High Stakes: Managing Risk and Policy Uncertainty in the Market for CBD Food Products

Andrew Stevens and Joy M. Pahl

Applied Economics Teaching Resources (AETR), 2021, vol. 3, issue 4

Abstract: Consumer demand for food products containing cannabidiol (CBD) has skyrocketed in recent years. This spike in demand has presented an opening for entrepreneurial small businesses to seize a lucrative market opportunity. However, sourcing CBD is risky due to volatile prices and spotty availability in the wholesale market. Consequently, some entrepreneurs have considered producing their own CBD by growing hemp and vertically integrating their supply chains. This strategy poses its own risks: hemp that contains too much tetrahydrocannabinol (THC) must be destroyed; hemp yields are variable; and state- and federal-level policies about hemp production are changing rapidly. This case study follows the story of Levi Budz, a young entrepreneur from northeast Wisconsin, as he founded and grew Budz Butter: a 2017 startup company that produced CBD food products. This case focuses on risk management and decision making under uncertainty with particular attention to a shifting policy landscape, price volatility for a key input (CBD extract), hemp production risks, and uncertainty about consumer demand and competition in the retail marketplace. These themes are broadly applicable to other emerging opportunities in the agricultural and food sectors, and especially applicable to entrepreneurial ventures.

Keywords: Teaching/Communication/Extension/Profession (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaeatr:316506

DOI: 10.22004/ag.econ.316506

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