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Why is CBD oil so expensive?

Why is CBD oil so expensive?

We receive a substantial amount of CBD-related questions every day, but the one that appears to perplex those interested in purchasing and using CBD oil the most is 'Why is CBD oil so expensive?'. Usually, a quick trip to Google will provide a straightforwardly digestible answer to most queries, but in the case of CBD oil there seems to be a shortage of easy-to-understand answers; and it is for this reason that we've written this article.

You’ll find out about the costs involved in growing, extracting, testing, marketing and distributing CBD and how these affect the quality of the different CBD oil brands.

An introduction to the cost of CBD oil

With such a variety of products, suppliers, and, of course, terminology, the world of CBD, hemp and cannabis can leave even the most knowledgeable of folks scratching their heads. One area which certainly bemuses most people is the price of CBD. 

For example, if you were to head over to Google and search for a phrase related to purchasing CBD oil, you'd be presented with a plethora of products – the prices for which would vary wildly. Naturally, this will lead to one question popping up in your mind:

Is a higher price an indicator of higher quality?

In short, the answer to this question is: yes. Of course, there will always be exceptions to this, and no-one can ever guarantee 100% that a product with a high price is of greater quality than a lower-priced product, but, in most instances, this tends to be correct.

The key to understanding why CBD products are so expensive is to get your head around the costs involved in manufacturing, marketing and selling CBD.

What are the costs of growing hemp?

There is far more to growing hemp then merely throwing a few seeds in the ground, watering them frequently and simply watching them grow. Unfortunately, it takes quite a bit more than that to ensure both the quality and quantity of a hemp crop.

Instead of looking at the growing costs per se (as they will vary from country to country, state to state etc.), it is more prudent to ask (and answer) the following question:

What drives the cost of hemp up?

To answer this both comprehensively and succinctly, we will split this into two sections.

Firstly, we will look at the barriers to entry (and growth) of hemp growing, and then we will follow that up by discussing the costs of raw materials.

Hemp Growing: Barriers to entry and growth

As with the growth of any crop, there are fundamental aspects to growing hemp. These include, but are not limited to land, hemp seeds, fertiliser and, of course, a license to grow. In addition to this, there are several factors that will enhance yield and the quality of the crop and allow the crop to grow to its potential. These include optimal soil type and preparation, weed control, time of seeding, plant population, breeding characteristics and rotation.

As you can see, even before we examine barriers that hemp growers may face, there are numerous factors that affect the quality and quantity of hemp growth and harvesting.

So, what are these barriers? The supply chain as a whole, the requirement for specialised equipment, access to permitted seeds, competition, and legal restrictions (such as being unable to process the whole plant). 

The cost of hemp's raw materials

The hemp plant is made up of several different parts: root, seed, stem, leaves, pollen and flower. Typically, the latter (the flower) contains a far higher concentration of CBD (cannabidiol) compared to the root, the stem, the seed, and pollen.

With this being the case it makes far more sense to utilise those parts of the plant that are rich in CBD (such as the flower). However, in reality, it is not a straightforward as this. The cost of the flower compared to other parts such as the seed is far greater (sometimes up to 200 times more expensive).

Those purchasing the raw materials needed to produce CBD oil and products with a conundrum:

Do they purchase (a lower quantity of) the more expensive parts of the hemp plant that contains more CBD?

Or, do they purchase a larger quantity of the less expensive parts of the hemp plant that contains less CBD?

No matter which route they decided to take the cost of purchasing sufficient quantities of (hemp-containing) CBD will be expensive. A cost that is passed on to you, the consumer.

The manufacturing process continues...

It doesn't stop there.

There are several stages to the manufacturing process – all of which add extra cost.

Costs of CBD oil’s extraction process

The manufacturing process of CBD is far beyond that of both hemp and cannabis. CBD needs to be extracted from the hemp, which involves separating it from other cannabinoids and impurities.

There are three main types of extraction methods, all of which have their pros and cons. They are as follows: Liquid solvents, CO2 extraction and Oil extraction.

CO2 is considered the 'gold standard' of CBD extraction due to the fact that it utilises both subcritical and supercritical CO2, which is purported to be the safest, cleanest and purest way to extract oil from plant material (such as CBD from hemp). It is widely used in the food industry to remove caffeine from coffee and to carbonate soft drinks (amongst other things).

'The downsides?', you're no doubt wondering.

Well, there is one: The cost.

CO2 extraction is one of the most expensive forms of extraction. Although it may work out less expensive in the long run when compared to solvent-based extraction methods (if you purchase the equipment outright), the startup costs are very high.

Either way, any company that manufactures CBD oil products should strive to use CO2 extraction for their products where possible, which, as you've probably guessed by now, increases the end cost to you, the end user.

(Liquid solvent extraction can also be used, but extensive testing is required to ensure the end product is safe as it possibly can be).

The above leads us on the next step perfectly...

Costs for testing CBD oil

After extraction comes testing.

Some of you might be wondering why testing is needed if CO2 extraction is exceptionally safe, clean and pure.

An understandable question, sure, but testing of products such as CBD oil goes way beyond testing for the levels of Cannabidiol present in the product.

There is far more to the testing of CBD products than you'd think. Rigorous analysis involves a multitude of testing procedures. Procedures that are used to ensure that the product meets a vast set of criteria. These include:

Residual solvent analysis: If the CBD has been extracted using solvents, the final product must be tested to ensure that the highest percentage of solvents has been removed.

Contamination: Physical contamination is always a possibility where the physical handling and packaging of products has occurred. Analysis of the product for physical contamination is, therefore, a necessity.

Microbial analysis: Without microbial analysis, the product may pose a safety threat to those using it. This typically includes microorganism testing, statistical sampling, validation and sound assay design.

Potency: All CBD oil products will be tested for the levels of Cannabidiol in it, but it should also be tested for THC too. There are strict laws related to the amount of THC that a product can have in it. The last thing a company would want is to have a product that contravenes legal regulations.

Terpene testing: For the flavour and fragrance of the product to be tested a terpene analysis must be carried out. Terpenes do also have effects of their own, which may or may not affect the product.

A very extensive testing list.

And yes, you guessed it, an expensive one too. Granted, not all companies will go the lengths of carrying out such a thorough analysis, but those that clearly value their customers (even if they do cost more).

I know which product I'd rather buy.

Costs for distributing CBD oil

So, where are we at now?

Well, we have turned raw materials into an extract oil, which has then been tested, bottled and labelled. What next?

Distribution and its costs.

This, in layman's terms, is the cost(s) incurred to deliver the product from production to the consumer. And, just as with most other areas covered in this piece, there is more to distribution costs than meets the eye.

Here are just a few of the costs that are involved: Business-to-customer selling, advertising & promotion, product and packaging, discounts (trade), market research, warehouse and handling, delivery and shipping, customer service, and sales returns.

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