ALEXANDRIA, Va. — Just one year after NACS added a cannabidiol (CBD) pavilion to the NACS Show, its Crack the Code Experience brought a strong collection of insights and conversation in five CBD-focused sessions and a live Ask the Expert event dedicated to the category.
CBD research source BDSA projects the global CBD market will hit $47 billion by 2025, roughly half the size of total global candy sales. “It’s a huge market and getting bigger,” said Jonathan Havens, partner in Washington, D.C., and Baltimore-based Saul Ewing Arnstein & Lehr LLP, speaking in the “Cannabis in the Age of COVID” session.
That’s good news for the convenience channel, which many presenters predicted will continue to lead in the new retail category, made legal by the 2018 Farm Bill.
“I think our channel is going to be the champion for CBD,” said retailer Don Rhoads, CEO of Vancouver, Wash.-based Convenience Group. Rhoads participated in the “Ask the Expert” session. “The only question is how we get there.”
Here are seven insights shared by Havens, Rhoads and other CBD speakers during the Crack the Code Experience …
1. CBD meets mainstream
Nielsen data shows a majority of CBD sales are still taking place in marijuana dispensaries, specialty shops or online, but Kristen Nichols, editor of Hemp Industry Daily, Denver, said those sales will continue to shift to mainstream outlets. “Everyone wants their products out of dispensaries, out of head shops,” she said during a three-part “CBD-Infused Foodservice” session. “We’re seeing greater adoption in the c-store channel, and I think we’ll see overall sales in dispensaries and head shops go down. There’s a lot of those potential shoppers who will never ever walk into a head shop.”
2. Understanding regulations
Operating in a regulatory gray area has kept many mainstream CPG companies from investing outright in the CBD space, and some retailers from stocking an array of CBD products. Havens said the U.S. Food and Drug Administration (FDA) had sent a guidance on CBD to the Office and Management and Budget (OMB) to review earlier in the fall, but so far, no one else has seen it to know how it might impact the agency’s CBD policy. “I do think Congress may force FDA’s hand at some point,” he said. “That said, there's a number of very pro-hemp representatives who have not stuck their necks out to do so yet.” For the time being, Havens stressed the importance of having a thorough understanding of state and local regulations in a given market. “Know before you go,” he said. “California's laws are different than Florida's. You can't have an all-state approach to CBD.”
3. A trade group?
Paul Crozier, sales manager of cigarettes, tobacco, CBD and lottery for Sheetz Inc., Altoona, Pa., said what CBD needs to succeed is “a trade group like NATO,” referring to the tobacco retailing association based in Lakeville, Minn.The winner of CSP’s first CBD Category Manager of the Year award, Crozier called out NATO’s ability to educate members on regulations and legislative proposals. “A trade group like this for CBD would be great to provide retailers and manufacturers with information and education on what is happening at the federal, state and local level,” he said. “We really need that to succeed.”
4. Hemp as medicinal
While many consumers increased their CBD usage in the midst of the COVID-19 shutdowns (Colorado dispensaries saw CBD sales spike 363% the day the pandemic was declared), people have been using hemp as a treatment for physical and mental troubles for hundreds of years according to Russ Cersosimo, founder and managing partner of Hemp Synergistics, Leetsdale, Pa. During the “CBD-Infused Foodservice” session, Cersosimo shared that in the 1850s, cannabis was used for a number of medical treatments and was found to be "unparalleled" in treating post-traumatic stress disorder (PTSD).
5. The CBD shopper
Nichols shared data gathered with Nielsen on just who is purchasing—or willing to purchase—CBD. Survey work found roughly one-third of U.S. adults were likely to consume CBD this year. “That’s a lot more than you see in the THC space,” Nichols said. In terms of segments, females were only slightly more willing than males to try CBD, and most age groups were equally willing to try it, with the biggest difference being people over the age of 65, where only one-quarter of respondents said “yes” to CBD. This data came to life in what retailer VERC Enterprises, Duxbury, Mass., has seen in its store-within-a-store CBD Wellness Center (pictured). “We were told by all the data that the CBD shopper is women in their 40s. That’s not exactly who comes into our stores,” said VERC Project Manager Tyla Vercollone. “But with the Wellness Center, we’ve found the clientele is really diverse. It is in fact our customers.”
6. The promise of beverages
In terms of what those customers are buying, Rhoads said beverages have been the top-seller. “It’s not even close,” he said. “I think beverages will continue to be strong, but I also love the snack category.” This echoed data shared from Brightfield Group in Nichols’ session: The 2020 CBD beverage market is predicted to grow to $194 million (up 36% from 2019), and the compound annual growth rate (CAGR) is predicted to be 65% between now and 2025.
7. Trends to watch
Convenience stores are “super-savvy and doing a lot of right things” when it comes to CBD, according to Nichols. But she did identify two trends ripe for the channel to capitalize on: private label CBD and mixable beverage powders. Nichols said she’s seen other channels adding private-label brands in familiar like granola bars and bottled waters. “It’s people incorporating hemp as an ingredient in house lines,” she said. Beverage powders, however, are an area specifically called out by Nielsen as one to watch. “(Mixable powders) are pretty rare in c-stores, but this sector is growing,” she said, specifically citing the opportunity to add “shots” of CBD to coffee and other drinks (in a non-self-service way). “We’re seeing really explosive growth in that category.”