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How to Start an Edibles Business

The entire edible market recorded a 54% growth in 2020. This is attributed to the growing popularity of cannabis edibles as an alternative to the traditional smoking of blunts or joints. Edibles are cannabis-infused foods and drinks. Industry experts project that the edibles industry will be worth $11.5 billion in the next four years. With […]

How to Start an Edibles Business

The entire edible market recorded a 54% growth in 2020. This is attributed to the growing popularity of cannabis edibles as an alternative to the traditional smoking of blunts or joints. Edibles are cannabis-infused foods and drinks.

Industry experts project that the edibles industry will be worth $11.5 billion in the next four years. With such impressive numbers, many entrepreneurs are already joining the bandwagon and setting up edible companies of their own.

However, starting an edibles business requires a lot more than just acquiring a business license and opening up an edible shop in your desired location. Before diving in, you must perform your due diligence on the existing and projected regulatory climate.

While there are many recognized brands of edibles today, the sector is still in its formative years. This means that there’s still enough space for entrepreneurs who are ready to invest in the industry. In this guide, we explain what is required when you want to make forays in the edible industry.

Choose Your Location Wisely

As with any other business, location is important for your edible business. Think about where you want to set up shop, and learn about the regulations pertaining to that specific municipality.

Rules and regulations differ from one municipality to another. The majority require an application fee of about $5,000, which is non-refundable and can differ widely from one state to another. So you have to check out municipality laws before making an investment decision. Also, you’ll spend a significant amount of time at city hall meetings and planning commissions.

Remember to also keep zoning laws in mind. They stipulate the minimal distance between your edible shop and places like schools. Hastily picking a location and setting up shop without taking into account school locations may lead to a chunk of wasted resources, fines, and even a jail sentence.

The ideal location also allows easy access for your staff and can accommodate all the tools you need in the kitchen. These features allow your staff to work effectively and boost productivity.

What Type of License Do You Need?

Next, think about the type of license required for your edible business. Any cannabis business intending to put up shop in Florida, for example, needs only one type of license. It’s called the medical marijuana treatment centers (MMTC) license. This license is issued by the Florida Department of Health.

If you intend to produce and sell marijuana edibles, you will need to apply for a permit called the medical marijuana treatment center edibles food license. With this permit, you will be certified to operate as a food establishment in Florida. Florida Department of Agriculture and Consumer Services (FDACS) is responsible for issuing food permits to MMTCs to make and sell edibles.

You will have to provide a list of the edibles you intend to produce at your food establishment. A field inspector then conducts an onsite inspection of your premises before your food permit application is approved.

What Type of License Do You Need

Preventing Control Plan

According to cannabis regulations, any edible business must prepare, retain, and implement a well-drafted Preventive Control Plan (PCP). This plan explains in detail how a business handles cannabis or any ingredient that it uses in the manufacture of edibles.

This written document reveals how you identify, prevent, eliminate, or reduce to an acceptable level any physical, chemical, or biological risks to your edible. The particulars of your PCP depend on what you do in your edible business. It may highlight aspects relating to packaging, grading, labeling, food safety, and identity standards.

A preventive control plan calls for proficiency in quality assurance. As such, your PCP must be appraised and approved by your Quality Assurance Person (QAP). This is the person responsible for overseeing the production processes involving your cannabis product. They also ensure that product safety standards are met.

Plan Your Expenditure

Wondering how much you need to open an edible business?

  • Minimum startup expenses: $6,779
  • Maximum startup expenses: $66,832

On average, the startup expenses are about $36,880.

As you can see, opening an edible shop is not cheap. But it’s less costly than setting up a cannabis dispensary. The cost of setting up a marijuana business begins at $250,000 on average. That’s even before you account for the baking expenditure for your variety of edibles.

Here’s an exhaustive list of the startup costs of an edibles business:

  • Equipment & supply expenses.
  • Rental fees
  • Business formation fees
  • Software expenses
  • Utility costs for office space
  • Employee expenses
  • Inventory expenses
  • Vehicle expenses
  • Website expenses
  • Advertising and marketing costs

With such high overhead expenses, you might think about getting a business loan. Well, not so fast. Most banks are skeptical about lending money to cannabis businesses because of the risks involved.

However, there are investors looking to join the game. So you might be better off convincing an investor to come on board than asking for a loan from the bank.

Also, there are accelerators out there who provide new startups with office space, mentors, legal assistance, and start-up knowledge. You can get all that in exchange for an agreed amount of equity. Your best option is to work with existing startups in accelerators and learn more about how to get in.

Where to Source Your Cannabis

Where to Source Your Cannabis

Do you intend to buy cannabis from a licensed grower or supplier? Or are you planning to grow your own weed for your edible products? If you opt for the former, you’ll need to locate a wholesaler.

Your best bet in locating a dependable marijuana supplier is to attend cannabis-specific events and workshops. Here, you’ll meet many growers and manufacturers. Make sure you pick someone reputable who guarantees AAAA+ flower; this is the highest grade of cannabis flower available. Some edible shops use whatever they come across: flower, trim, shake, and so on. You can as well inquire about these and make bulk orders.

On the other hand, if you choose to grow your own weed, you’ll need to apply for a separate farming license. Of course, this translates to more regulations and increased costs. If the costs of setting up a grow room or extraction operations in your locality are costly, then your best option is to buy from other wholesalers. Just make sure you do your research well to get a good deal and avoid getting ripped off.

Setting Up a Kitchen

You need a commercial kitchen to keep up with the demand for edibles that you’ll be selling. And based on whether you wish to create chocolates, butter, drinks, or a variety of other types, you need to stock up with adequate ingredients. Other considerations include the expiry date of most of your products and whether they need refrigeration or not.

Setting up kitchen infrastructure is not cheap. The alternative is to enter into partnership with co-packing companies that already have their infrastructure in place. They can produce edibles on your behalf and package them using your brand name.

Distribution Channels

As a startup brand, you need to put your product out there to attract potential customers. Your best bet, in this case, is to visit established dispensaries and convince them to stock your edibles. This allows you to obtain some preliminary customer feedback and determine whether your product can attract demand.

Once you’ve established that there’s product demand and you’ve set up your production, the next step is to solve the distribution puzzle. This involves getting your product out there close to the consumers for quick and easy purchasing.

When picking out your distribution channels, consider the following factors:

  • Choose the type of cannabis dispensaries and drug stores to stock your edibles. Different dispensaries and delivery groups have varying customer bases. That’s why you need to classify your brand positioning and identify your target customers.
  • Locate distributors who can increase your product reach. To find the right distributor, think about the following aspects:
  • The amount of product supply they require from you
  • Their storage methods
  • Their shipping methods
  • How they represent your brand product
  • Their established supply areas and where they don’t reach
  • Other product brands currently on their shelves
  • Their required cut or percentage

Once you’ve entered into a partnership with some distributors, you need to ensure that your edibles are supplied consistently. You also have to make sure the distributor is presenting your products to potential consumers in the right way.

As such, you’ll need to walk around and visit dispensaries that have your product on the shelves. The idea is to experience what a consumer sees when they look at your product.

Distribution Channels

Packaging Requirements

Entrepreneurs are not bogged down only by cannabis licensing requirements. There are more bottlenecks to navigate. These include compliance with standards for packaging for edibles. As with everything else, the regulations vary by state.

Here is what you need to know:

  • Factor in childproof packaging
  • Products should not be packaged or labeled in a way that confuses a customer to think it’s a trademarked baked brownie or cookie.
  • You cannot add cannabis to trademarked products with the intention of selling

Products should be packed in opaque packaging, and the following details should be clearly seen on all your product packaging:

  • Product name
  • Retail location
  • Use-by dates
  • Safety warning labels
  • All ingredients
  • Potential allergens
  • Available nutritional facts
  • Types of cannabinoids and total weight in ounces or grams
  • Recommended dosage details
  • Product Identification Number
  • Name and address of the processing facility
  • License and batch number of the processing facility

Advertising

As with any other business, marketing is integral for your edibles business. However, cannabis marketing on digital and print media is beleaguered by strict advertising restrictions. That’s why you need to adopt more creative marketing tactics.

Keep in mind that you cannot market health claims when it comes to your edibles. If you want to make more sales and increase the awareness of your edibles, here are some creative marketing techniques to adopt:

  • Work with cannabis-friendly ad networks: If you’re having a hard time marketing your edibles via social media channels, consider trying out marijuana ad networks. These are industry-specific weed advertising platforms that promote ads on medical or recreational products on different 420 websites. Notable examples include Mantis Ads, ALT AND, Traffic Roots, and RevOffers.
  • Set up a website & online store: Statistics in the American Journal of Preventive Medicine revealed that internet searches for cannabis have increased by a whopping 98% starting from 2005 to 2017. This means millions of Americans are searching for cannabis products online.
  • Guest Posting: Writing guest posts is one of the best edible advertising tactics to obtain instant exposure in front of your target audience. Look for renowned niche websites and magazines where you can write on informative topics linked to cannabis products.

This will help strengthen your search rankings, backlink profile, and internet traffic and, ultimately, boost your ROI. Remember to always back up your claims about cannabis benefits with statistics and research studies. Websites that accept well-researched blog posts on anything marijuana-related include High Times, Marijuana Marketing Xperts, and Marijuana Mommy.

  •  Instagram & Pinterest marketing: The trick is to plan your visual content in a creative manner. Create and upload eye-catching photos, gifographics, infographics, and videos with relevant hashtags. Think about posting photos of cannabis-themed apparel, cups, and backpacks. These will help you direct more traffic to your online store. Remember, you can’t directly sell edibles or any other cannabis product on Pinterest or Instagram.

Edible Advertising

Software

Your edible business needs integrated software to automate all the critical business aspects like:

  • Inventory Management
  • Task Management
  • Customer Service Management
  • Accounting & Payroll
  • Order Management

The Bottom Line

Setting up an edible business is easier said than done. This is because there are plenty of licensing regulations to abide by in order to achieve compliance. Plus, traditional marketing tactics don’t apply here.

However, if you’re armed with the right information and a wonderful recipe, and you can bring awareness to your edibles among your target customers, you will achieve a higher ROI in no time.