CBD: Change Is Coming Fast

Category not standing still, product managers say
CBD Gummies
Photograph: Jason Little

CHICAGO — Cannabidiol (CBD) products are still relatively new to convenience retailers and consumers, but that doesn’t mean they aren’t already changing.

Despite double-digit declines in dollar and unit sales following a banner year of growth in the convenience-store and other retail channels, retail category managers are still very optimistic about the future of CBD products and their continued expansion into new product subcategories.

“It’s exciting to manage a category that has so much growth ahead of it,” says Brad Campbell, winner of CSP’s 2021 Category Manager of the Year honor for the CBD-product category. “The CBD category continues to change,” says the category leader for tobacco and CBD at Sheetz.

Campbell has been with the Altoona, Pa.-based company for 11 years, starting as a salesperson. He worked in the merchandising department as a plan-o-gram analyst and then as retail space manager, where he managed the plan-o-gram team and lottery sales for six states. In January 2019, he transitioned into his current role, overseeing OTP (other tobacco products), including snuff, cigars, e-cigarette and nicotine pouches, as well as CBD.

Category managers must continue to adapt to those changes, says Campbell. “We’re starting to see products containing other cannabinoids like cannabigerol (CBG) and cannabinol (CBN). The types of products containing CBD continue to evolve.”

Cannabigerol (CBG) is a mildly psychoactive cannabinoid compound. It is the parent molecule from which other cannabinoids are synthesized. CBG derived from marijuana is illegal, while CBG derived from hemp is legal. Cannabinol (CBN) is another mildly psychoactive cannabinoid compound, but unlike other cannabinoids, CBN does not derive directly from CBG.

That is a positive development, as finding alternative items to traditional tetrahydrocannabinol (THC)-derived products can be a challenge, says Jon Bunch, director of marketing and business development with Carmi, Ill.-based Martin & Bayley Inc., which operates the Huck’s c-store chain. He also named Delta-8, a less-potent form of THC, as an emerging item.

“If you compare to this time last year, CBD revolved around gummies and a few options in topical,” says Michael Tirey, with Circle K, a finalist in the CBD-product category for Category Manager of the Year. “Gummies started out very strong, and are still selling strong, but topicals for a more specialized pain relief have overtaken gummies,” he says. “Tinctures are climbing as flavor and potency have changed for the better, and CBD users have taken notice.”

Topicals have overtaken edibles in sales, he says, “as people are realizing how those products are able to help them in their everyday life. Innovation is coming fast in terms of expansion in edibles, including beverages, energy bars and in the smokable products. We have just scratched the surface.”

Tirey has been with Laval, Quebec-based Alimentation Couche-Tard Inc.’s Circle K for about 13 years, now as marketing manager for North America franchise in the Tampa/St. Petersburg, Fla., area. Along with CBD, his category responsibilities include cigarettes, OTP, grocery, automotive, health and beauty care (HBC), general merchandise and lottery.

Edible Intrigue

CBD-enhanced products that performed well over the past year include CBD beverages, which seem to be gaining some momentum, says Campbell. “CBD edibles, vapor, oral pouches and tinctures really carried the category for us. We’re also keeping an eye on cannabis legalization in the states we operate in. Most of the data we’ve seen shows that legal cannabis has a profound effect on the hemp-derived CBD category.”

At Huck’s, “gummies have become our bread and butter,” says Bunch, another Category Manager of the Year finalist, “and vape cartridges showed the largest growth.”

New packaging and brand expansion, and creating a multi-tier offering to encourage consumers to trade up also keeps the category interesting for Bunch. He spent 15 years on the vendor side of the c-store industry in the general-merchandise category and moved over to the retail side more than three years ago.

He enjoys working with CBD suppliers. “They do not let education fall by the side,” he says. “They make sure we are 100% comfortable and knowledgeable with what we are selling in our stores. That give us that extra confidence that we are selling a quality product to our consumers.”

“We are looking into bigger sets and more consumer education.”

Retailers are experimenting with different display options, as well. “We are trying different avenues on display options, including countertop units, freestanding floor units and back-bar plan-o-grams,” says Tirey. “Each has its own challenges, but also its own rewards. The key is how easily customers can see the products.”

Sheetz designed its own fixtures when it launched the category in its stores, says Campbell. “Both are behind the sales counter. One is mounted on the windowsill of select stores and the other is on the back bar.”

Bunch says Huck’s has continued to display the products on the front counter, opting for a larger display rack for stores with a high volume of CBD sales.

The category is not without its frustrations. Tirey and Campbell cite keeping up with changes in regulation, particularly at the state level, as very challenging. For chains like Circle K that operate in many states, that is especially challenging. “Since Circle K Franchise operates in 34 states, the changes in localized regulation are frustrating, as those changes are not always communicated in advance.”

Also important is keeping up with the industry through research, articles and interviews from experts on the CBD manufacturing and distribution side. “That can be a time-consuming venture,” Tirey says, “but it is a necessary one if you want to understand the industry and where it is going.”

Having “great partners and a great legal team that helps to guide us through all of the changing regulation” is helpful, Campbell says.

*Click here to review complete category sales data.

Customer Counts

The pandemic, which led to lower customer counts, has affected the CBD category like all others.

After a nearly 57% year-over-year increase in January 2020, the category took a rapid downward turn, declining by 69% year-over-year in June, and never really recovering.

But the decline is starting to reverse itself now, according to Bunch. “CBD took a hit during the pandemic,” he says. But he thinks 2021 “will be a great year of restoring CBD sales. While sales were flat to slightly down, we do see an increase in other delivery methods being added into distribution.”

COVID-19 affected the category’s momentum, says Campbell, and “we’re starting to see some improvement, but we have a way to go before it starts growing at the pace it was pre-pandemic.”

“The CBD category is not growing as fast as originally thought due to the pandemic and consumers’ fewer trips to stores with a big reduction in commuter traffic,” says Tirey. “This is not to say the category is not growing, just that customers have changed buying habits. Customers are buying more in bulk during their trips. Product assortment is key, though. It has changed what type of CBD products customers are buying, thinking of more health and wellness including stress relief due to more people working from home.”

At 84%, wholesale shipments of health-and-beauty CBD products made up the largest share of the category in terms of dollar sales, according to Management Science Associates Inc. (MSA) data.

Many retailers are intent on focusing on consumer preferences. Sheetz is planning to realign the CBD category based on market trends. “With a growing category, you have to constantly evaluate your strategy to ensure it aligns with what consumers want,” says Campbell.

Circle K plans to expand into more product variety from more manufacturers, says Tirey. The retailer is “looking into bigger sets and more consumer education to show that Circle K is in the business of selling only the best quality, tested products.”

Bunch says that consumers have become more health conscious during the pandemic, and “innovation is very important to keep up with the trends and delivery methods that customers are looking for.” So Huck’s CBD strategy will be to “grow, grow, grow the category.”

Click here to view the complete Category Management Handbook.

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