There is a new and somewhat unexpected trend in the cannabis industry - selling seeds directly to consumers. As first reported by mjbizdaily, marijuana companies have begun selling seeds to their customers for home cultivation thanks to a change in federal policy.
At first glance, this may seem like an illogical and unwise business move for cannabis companies. However, for many of those businesses, selling seeds could turn out to be a highly profitable business move. Others view it as a means to develop strong brand loyalty and share successful plant genetics.
One of those innovative entrepreneurs is Carl Giannone, co-founder of Trade Roots, a marijuana company based in Wareham, Massachusetts. He recently began selling seeds directly to consumers for the same reason a farmer might sell fruit and vegetable seeds to customers at a farmers' market.
He says, "Everybody who's got a home garden during the spring and summer grows tomatoes. But 98% of the tomatoes they buy are at a store. If growing tomatoes makes them want to buy tomatoes, then I want to let them grow."
The change in federal policy concerning the sale of cannabis seeds began with the passage of the Farm Bill in 2018. That measure legalized the cultivation of hemp and the sale of hemp-derived products. According to the bill's language, hemp is any part of the cannabis sativa plant that produces less than 0.3% of the delta-9 THC cannabinoid.
Following the enactment of the Farm Bill, marijuana seeds were still considered illegal under federal law. However, this past April, the U.S. Drug Enforcement Agency, issued a statement reversing that position.
In that press release, the agency stated in part that the:
"...Marihuana seed that has a delta-9-tetrahydrocannabinol [D9-THC] concentration of not more than 0.3 percent on a dry weight basis meets the definition of 'hemp' and thus is not controlled under the CSA."
Because no marijuana seeds contain more than 0.3% of delta-9 THC, the DEA essentially removed them from the controlled substances list allowing companies like Trade Roots to begin selling their seeds directly to consumers. What makes this ruling truly remarkable is two-fold.
First, in the past, a cannabinoid's legality was determined based on the source from which it was derived. So, if a seed was produced by a part of the plant deemed to contain more than 0.3% delta-9 THC, it was determined to be illegal. This new interpretation completely reverses that position.
Secondly, and perhaps more importantly, the DEA rarely makes rulings favorable to the cannabis industry or its consumers, particularly regarding legal issues. For many stakeholders, this new legal market is a remarkable shift in policy and enforcement by the federal government. Furthermore, it could be a sign that the end to the federal prohibition of marijuana is closer than expected.
Industry experts view this new market as a way to spread the message and the "genetic wealth" concerning the best cannabis strains available to consumers. As Florida-based cannabis cultivation consultant Ryan Douglas explains, "If you have amazing cannabis genetics, but no one knows you exist, you're not going to sell any seeds. This opportunity can present a compelling business model for companies with recognizable brands that consumers associate with rare varieties or high-quality cannabis."
Other companies jumping into the seed-selling market include Canadian cannabis retailer High Tide, which announced it would begin selling directly to consumers this past December. The target market for these companies is the serious home grower or the professional breeder. The purpose is not to necessarily make massive profits selling seeds.
However, America is an economy built on name brands. Companies like Coca-Cola, Budweiser, Apple and others built much of their financial success on branding. Cannabis companies see the high-end seed market as a way to cultivate name-brand recognition and, more importantly, loyalty to those brands.
Moreover, as the cannabis industry matures and solidifies itself as one of America's most lucrative and successful economic strongholds in the coming decades, the hope is that the seeds these companies literally plant and sell will blossom into some of the most iconic brands for future generations to cherish as much as their favorite soft drink, adult beverage or smartphone.