CHICAGO — Speakers at the USA CBD Expo in Chicago shared insights on who is buying cannabidiol (CBD), how retailers and manufacturers can legally market CBD products, trends in the category and more.
In his presentation “The CBD Consumer: Who are They and What are They Buying?” Don Burke (pictured top left), senior vice president with Management Science Associates, said those who use CBD, are two to three times more likely to use tobacco than the general population.
“That gives you an idea of products you want to market to this audience,” he said at the late-October expo. “This is why convenience is important to your business: 70% of tobacco sales go through c-stores, so that’s an important audience.”
Burke also said the two biggest markets are the young, and those age 60 and older with higher incomes.
While the 2018 Farm Bill legalized hemp as a crop and ingredient, many retailers are hesitant to sell it because the U.S. Food and Drug Administration (FDA) has not released guidelines on handing and selling the substance. However, many states passed laws explicitly allowing cannabinoids and hemp derivatives in food.
Burke laid out the following usage of CBD in states where it's legal:
- In fully legal states, 12% use CBD
- In medically legal states, 10% use CBD
- In states where it’s illegal, 11% use CBD
“So if you think your state legalizes it and it will make a difference to your business, it’s likely that’s not true,” he said.
Most CBD buyers, 42%, spend $1 to $29.99 month on CBD. This is the largest chunk of buyers, a fact that sellers should keep in mind when setting prices. “Be sure you’re appealing to the lower-buying audience, because they are about 42%,” Burke said. The next biggest group, those who spend $30 to $99.99 monthly, make up 30% of CBD buyers.
Sixty-nine percent of buyers with no kids stop in a brick-and-mortar location, versus 76% of those with kids. “If they have kids and have to run in to buy diapers or something else, they’ll buy their CBD in those retail outlets. This is why convenience can be such an important part of your business,” he said.
Edibles are the most popular form of CBD purchased (35%), followed by topicals (34%), tinctures (29%), drinks (22%) and vaporizers/vape pens (21%).
The top location consumers have been shopping for CBD during the pandemic is at health-food stores, 49%, with c-stores tying for fourth place with “other internet” at 33%. Buying directly from a manufacturer is second (45%) and smoke/vape shop is third (38%).
“Thus there’s an equal chance of them buying online as in brick and mortar,” Burke said.
But CBD sales in 2021 haven’t come close to 2020 or 2019 sales. To this point, in 2021, gummies have sold best a c-stores, making up 26% of sales, followed by vape (22%), topicals (12%), tinctures (10%), beverages (9%), moist/snuff (7%), pills (6%) and hemp smokes (3%).
Marketing and Compliance
In another presentation, “Marketing & Compliance: How to Legally Market Your CBD Company,” a panel moderated by Asa Waldstein (right photo, far right), founder and principal of Supplement Advisory Group, covered, among other things, the testing involved in products and what to watch.
When asked how companies protect themselves regarding the CBD products they are considering carrying in stores, Henry Baskerville (right photo, second from left), a partner with Fortis Law Partners, said, “Don’t just trust the tests [a manufacturer] gives you,” he said. “Until you get to really know a manufacturer, test the product yourself to make sure you’re getting what they say you’re getting.”
In regard to marketing issues, particularly via social media, Nathalie Bougenies (right photo, second from right), an attorney with Harris Bricken, said in the last 18 months, the industry has faced major hurdles. Shy away from words or claims that may immediately raise a flag, she said.
“The main challenge is a lot of these companies don’t have clear guidelines in place,” Bricken said. “Until there are federal regulations, we will have these kinds of issues.”
Added Baskerville: “The biggest issue is that regulators say you can’t promote anything illegal, but hemp is legal; standards are not being applied in a uniform way.”
Regarding how much one needs to disclose, Baskerville said there is no such thing as a 50-state compliance hemp label.
One helpful thing to keep in mind when crafting a label, Bougenies said, is to “go with the most stringent labeling requirement … then that means you’ll be in compliance with states that aren’t as stringent.
“There are ways to mitigate risks, but it requires due diligence and working with law firm,” she said.
When asked about the controversial Delta 8 and the legally gray area into which it falls, Adam Grossman (right photo, far left), founder and executive chairman of Papa & Barkley, which sells CBD and THC products, said, “I think in a moment in time, as a side hustle, you could make money with it, but if you want to build a long-term, reliable business, you might run into problems with Delta 8.”
Hot Trends in CBD
In another presentation, “Hot Trends in CBD,” Ryan Allio (pictured bottom left), vice president of sales and business with ZuRI, a CBD supplier, said there’s still a large, skeptical audience out there, but that strong growth is expected in 2022.
For the first time, in a consumer insights survey by Brightfield Group in Q2 2021 that he presented, “price is not the number one” concern for the first time, Allio said. Rather, “desired effects” is tops. Also, females purchase more CBD than males, and baby boomers grew from 3% in 2019’s fourth quarter to 12% in 2021’s second quarter.
“I think packaging is extremely important in speaking to your customer,” Allio said, and tinctures still dominate the market.
With white label trends, “skincare has been off charts in 2021 with brands we work with,” he said. “Three out of four brands that we work with or in our pipeline are skincare related. People already spend a lot on skincare products, so if you add CBD,” you have nothing to lose, he added.
In addition, the doses are growing. Where 250 or 500 milligrams was the norm, products are now starting at 1,500 milligrams.
“Consumers are valuing the desired effects and realize you need a stronger milligram to get the desired effects,” he said.
It’s also important to increase awareness regarding point-of-sale marketing material. “You’re not just going to sell on the retailer’s shelf,” he said. “You need POS items, and retailers want help and hand-holding to transfer that knowledge to them so they can pass on to the consumer.”
Finding the Right Wholesaler
In “How to Find the Right CBD Wholesale Supplier,” Marzena Jonak (pictured top center), business strategist with CBD Hemp Experts, said when forming a partnership, make sure the wholesaler is a premium user, licensed and certified.
“Ask how long they’ve been in the business, what their control processes are and why they are better than someone else,” she said, adding it’s important to evaluate their customer service. “Eighty percent who call us have a complaint about customer service someplace else. If they’re not picking up the phone, that’s a sign they won’t be a good partner.”
Jonak also said it’s important to ask if the supplier has a sample program. When one does receive samples, look to see if they came with a tracking/batch number and make sure you can visit a website and examine the information on third-party testing. Also, determine how long the shipment took. “Test them on family and friends,” she said. “Judge the entire process to be sure it’s what you hoped for.”
In regard to licensing and certification, does the supplier follow good manufacturing practices and avoid cross-contamination, she asked, adding to look for a company that has as many of the following labels as possible:
- Manufactured in a FDA Registered Facility
- ISO 9001 Certified
- USDA Organic
- Kosher or Halal Certification
- Not Tested on Animals
- Third Party Tested in Certified Labs (COA)
- Certified Good Manufacturing Practice (CGMP)
- In some states: a required food permit from the Division of Food Safety
“Whoever you talk to at the reseller or manufacturer, make sure they show you the Certificate of Analysis (COA),” she said. “Your manufacturer should be able to protect you and them.”