When and How Should C-Stores Prepare for the CBD Boom?

ORLANDO, Fla. — Mitch Morrison asked the room of retailers one question as the final panel of this year’s Convenience Retailing University commenced: “How many of you know what CBD is?” Roughly half the room raised their hands.

“Now, how many of you are selling CBD in your stores?” asked Morrison, vice president of retailer relations for Winsight Media, CSP’s parent company. Crickets.

CBD—the nonpsychoactive ingredient in marijuana or hemp—was one of the hottest topics at this year’s event in Orlando, Fla. The final panel, which featured experts in retail and cannabis, offered insights into what the product is, market opportunities, the regulatory landscape and merchandising strategies for convenience stores.

Here’s how retailers can approach CBD and what they can expect in the upcoming months regarding its regulations …

The U.S. Department of Agriculture (USDA), the agency that crafted last year’s Farm Bill, is making guidelines for various states to cultivate hemp and make it legal, said Rachel Gillette, partner and chair of the cannabis law practice firm Greenspoon Marder LLP, Fort Lauderdale, Fla. This means retailers will have to craft their CBD plan-o-grams around these regulations, especially for CBD edibles, which have been forcibly removed from certain states over the past few months.

“The FDA will come out with a pathway for us to see CBD in foods or as a dietary supplement,” she said. “That would give a lot of states and retailers clarity and cure any confusion.”

These programs are also essential for law enforcement officials, who often ignore or confuse the difference between CBD and tetrahydrocannabinol (THC), the psychoactive component of cannabis.

“If we have this conversation a year from now, it’ll be a very different legal environment,” she said.

There appears to be a combination of excitement and caution regarding CBD among retailers. Erin Butler, senior category manager for West Des Moines, Iowa-based Kum & Go LC, said that although she hopes the chain is selling CBDs within the next year, it is still a hypothetical situation until the regulations unfold.

“We don’t want to risk any legal ramifications,” she said. “We’re exploring, talking with suppliers and making plan-o-grams for our stores. But we won’t act until we know that we can, legally.”

Although there is no age restriction for CBD yet, many retailers plan to display the product behind the counter like tobacco products. This is exactly how Kum & Go will approach the category, Butler said.

“We’ll have it behind the counter in a display and have educational materials, similar to buying Sudafed at a drugstore,” she said.

Nik Modi, managing director for RBC Capital Markets, New York, compared today’s CBD hype to the early stages of e-cigarettes: people are talking, they’re excited, but they don’t know how to approach it.

The lesson retailers can learn from this comparison is that research is critical, he said. Such research includes diving into the manufacturer’s history, what their products are and if they’re well-capitalized.

“Everyone wants to chase the trend, but there’s no guidance and infrastructure,” he said. “I’d urge everyone to take your time about how you approach the category.”

Gillette concurred, also suggesting retailers question their CBD suppliers on where their products are manufactured, their general production process, and, most importantly, on lab results. Confirming that CBD products don’t contain more than 0.3% THC—the legal limit per product, according to the Farm Bill—goes a long way, she said.

“There are labs that are certified to test CBD, and you’ll want to call and verify those test results,” she said. “Even if you’re unknowingly selling CBD oil that contains more than 0.3% THC, you can be arrested.”

Despite the murky waters, suppliers can still help retailers make CBD distribution a seamless process. Such support includes offering as many educational tools as possible, including pamphlets and brochures, and ensuring their products contain absolutely zero THC, said Floyd Landis, founder of Floyd’s of Leadville, Leadville, Colo.

“Some companies, even if they don’t say it, are selling hemp-derived products with more THC than considered safe,” he said. “The safest thing we can do is remove THC entirely and educate consumers. It’s an unnecessary risk to have any levels of THC at all in these products.”

CBD has been touted as a budding product and surging category for retailers. But is that what it really is? Modi argues that retailers shouldn’t think of CBD as a product or a category, but as an ingredient—and one that will emerge in nearly every area of the store, he said.

“CBD is like nicotine and caffeine: It has functional benefits and will be placed in many products in your stores,” he said. “That’s how this category is going to evolve. Don’t pigeonhole yourself into thinking this is its own category—it’s an ingredient that will arrive in every category.”