How Do C-Store Operators Feel About CBD?

ASHEVILLE, N.C. — Cannabidiol (CBD), a nonpsychoactive component of cannabis, has become one of the most sought-after—and controversial—ingredients in retail products in recent memory. It has emerged in a variety of items, such as gummies, lotions and oils, and is estimated to reach nearly $200 billion in global sales by 2025, according to Wells Fargo Securities, New York.

“CBD is right up there with other CPG categories, like beer, cigarettes and wine,” said Bonnie Herzog, managing director of equity research for Wells Fargo Securities, during her presentation at Winsight and CSP’s  2019 Outlook Leadership Conference in Asheville, N.C. “It will disrupt multiple sectors, including alcoholic beverages, tobacco and pharmaceuticals.”

But concern trumps excitement for many retailers, because neither the U.S. Food & Drug Administration nor the U.S. Department of Agriculture has released guidelines on handling and selling the substance. And until those regulations are released, many retailers will remain on the sidelines of the CBD frenzy.

Here are five more insights on CBD from the Outlook Leadership session …

Pictured: Bonnie Herzog (from left) and Catia Kossovsky

One thing is for sure: Retailers are in on CBD. Roughly half of convenience-store retailers sell CBD products in their stores today, while 20% plan on doing so down the line, according to a c-store operator survey by Wells Fargo. Beyond that, c-store retailers currently sell the most of or are most interested in selling lotions and topicals more than any other CBD product. They outpaced gummies, tinctures, gel caps, shots, pet treats, bottled water, oils and more.

“Most of the CBD innovation is in food and beverages, beauty products and nicotine,” Herzog said.

Fifty-five percent of c-store retailers who already sell or are looking to sell CBD products said they will merchandise the items as age-verified, behind-the counter-products, according to Wells Fargo. On the other end, 40% of these retailers said they’re merchandising the ingredient within specific categories, such as tobacco, beverages and snacks.

Case in point: Whether it’s behind the counter or mixed into categories, retailers are dedicating shelf space to CBD products.

“More than four-fifths of retailers said they are creating space for CBD, and most of them are adding 2 to 4 feet of shelf space,” Herzog said.

Most retailers are worried about selling CBD products in some capacity, and it’s mainly due to the hazy regulations, said Herzog. Fifty-one percent of c-store operators said state-by-state regulations are their top concern regarding CBD, which is by far the highest concern, according to Wells Fargo. Others included federal regulations (10%), the social stigma of selling CBD (10%), the lack of education regarding CBD (8%) and in-store theft (6%).

Some CBD products in the HBC space—such as lotions or creams—that are considered a wellness or “curing” item are forbidden, because there is no scientific proof that CBD offers these benefits, said Catia Kossovsky, chair of corporate and securities practice for Hoban Law Group, Denver, during the presentation.

“You can’t say these things, or else the FDA will come after you,” she said.

New CBD product companies are entering the market almost daily. This will likely continue over the next two years until the legislative playing field changes and corporate firms acquire these smaller brands, Kossovsky said. Some large beverage and tobacco companies that have revealed plans for CBD include Coca Cola, Altria, Constellation Brands, Heineken, PepsiCo and AriZona Beverages.

Herzog agrees with Kossovsky. She believes only a few corporate brands will represent the entire CBD category in the years to come. But don’t expect that to happen until the regulations are made, she said.

“We won’t see a shakeout until we see more clarity and a need for these smaller companies to comply,” Herzog said. “Until then, do your homework, do your due diligence and understand the terms and ingredients.”