May 11, 2020 11 min read

By Laura Newcomer

If you’re reading this, you know that cannabis is big business. And you might have an inkling that cannabis-infused edible products, such as baked goods, are growing in popularity. 

In fact, the edibles market is becoming a major money maker. The Specialty Food Association ranked marijuana edibles at #8 on its list of Food Trends for 2018, and edibles’ popularity has been growing by leaps and bounds ever since. A Colorado-based research firm, BDS Analytics, predicts the U.S. and Canadian edibles market is on track to hit $4.1 billion in sales by 2022. 

Why the growing interest in cannabis food products? There are several theories

  • A major factor is that more and more people who are interested in cannabis prefer not to smoke it. Edibles provide a discrete way to enjoy cannabis without smoke inhalation.
  • Edibles can be a less intimidating entry point for people who are trying legal cannabis for the first time. 
  • Many people like the fact that commercially manufactured edibles can make it easier to control THC dosage. 
  • Consumers are drawn to the creative flavors and products coming out of the edibles space. 

The growing popularity of cannabis edibles is a double-edged sword: It means there’s tremendous opportunity for cannapreneurs looking to enter this space, but it also means there’s tremendous competition. 

If you’re looking to open a cannabis bakery, it’s important to emphasize quality at every stage of the process so you stand out from the pack. No matter where you’re located, here are some important guidelines for how to start a cannabis bakery and run your business successfully. 

How to Start a Cannabis Bakery

Ready to embark on the arduous yet rewarding journey of starting a cannabis bakery? Then read on for some critical guidelines that will ease your passage on the way to a successful business. 

Know the local laws. 

Cannabis-related laws don’t just vary from state to state; cities and municipalities can also enact their own regulations. So before you open up shop, it’s essential to know the local laws.

This research will also help you clarify your business processes.

Do you want to grow the cannabis that you’ll use in your baked goods? Then you’ll probably need a cultivation license.

Do you want to extract oils to use in your products? Many localities will require an extraction license.

Do you want to start a dispensary and sell directly to consumers? You’ll need a dispensary license for that. And you’ll almost definitely need an infusion license to legally infuse cannabis into your baked goods. 

Before starting your cannabis bakery, think through how you plan to craft your products. Then research whether the laws in your area will permit you to follow through on those plans. If not, it’s time to modify your business plan (for instance, you could purchase commercial cannabis instead of growing it yourself) or consider opening up in a different municipality with more permissive regulations. 

It’s also important to inform yourself about the licensing process in your area. Every state and locality has a slightly different process, but most places will require you to be a resident of the state, have a clean criminal background, present a thorough business plan, and so on. 

If you’re planning to open a cannabis bakery in California, check out our detailed guide to starting an edibles business in Cali

Develop a business plan & consider how you want to sell. 

Any company needs a business plan, and it’s no different in the cannabis space. Because the cannabis industry is so complex, it’s a good idea to consult a lawyer or industry expert at this stage in the process. 

A solid business plan should outline a company’s general description, goals, financial backing and projections, organization, leadership team, marketing and advertising, milestones, and so on. If you’re not sure where to start, check out this sample cannabis edibles business plan

As you craft your plan, be diligent about market research. Make sure there’s consumer demand in the area where you intend to set up shop, investigate competitors in your area, confirm that zoning laws will allow you to operate effectively, and identify opportunities for standing out in your desired market. 

Also be sure to think about financials and expenditures. The many costs that go into starting a cannabis bakery include material sourcing (not just cannabis but also flour, sugar, and other conventional baking ingredients), kitchen infrastructure and equipment, property rent and utilities, staffing, brand development, testing, packaging, marketing, insurance, tracking software, and so on.

If necessary, consider seeking venture funding or applying for a cannabis incubator or accelerator

Finally, an important part of this process will be deciding whether you want to sell directly to consumers through a retail shop or if you’d prefer to sell to consumers through dispensaries. There are pros and cons to either choice: 

  • Running your own shop means you can cut out the middlemen, build direct relationships with your consumers, and control every aspect of your products’ presentation. The downsides are that up-front costs and licensing requirements will be a lot more cumbersome, and your company won’t be as nimble if it’s tied to a physical storefront. 
  • Selling through dispensaries means you don’t have to deal with the cost or bureaucratic headaches involved in getting a dispensary license. It also means your product can be distributed virtually anywhere that cannabis is legal and dispensaries exist. This can provide great growth potential. 

Work toward obtaining your license. 

Once you’ve put together a preliminary business plan, it’s time to pursue licensing in your state and from the local municipality in which you intend to operate. 

This process varies depending on locale, but you can rest assured that it will be expensive and time-consuming. It’s a good idea to consult a lawyer or industry expert at this stage to increase your chances of getting your license approved. 

Know your audience. 

Edibles have come a long way from the days when anyone with access to weed would just whip up some brownies with melted butter and a few stems. Today’s consumers expect a lot more from the edibles they pay for, and anyone looking to start a cannabis bakery will need to be aware of the modern audience for these products. 

While cannabis consumers are constantly evolving, here’s an overview of some of the current trends

  • People aren’t just interested in getting blazed out of their minds. Today’s consumers are looking for a more nuanced high, whether that comes down to indica versus sativa strains, 1:1 or other THC:CBD ratios, or the option to microdose with smaller serving sizes, such as 2.5 or 5 mg of THC. 
  • Because today’s consumers are looking for more than a quick high from their edibles, people are placing more of a premium on things like taste and flavor, quality ingredients, presentation, and so on. 
  • On the whole, U.S. society is getting more health-conscious. This means consumers are looking for cannabis baked goods that have a “better-for-you” component. This could mean using antioxidant-rich dark chocolate in lieu of milk chocolate, avoiding the use of preservatives, producing a protein-rich line of baked goods, using organic ingredients, minimizing sugars, and so on.

As you begin experimenting with different baked goods, keep these consumer preferences in mind. 

Experiment until you’ve crafted a great product. 

The edibles space in the cannabis market is increasingly competitive, and that means your product(s) will need to stand out amidst a sea of competitors. Translation? Mediocre baked goods aren’t going to cut it. 

Experiment with different suppliers, ingredients, recipes, and so on until you’ve landed on something truly exceptional. Emphasize quality over quantity — it’s probably better to start with one or two praiseworthy products than it is to offer a whole line of so-so edibles. There’s no need to spend money on a commercial kitchen during this phase; go ahead and experiment at home until you feel like you’ve created a product worth selling. 

During this experimentation, be sure to keep relevant laws in mind. For instance, most states with legal cannabis have laws around the shapes, colors, and packaging that cannabis edibles can use, because they don’t want products to look appealing to kids. As another example, Colorado law requires homogeneous distribution of THC throughout a product, which means that large mix-ins (e.g. granola or puffed rice) can make it difficult to meet state requirements. 

Identify your cultivation source.

You have two options when it comes to procuring the cannabis flower and/or extracts that you’ll use in your products: Depending on your preferences and the laws in your area, you can grow your own cannabis or purchase cannabis from legal cultivation businesses.

If you’re planning to purchase from a professional cultivator, make sure you thoroughly vet their business.

  • What’s their growing process?
  • Do they use organic growing methods or make an effort to reduce their carbon footprint?
  • Do they specialize in a particular strain(s)?
  • Do they use third-party lab testing?

Your customers will want to know the answers to these questions, so it’s important to inform yourself up front. 

You’ll also want to confirm that the cultivator’s cannabis works well in the products you plan to sell. Test a variety of strains and brands before settling on the cultivator(s) with whom you want to do business. Once you’re ready to sign a contract, consult a lawyer to guide you through the process. 

Locate a commercial kitchen for lease or purchase

In general, there are strict requirements for the spaces in which commercial edibles can be produced. 

If you aren’t cultivating your own cannabis, some municipalities will allow you to create edibles in your home kitchen — though you might need to undergo some renovations. Retail marijuana business applications require a diagram of the business, and you’ll need to prove that your kitchen space has an entrance and exits, partitions/walls, limited-access areas, security equipment, and more. (Consult the regulations in your locality for more details.) 

Many localities require edible companies to cook their products in a commercial kitchen, which means (you guessed it!) you’ll need to find a commercial kitchen that is zoned for cannabis-related use.

If you’re planning to dispense your products directly to consumers, it’s also a good idea to look for a kitchen that’s connected to (or at least nearby) a dispensary space that’s approved for cannabis-related companies. 

As you select your kitchen space, keep state and local laws in mind. For instance, Colorado requires four stages of potency testing for edibles: Edibles manufacturers must lab-test the flower, decarbed flower, butter infusion, and the final product.

Colorado also requires strict inventory counts, and every product that doesn’t pass quality control has to be tagged and destroyed. Laws such as this will have an impact on your kitchen space and processes, so make sure you’re in compliance. 

Consider product consistency. 

In order for consumers to enjoy your product and rave about it to others, you need to provide a consistent user experience.

Edibles are notoriously tricky in this regard; virtually every cannabis user has stories of an edible that didn’t affect them at all one week only to leave them high as a kite the next. That’s not the kind of experience people will rave about — especially if they’re paying a premium for your product. 

This means it’s essential to think about how you’ll deliver a consistent product. Some states will mandate this consideration; as an example, per above, Colorado requires four potency tests at different stages of production.

Delivering a consistent product starts with the cannabis you source, which is why identifying a cultivation source is such a crucial part of this process. It might also be helpful to recruit software or testing resources that keep track of THC levels at every stage of processing. 

Choose a business management software. 

Because compliance with cannabis laws is so complex, you’ll want to select a software platform that’s up to the task of helping you manage your business in this particular industry. Each business’s needs will vary, but it’s generally a good idea to look for a software product that helps you automate and manage: 

  • Orders
  • Inventory
  • Testing
  • Tasks
  • Accounting and payroll
  • Customer relationships

Don’t be afraid to experiment with a variety of software products before selecting the one that best suits your company’s needs. 

Invest in packaging and label design. 

As a manufacturer of cannabis edibles, packaging will be a critical element of your marketing efforts. Quality packaging can help your products fly off the shelves, while low-quality labels… won’t. (Which are you more likely to trust: A cookie in a plastic bag with a label written on it in Sharpie, or a professional graphic design?) 

Beyond quality, here are a few other things to keep in mind when it comes to packaging and labeling

  • Make sure your packaging is compliant with local and state laws. For instance, many states’ laws mandate that edibles packaging must be both childproof and resealable. 
  • Counterfeit labels are becoming more commonplace in the cannabis industry, so you can help shore up consumers’ trust by investing in counterfeit-proof labels. 
  • To maintain professionalism, it’s essential that your packaging is consistent. You can maintain quality control by investing in an automated packaging solution. 

Identify distribution partners. 

Unless you’re planning to sell your cannabis baked goods out of your own retail dispensary, then you’ll need to partner with local and state dispensaries to distribute your product. 

To do that, start researching dispensaries online.

Make a list of dispensaries that seem like they could be a good fit for your product(s), and then call or visit in person to start building a relationship and further vet the company. Ask questions about the dispensary’s customer demographics, offerings, financial policies, and so on.

Once you’ve identified some potential good fits, ask the dispensary to sell a small amount of your product or maybe even offer free product samples so they can get feedback from their customers.

This information will help determine if there’s a demand for your product in that area. It will also provide you with valuable feedback that can be used to improve your products. 

Once your products are present in a few dispensaries, keep track of sales so you can identify what’s working, what could be improved, and what’s not worth your time.

Make sure to maintain friendly and positive relationships with the people who work at the dispensaries, so they’ll be more inclined to keep working with you moving forward. And check in at the dispensaries on a regular basis to make sure you’re happy with how your products are being presented. 

Pursue ongoing marketing efforts. 

When you’re just starting out, word of mouth will be crucial to getting your cannabis bakery off the ground.

But just because you’re relying on satisfied customers to spread the word about your product, that doesn’t mean you can just sit back and do nothing when it comes to marketing. 

Your budget will determine what’s possible when it comes to advertising your business, but here are a few ideas

  • Create a well-designed website that’s targeted toward your ideal customer demographic and provides transparency about how your products are made. 
  • Advertise in local newspapers and on relevant online forums, websites, and directories. 
  • Invest in banner ads on sites that are likely to attract your target demo.  
  • Attend cannabis-related events (and other events where cannabis products are allowed) and hand out free samples. 
  • Send samples to dispensaries, cannabis product reviewers, and other businesses in the cannabis space. (Just make sure you’re following the relevant laws when it comes to shipping products with THC in them!) 
  • Invest in relationships with your customers by asking for feedback, sharing giveaways, and maybe creating a loyalty and/or referral program. 
  • Continue to improve your products’ presentation, packaging, and labeling. 

As your business grows, make sure you incorporate customer data and feedback into your future marketing efforts. 

Starting a Cannabis Bakery: The Bottom Line

If your goal is to start a cannabis bakery, then ongoing planning and preparation is key. 

If you take the time to develop a thoughtful business plan, square away your financials, think about compliance at every step of the process, and obtain appropriate licensing, every other stage of the process will be that much easier. 

Above all else, the key is to focus on product quality. The edibles market can be highly lucrative, but it’s also highly competitive. By understanding today’s consumer preferences and crafting high-quality cannabis baked goods in accordance with those demands, you’ll increase your chances of developing a loyal following and earning a slot on dispensary shelves. 

Happy baking! 

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