The cannabis industry has surpassed the predicted revenue threshold thanks to the fast-growing edibles sector. The reason: the reason is pretty simple. You see, not all people inhale or vape cannabis. To experience the benefit of this “loyal herb”, the only option is to consume it in the form of edibles such as chocolates, candies, baked goods and gummies among a plethora of other cannabis-infused products.
With so many state regulations to adhere to, it sometimes becomes confusing to sort things through. Due to this reason, this article will give you everything you need to know about selling cannabis edibles.
- Is it illegal to sell edibles?
- Do you need a license?
- Why are edibles so profitable?
- How much do edibles cost?
- How much can you make selling edibles?
- How to price edibles
- How to start selling edibles in public
- How to sell edibles to dispensaries
- Selling edibles online
- Tips for selling edibles
Is it illegal to sell edibles?
The answer to this question hugely depends on the state where you’re operating from. Most states that legalize cannabis for medicinal and recreational use also legalize cannabis edibles. However, since cannabis edibles are considered to be in their own league, regulations regarding edibles hugely vary from state to state.
For instance, states such as Alabama, Idaho, Indiana Iowa, Kentucky, Minnesota, Missouri, and Nebraska among others have failed to legalize edibles for medicinal use while other states such as Washington, Alaska, Arizona, Arkansas, Colorado and California among others have legalized edibles but under very tight and strict regulations.
For instance in Colorado, edibles with fruit and animal shapes are disallowed as they attract kids to consume them. Some states allow edibles for all adults from the age of 21, while in other states, edibles are only allowed for medicinal use to patients suffering from intractable epilepsy and severe seizure disorders.
Finally, states such as Colorado and California restrict dispensaries to sell edibles with a minimum mg per serving of THC set at 10mg to a maximum of up to 100mg. the THC labeling must be printed with a large bold font for easy visibility.
Do you need a license?
The cannabis edibles sector has lots of opportunities for new investors looking to get into action. However, before setting up an edibles business, it’s imperative that you do your due diligence and research the current licensing and regulatory climate.
Now, to simplify the complex laws that revolve around cannabis edibles business, let me mention that there are two major licenses required for selling edibles—one from the state and one from your city or county (for those living in an unincorporated area).
Why are edibles so profitable?
As the cannabis industry gains momentum, most stoners and patients have turned their attention to edibles as their mode of consumption. In the past, the concept of making edibles was perceived as a stoner’s novelty as they were produced illegally in home kitchens. Today, the edibles sector has grown into a burgeoning industry with lots of delicious treats to choose from.
Now, with such a notable elevation, cannabis edibles investors are continually asking this question—why are edibles so profitable? Please sit back to learn why. First, according to government data, a gram of dried marijuana flower (in its most basic form) was selling at $7.50 as of 2017. However, as the market matures, it’s likely that customers will have more options to choose from thus increasing competition and suppressing the price.
When it comes to processing, raw flower is fed into high-pressure machines which only process the active ingredients from the flower. Depending on the marijuana strain, the amount of THC greatly varies from 5-25% after processing. To our estimation, it’s likely raw marijuana flower has about 15% THC before processing something which will translate to about 70% THC yield after processing.
When it comes to the sales, a gram of high-quality oil will sell at about $12; a price much better as compared to selling a gram of the raw cannabis flower. The cost of processing a gram of dried marijuana flower is about $0.05. If you do the math, you’ll realize that the low production cost will lead to gross margins of about 84% as compared to 76% for marijuana flower.
Finally, speaking of selling cannabis edibles to consumers, this is where the big money lies. As you all know, edibles can take the form of cookies, gummies, chocolates and lollipops. Prices per dry gram of edibles range from $20 to $50 with $36 being the average price. If you put the cost of growing, processing, and manufacturing in the context, you’ll discover that the price of edibles generates attractive margins of up to 92%.
How much do edibles cost?
First, edibles come in many different forms thus causing the prices to fluctuate dramatically. However, depending on the level of THC and the ingredients used in making these edibles, the price can range from as low as $5 to as high as $100.
How much can you make selling edibles?
Imagine you buy an ounce of weed with 20% THC at $200. In case 1oz = 28g × 0.2 THC, then you’ll have 5,600 mg of THC. If every serving contains maximum allowed 10 mg of THC, you can make 560 edibles. Suppose you sell each cookie or brownie at roughly $5; this means you’ll make a total sale of $2800 and $2600 (2800-200) in profits excluding any other ingredients and external expenditures.
How to price edibles
As competition heats up in the marijuana edibles sector, one thing is certain—your business needs to be profitable and competitive at the same time. To understand how exactly you’re supposed to price edibles, simply calculate the cost of ingredients for a single batch of products and divide it by the number of products in that batch.
In case you’re operating an edibles company, you need to factor in the cost of labor, taxes, freight costs, discounts and lost/damaged products to ensure that you don’t under price your edibles.
How to start selling edibles in public
After legalizing cannabis edibles for medicinal and recreational use, Colorado experienced a lot of issues in their first year which forced the state to issue strict and tighter rules. Some of these issues included selling edibles with inconsistent THC servings and accidental consumption by children.
With that said, if you’re an investor looking to sell edibles to the public, the first thing you’ll need is a Type 6 Manufacturer license (in case of a company) from the state and the local government. From there, you need to find a proper commercial kitchen, think of security, learn about the best edibles in the market, build a brand, grow your own cannabis and finally, think of the finances.
Just to touch on finances, you need to think of loans and insurance. Since cannabis business is federally illegal in most areas, securing loans from banks might be quite difficult. Secondly, getting an insurance cover from insurance brokers, agents, policyholders or instance companies can be very expensive as they can’t afford to insure a business that’s federally illegal. Due to these reasons, the best way through is to have enough money to avoid debts.
How to sell edibles to dispensaries
- After you’ve identified the type of edibles you’re willing to sell, it’s time to identify a perfect dispensary that will sell your edibles. Remember cannabis dispensaries are different and each has its own customer base depending on what they offer (in terms of price, discounts and quality).
- Next, visit your local dispensary to convince them to sell your edibles to get some feedback from consumers. This approach will help you learn what to do and what not to do to your products.
- Once you’ve set your feet on the road and established some dispensary sales, the next step is to ensure that your edibles are delivered consistently and presented to consumers in the right manner. To enhance this, you’ll need to do some legwork and go into dispensaries that have your products stocked just to see how the end result look like to the final consumer.
Selling edibles online
Selling edibles online is not as easy as it sounds. In most states such as California, edibles are strictly sold within the states where they’re produced. In fact, dispensaries and edible companies usually don’t ship or advertise their products outside their jurisdiction. So, if you see a company advertising their products to you from a different state, simply know that they’re doing it 100% illegally and this could land you into hot soup if the law was to find out.
In states such as Colorado, shipping anything with over 0.3% THC across border lines is considered as shipping illegal substances. Unless you know someone who can ship you edibles (across border states which is, by the way, illegal), anything else with over 0.3% THC is only sold from licensed dispensaries within your state. Remember cannabis is a schedule I drug and is illegal according to federal laws so you need to be very careful.
However, these rules can change only when you’re dealing with CBD edibles derived from hemp. Such edibles are legal to ship across Border States.
Tips for selling edibles
- Consistent marketing: your edibles business is not just about the logo but instead it’s about how you present your product to the masses. The best way to do this is by consistently marketing your cannabis edibles across all platforms to reach out to all cannabis connoisseurs. You can do this through social media, physical marketing, labeling, packaging and through your website.
- Present something new to the table: other than bring in the usual stoner clichés, try putting in a spin to your edibles. Try to be innovative by using unique recipes with unusual ingredients to distance your edibles from the traditional illegal homemade pot brownies.
- Have a clear vision of your customers: to be successful in this sector, you need to learn about your target customers inside and out. In most cases, when you know your customers, then you know your audience and when you know your audience, you know what exactly what they need.
- Send samples: of course, you must send samples if you really wish to stand out. Especially for new businesses, you need to send samples to your local dispensary and inform the budtenders about your products.
- Presentation is key: here, you need to work with professionals in the edibles sector. Remember your edibles should be presentable on first sight so you need to work with professionals who are able to make delicious edibles without any fractures. Also, the edibles should be branded professionally with the appropriate logos in accordance with your state laws (avoid cartoon or animal logos).