Five years ago, CBD, or cannabidiol, products were expected to be the next big thing in convenience stores. But they haven’t delivered, says Scott Love, a c-store and CBD analyst with Chicago-based market research firm IRI.
And with the U.S. Food and Drug Administration’s latest ruling—or non-ruling, Love says—he expects that’s going to take the wind out of the sales of a lot of the segment.
The FDA said in January it does not intend to pursue rulemaking to allow the use of CBD in dietary supplements or conventional foods—essentially declining to regulate the substance and calling on Congress for a fix. The FDA also called out various safety concerns it has with CBD, especially with long-term use.
“This was expected to be a really big piece of the business in c-store, and a path for it, I don’t think you’re going to see it take off at the rate it would’ve in the total store,” Love says.
There is hope for the segment, though. “Where I think you’re still going to see growth in 2023 is in tobacco substitutes [and] tobacco-adjacent products because there’s less risk there,” Love says.
Despite CBD/hemp products less than stellar movement in c-stores, more c-stores sold CBD/hemp products in 2022 versus the previous year. According to IRI, 122,491 stores sold such products in 2022 versus 112,723 the year prior. Back in 2017, they were only in 66,320.
Love says IRI looks at CBD more broadly now that it has evolved over time, so it also analyzes hemp-based products sold in c-stores along with CBD products.
And 2022 wasn’t a bad year for the product category: CBD and hemp sales grew 26% in dollar sales and 9% in unit sales compared to the year prior in c-stores, according to IRI data for the year.
Total store sales in c-stores are down 2.4% in units for 2022, Love says, so CBD products are faring better in this respect. But the driver is mainly the number of stores that have started selling CBD/hemp products, which was up 8.6%, he says.
“So it’s going to show growth, but it’s off a very small base still,” Love says.
Electronic smoking devices infused with CBD took in the most dollar sales at more than $74.6 million and grew by about 89% in both dollar and unit sales.
Energy drinks, while a small segment of CBD/hemp products with $4.9 million in sales in c-stores in 2022, grew more than 600% in dollar sales and more than 1,000% in unit sales, IRI reported.
“Energy drinks are exploding and convenience overall, and so I think you’re going to see people trying to take that niche and grow off of it,” Love says.
“This was expected to be a really big piece of the business in c-store.”
Love says he sees opportunity in tobacco-adjacent products because they’re less risky, as there are already known health concerns associated with tobacco products. There are many hemp-based cigarettes and hemp tobacco blends that are coming out as smoking alternatives, he says.
“You’re going to see a lot of growth there this year just because there’s almost no items in the market right now and a lot of them are really coming out,” he says, adding these products may have the same feeling of smoking but provide the benefits of CBD.
C-stores should merchandise these products by looking at their other tobacco and tobacco-adjacent products, like smoking cessation products, Love says.
“That’s the evaluation that has to be done, is, ‘If I bring in a hemp-based cigarette, is it going to deliver the same velocity as a product that I would be pulling out of the assortment?’ ”
Michael Tirey, marketing manager for Circle K’s Tampa, Florida-based franchise division, says the category has taken a step back. He’s implemented open-shelf floor displays for CBD products in approximately 800 franchise Circle K stores. Sky Wellness, Scottsdale, Arizona, has been the chain’s biggest partner, Tirey says. Stores also sell Hemp Bombs, from Tampa, Florida-based Global Widget. Gummies are the No. 1 best seller, he says, but health and beauty items like creams, salves and freezes are close.
As of now, he’s not planning on adding anything new to his set in 2023, and he will look at sales data to see what the market is trending toward and whether he will take any products away.
“The category has taken a step back, it seems,” Tirey says. “The category seems to have lost its excitement. The only section that is growing are the Delta products.”
Delta-8 is one of more than 100 cannabinoids products derived from the cannabis sativa plant, but is not found naturally in significant amounts, according to the FDA. Concentrated amounts of Delta-8 THC are typically manufactured from hemp-derived CBD. Products containing Delta-8 THC can come in a variety of forms, including candy, cookies, gummies, vape cartridges, smokeable hemp and more.
What succeeds in the future will largely depend on what manufacturers are comfortable putting out in lieu of more FDA guidance, Love says.
“A lot of the larger manufacturers that had CBD-based or hemp-based products in their pipeline still haven’t released those,” Love says. “And the ruling from the FDA will most likely kill those products for the foreseeable future because there’s too much risk for the big companies to roll those items out without the backing from the FDA.”
While some hoped for clearer guidelines from the FDA for CBD in food and dietary supplements, the agency’s January announcement said there were too many unknowns about CBD products to regulate them as food or supplements under the agency’s current structure.
Studies have shown potential for harm to the liver, interactions with medications and possible harm to the male reproductive system, the FDA said.
What ultimately will happen to CBD may be a chicken-or-the-egg situation, Love says.
“There was a lot of hype around the product and opportunity, and it somewhat delivered, but really the regulation piece has really limited the availability of products and the development of products, and I think the latest ruling, [or] non-ruling is going to push that down the road,” says Love.
Consumer Trends
What are the reported benefits of CBD consumption that consumers seek? Here’s what hemp-derived CBD consumers are looking for, according to Louisville, Colorado-based cannabis data analytics firm BDSA:
- 50% Pain relief
- 41% Better sleep
- 33% Anxiety management