During the last 18 months, we have seen an insurgence of CBD brokers enter the world of Hemp. In 2017, the highly fragmented CBD industry was in need of connectors. Skilled individuals whose network builds new business relationships, which evolve into the infrastructure of the hemp industry. Since then, the hemp industry has matured. There is a known network of farmers and processors, there are websites selling wholesale material, and CBD and hemp trade shows to spur new relationships. As a result, the new wave of expert brokers have matured to create value outside of the sale.
How have brokers evolved?
I am going to split brokers into three categories, novices, experts and bad brokers.
Novice brokers operate as bridge builders and help new businesses enter the market through their relationships. They have sales skills, but lack business infrastructure to grow their brokerage business beyond a couple individuals. Novice brokers rely on NDAs and NCs before an introduction because the introduction is where all the value is created. These brokers are chasing tales of quick money made through arbitrage, by selling CBD material for more than they pay.
Expert brokers create value beyond pitching a product. The level of sophistication and knowledge they bring to the hemp and CBD industry is valuable for both small and large businesses. These expert brokers and consultants bring a holistic view of market trends and understand the relationship between supply and demand on a weekly basis. They are experts at sales, bring a book of business, are great relationship builders and know how to close a deal.
Bad brokers are novice brokers who who do not care about service or quality. These individuals are trying to get rich quick, do not care about product quality, and have no incentive to resolve issues when they occur. These individuals often have weak or non-existent business relationships, and DO NOT RETURN PHONE CALLS. Friends, never work with a business that can’t return a phone call in the best of times, because this person will completely disappear in the worst of times. These individuals chase unicorn deals, because they do have the knowledge to validate that their deals are credible.
Farmers and Brokers
Most agricultural industries utilize brokers to sell their crops. The reason is that brokers bring their understanding of market trends, and strong relationships with multiple buyers and sellers. Come harvest time, connecting with buyers is one of the most difficult challenges for a farmer. Think about the fact that processors will need most of 2019 to process hemp material on the market. This means that at harvest, there is a large oversupply of material. An expert broker will bring a perspective on when to sell your material, what is the fair market price and a will be able to put your crop in front of multiple buyers. These brokers also have extraordinary sales skills and will ensure you are getting a fair price for your crop. Farmers also deal with a large volume of inquiries about their product. A skilled broker will quickly sift through all the deals that are not credible, which eliminates a lot of headache. We want to protect your farm from false buyers and bad deals.
We recommend that farmers speak with an outside sales consultant whose sole job is selling Hemp. Working with an outside sales representative keeps your business expenses low by avoiding W-9 employees. Many outside sales consultants work on commission only, so there is little to no risk in working with an expert broker. If you would like more information about how these firms work, we have hemp consultants on staff who would are happy to provide advice with no obligation. Michel is an expert on Hemp biomass and is our national hemp consultant, you can contact him at 425-606-7236.
Processors and Brokers
Over the past 5 years, we spoke with hundreds of processors in both the Hemp and Cannabis industry. One thing is clear, processors are in a great place to grow. The Hemp and Cannabis markets are inevitably going to experience a trend of oversupply of material. While farmers are faced with plunging prices for their Hemp or Cannabis, processors are experiencing a widening of profit margins. This is because their processing costs stay the same, their COGS decreases, and with finished goods fairly inelastic in price, processors are making more money. There are two clear ways how processors can leverage brokers to grow their businesses at a furious pace to build market share.
The first way is to leverage an outside sales consultant to meet brokers who operate as a GPO (group purchase organization). These organized brokers represent a large client base, and bring a book of business to your doorstep. This can build your revenue, and streamline your sales process by letting the broker focus on closing deals by driving volumes of business in CBD crude, CBD distillate and CBD isolate. At this exact moment, consider your strategy for growth. Are you focused on short term revenue which is accessible due to the isolate shortage? Or, are you focused on creating long term value by capturing market share?
The second way to leverage brokers is to utilize them to streamline your procurement process. Biomass procurement in many ways is busy work. You need 10,000 lbs / month, at $4.00 / $ pt CBD / lb, and you spend the next month and a half fielding phone calls, negotiating and doing site visits with a half dozen farms. We have a team calling farmers non-stop to find all the deals that match your buying criteria, and the best part is this is at no cost to you, the buyer. You know the saying time is money? The time you spend on procurement, is time that you are spending not growing revenue. This is a great time to streamline your procurement process so your bandwidth can focus on what creates the most value for your business, building sales and capturing market share.
At Kush Marketplace, we built a platform that uses a smart search, like an Amazon of hemp to find products that fit your buying criteria. We believe in transparency, and streamlining the wholesale process for credible licensed businesses working in Hemp. Our goal is to eliminate bad brokers by building tools for the business owners, and having a team to help you achieve your goals. We look forward to harvest, and keeping you one step ahead of the game.
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