CHICAGO — While the 2018 Farm Bill opened the door for cannabidiol (CBD) products, there are still some gray areas in the category.
That hasn’t stopped many convenience-store retailers, though, from capitalizing on the trends and growing demand for CBD and other hemp products.
Cannabis is becoming more mainstream, and retailers who follow the rules can see great success in the category, experts said at Winsight Media’s 2020 CBD Forum.
Click through to see the latest updates on how COVID-19 has affected CBD sales, where federal regulation is at, what’s deterring consumers from buying CBD, what the latest consumer data is showing and more …
What to Know About Regulation
It’s important for retailers to do their research and seek help from experts if they’re thinking about selling CBD, Cindy Sovine, of Hemp Compliance Consulting, said at the CBD Forum.
The first step is understanding the terminology.
Cannabis refers to a specific genus of flowering plant, while marijuana is a legal term that refers to anything with more than 0.3% tetrahydrocannabinol (THC), the psychoactive component to marijuana, Sovine said.
Industrial hemp is a catch-all term that is defined as anything containing 0.3% or less THC, and would include CBD, she said.
One of the main challenges for multi-state operators is navigating not only federal laws but local laws, which vary by state. Forty-six states—all but Idaho, South Dakota, New Hampshire and Mississippi—have enacted hemp legislation, Sovine said.
Alex Buscher, founder of Buscher Law out of Denver, started his law firm to focus on the complexities of the hemp industry. The FDA oversees regulation the hemp industry, and the agency has stated that CBD in cosmetic products is legal; however, food or dietary supplements with CBD is illegal under federal law, Buscher said.
There is a gray area when it comes to whether adding hemp with naturally occurring CBD in it counts as directly adding CBD to a product.
“So there is a question—and the FDA has not actually stated one way or another on how they would enforce on this—on whether when you put hemp extract containing CBD into food whether that violates the food drug and cosmetic act. And that’s really where the crux of the issue is right now federally,” Buscher said.
At a more local level, many states have passed laws explicitly allowing cannabinoids and hemp derivatives in food, he said.
What the FDA seems to care about most, he said, is medical claims. The agency has cracked down on CBD products that make medical claims—like that CBD can improve sleep or ease pain. Retailers need to keep those claims out of packaging, websites and even testimonials, Buscher said.
While it can be challenging to navigate CBD regulation, Sovine provided these tips for c-stores who are looking to get into the business:
- Know where products are coming from.
- Ensure products are compliant with all state and local laws.
- Source edible products from states that have laws governing food production.
- Ensure products have legal labeling .
- Don’t go into this industry blind—use experts who are willing to help.
Cannabis Becomes Mainstream
Cannabis has universal appeal, said Larry Levin, executive vice president of consumer and shopper marketing at IRI.
“There’s not a faster sphere of innovation that’s happening and it’s also going mainstream. And that’s why we’re starting to see more and more traditional retail outlets taking CBD products,” Levin said.
The industry is still facing challenges, however, when it comes to consumers’ knowledge and acceptance of cannabis products. Levin, citing data from Chicago-based market research firm IRI and its partner Denver-based BDS Analytics, said one in five Americans cannot describe what a cannabinoid is, leading to confusion.
The demand is there, though, and as stereotypes and challenges are removed, the market will grow, Levin said.
By the end of 2020, the worldwide cannabis market is expected to reach $20 billion, and that is predicted to more than double by 2025 to reach a $47 billion market, according to BDS Analytics research.
In mainstream retail channels, like c-stores, CBD food and beverages are just getting started, Levin said. The categories amassed $136 million over the last year.
While CBD acceptance is growing, so is marijuana—69% of Americans said they are a consumer or acceptor of cannabis, Levin said. And there is no one cannabis consumer, Levin said. Cannabis consumers span generations, gender, socio and economic backgrounds, motivations and more.
“Let’s get away from that stereotype that it’s strictly for the ‘stoner’ because that’s just not the case,” Levin said. “It really is mainstream and reflected in the consumers that you see coming into your stores to buy.”
What’s Driving Hemp Use?
Three fourths of users are using hemp products for recreational or social use, Levin said.
“A lot of people are substituting a beer and a [glass of] wine for an opportunity to have marijuana, or they’re complementing that,” Levin said.
Thirty-seven percent consume for both recreational and social and health or medical reasons, he said.
Almost half of consumers preferring edible THC or CBD products consume daily, with evening being a heavy consumption time, Levin said. Forty-five percent said they consumed later in the evening.
“Start to think about when to promote product usage of some CBD products,” Levin said. “Maybe it’s later in the day as a way to get the message out there because that’s when people really think about using the product.”
People are influenced by taste, price and familiarity with a brand when they make an edible purchase. Candy takes the lead of sales with dispensary edibles, driven by gummies. That’s followed by chocolate, infused foods, pills and beverages, Levin said.
There’s also a connection between CBD and tobacco.
CBD users are two to three times more likely to use tobacco than the general population, Don Burke, senior vice president of Management Science Associates Inc., said.
While 20% of total people use cigarettes, but about 36% of people who use CBD use cigarettes, according to survey data. That trend holds for other subcategories like cigars, chewing tobacco, e-cigarettes and pipe tobacco, he said.
“In every case… those that use CBD are also far more likely to use a tobacco item,” Burke said. “Good news for the convenience retailer, that continues.”
Consumers claimed a slight increase in purchasing of CBD products during COVID-19, Levin said. Reasons for shopping included fears of long stay-at-home or shelter-in-place orders.
About two-third of consumers in the first quarter of the year said their shopping frequency either increased or didn’t change at all due to COVID-19.
How the industry was affected also depended on the market. A BDS Analytics study of dispensary sales in Arizona, California, Colorado, Maryland, Nevada and Oregon found that the Nevada cannabis market took the biggest hit due to COVID-19.
This is likely due to the state's dependency on tourism, which was affected by the pandemic, Levin said. The other mentioned states, however, saw growth in April and compared to 2019.
C-Store Consumer Insights
Fifty-six percent of c-store customers are knowledgeable about CBD and 41% said they have tried it, according to Technomic data from an October survey of 1,000 c-store customers 18 years and older.
Among those who have not tired CBD or are not interested in trying it, 40% said they would be at least somewhat likely to try CBD after reading a detailed description, said Bret Yonke, senior manager of research and insights at Technomic. Customers need to be reassured of the product’s safety, he said.
“It’ll be really important to increase customer knowledge to really grow this industry in the future,” Yonke said.
Deterrents to people trying CBD are people not being interested in general, people being worried about its safety and people not knowing enough about CBD.
So what can help?
Technology is one way to help provide c-store customers with the CBD knowledge they need, Yonke said. One example of this is greenbox’s self-dispensing CBD vending machines. This would allow consumers to learn about and buy CBD on their own, without bothering time-pressed c-store employees who may not be able to provide customers with the answers they need on CBD, he said.
Topicals are the most-used CBD format, according to Technomic’s survey, and use is up across the board since the first quarter of 2020.
When consumers were asked what CBD formats they used at least once a month, 59% said topicals, 58% said gummies, 57% said concentrations, 57% said baked goods, 56% said water, 56% said candy (non-chocolate) and 55% said chocolate.
There is also an interest in customers trying CBD in prepared foods, Yonke said.
When customers were asked if they would be interested in purchasing CBD-infused prepared foods or beverages from c-stores, 62% said yes. That number rose to 74% for those 18 to 24 years old.
In terms of CBD-infused foodservice items, cold beverages and baked goods were of most interest to consumers, Technomic found.