be difficult to regain.

Until the FDA issues clear rules for the sale of products containing CBD, customers are taking their chances with each brand they try. The challenge of competing with bad actors who are in it for a quick buck is that those competitors will not be deterred by a desire to be truthful or to cultivate repeat customers and long-term loyalty. In other words, unethical opportunists will not play fair with their competitive tactics, and honest CBD companies may be judged with the same skepticism that results from false marketing. Building a loyal customer base is good business and worth taking the time to build long-term trust.



DIFFERING STATE LAWS, AND FEDERAL LEGAL CHALLENGES

It is likely that most consumers do not fully understand the laws concerning CBD products, which differ from state to state. Federally, there have yet to be clear regulations issued defining what producers are allowed to say and do. Consumers may be further confused by the availability of CBD products on prominent display in mainstream national retail outlets such as CVS Pharmacy.

Until federal regulations are issued and squared with the rules enforced in each state, sellers will be vulnerable to legal challenges which could include asset forfeiture and criminal charges, along with damaged reputations. The FDA looked at everything from claims of pain relief,f to testimonials, to "research", to published news story links and social media comments. Have you reviewed your website and social media to make sure you aren’t the next company to receive a letter from the FDA?



BANKING AND BUSINESS LOAN CHALLENGES

Many financiers and mainstream investors are still leery about getting involved with a new industry associated with cannabis, because of the consequences that involvement could bring upon themselves. Many banks will not allow CBD companies to open business accounts, and those that facilitate payment systems for online businesses have made it difficult to meet requirements, forcing some CBD businesses to pay overrated transaction fees.

Last fall the U.S. House of Representatives passed the Secure And Fair Enforcement (SAFE) Banking Act to protect financial institutions working with cannabis businesses from prosecution. The Senate has yet to take up the House bill, and it is unclear whether the President would sign such a bill into law. Unless SAFE becomes federal law, most banks and investors are likely to continue holding off on treating the CBD industry as it does other legitimate businesses.

Despite these challenges, there are steps a CBD business can take to safely include an eCommerce element in the model. M&C Communications would be delighted to discuss a strategy that includes professional PR tactics to strengthen your brand image.