CBD or cannabinoid products appeared bound for glory in the convenience channel in 2017 and 2018. Just made legal by the Farm Bill of 2018, the change opened the door to new and varied types of products enhanced with CBD and packaged for a new audience. But the retail sector hit a rough patch in early 2020 as the pandemic dawned, upsetting precious momentum as consumers flocked to e-commerce to fulfill CBD needs.
“During the pandemic people avoided brick-and-mortar stores for CBD and went online, which still sees sales proceeding well,” says Don Burke, senior vice president of Pittsburgh-based database management firm Management Science Associates Inc. (MSA).
As a counterstrike, MSA recommends c-stores work on select merchandising techniques, such as strong, strategic visibility of products across the store and frequent communication.
That’s exactly the goal of BW Gas & Convenience Retail’s “store-within-a-store” retail model launched in March with a multi-category CBD and hemp-derived product portfolio.
Already a pioneer in CBD merchandising across price, promotion and display, the Fort Worth, Texas-based corporate parent of the Yesway and Allsup’s convenience chains put a new wrinkle in its CBD fortunes with The Feel Good Shop+. The format offers an extensive range of CBD items, an arrangement done with GPO Plus Inc. and Distro+, suppliers of CBD beverages, snacks, vape products and more. GPO supplies the products on a consignment basis.
“We believe this relationship will provide a nice boost to our existing sales made through this channel,” says Derek Gaskins, chief marketing officer of Yesway. “We’re extremely pleased to be able to offer an expanded range of products combined with best-in-class DSD delivery for our customers, matching our focus on quality, service and value.”
Create a Spark
GPO Plus/Distro+ oversees the merchandising effort upfront and works with Yesway and Allsup’s stores on sales and profit arrangements.
The distributor pledges to bring “white glove service to all of the Yesway and Allsup’s stores. Our investment in supply chain and logistics is creating jobs and entrenching us further with the communities we serve,” says Joseph Jaconi, president of Distro+.
The Feel Good Shop+ offers consumers an extensive range of hemp-derived cannabinoid products, including Delta-8, HHC and other cannabinoid variants, all in one position. Currently, it provides products from a variety of CBD vendors, including Hempacco, Kill Cliff, Canopy Growth and CaliGold’s Flayvorz.
Growing the section, Yesway and Allsup’s also have partnered with Noble Brands to stock hemp beverage brand Plift in its 325-plus stores. The flavor-forward beverage contains 4 milligrams of hemp-derived Delta-9 THC per 12-ounce can. It has less than 0.3% Delta-9 THC and is manufactured in accordance with the Agriculture Improvement Act of 2018.
Burke says a platform such as Yesway’s Feel Good Shop+ is a good start. “[One] caveat is that kratom (an herbal substance that produces opioid- and psychoactive effects) and Delta-8 might be cannibalizing CBD business across all retail classes of trade, including convenience,” he says. “In states where legal, c-stores should look to bundle CBD, kratom and Delta together.”
Trending Categories
Looking at the top forms of CBD products year to date through Feb. 4, 2023, gummies, vape and topicals accounted for 78% of all distributor shipments to all retail channels, according to MSA. Gummies dollar shares increased significantly versus 2022, while topicals declined.
Gummies continue to trend higher as a CBD format consumers value. The nonchocolate segment increased its aggregate retail channel dollar share from 18% in 2021 to 21% in 2022 and to 15% through Feb. 4, according to MSA’s distributor shipment data to all retail channels. In particular, Burke says, c-stores represent the prime channel for the sales of CBD-enhanced gummies and beverages.
CBD vape dollar share fell from 31% in 2021 to 25% as of February, while topicals endured the deepest dive—from 24% dollar share across all retail in 2022 to 15% through Feb. 4, according to MSA. People are using more CBD formats for their pets as well; distributor shipments increased from 1% in 2022 to 5% by February 2023, according to MSA.
For full-year 2022, electronic smoking devices infused with CBD grew by 89% for both dollar and unit sales within c-stores, compared to like-period 2021, says Scott Love, c-store and CBD analyst for Chicago-based market research firm Circana. Love sees opportunity in tobacco-adjacent products.
Hemp-based cigarettes and hemp tobacco blends are arriving to market as viable smoking alternatives, Love says.
C-stores should look to merchandise these varieties by looking at their other tobacco and tobacco-adjacent products, such as those for smoking cessation.
Educating Consumers
Thirty-four percent of consumers say they are not familiar with the various compounds and uses for CBD products, according to BDSA Consumer Insights.
Burke says consumer education is one practice that could help boost CBD-product sales, including through product packaging to help consumers make more informed buying choices. But Burke says c-stores have limited opportunity to make a marked difference in influencing a CBD-oriented sale.
“CBD users get most of their education online, all done in the convenience and comfort of their homes,” says Burke. “C-stores don’t have much opportunity to implement in-store education about CBD in the few minutes that customers spend in their stores. Maybe provide distributor-supplied pamphlets.”
Rebound Bound?
Burke has high expectations for the category in 2023 within the c-store channel, expecting it to “work back toward” the growth it initially saw in 2020.
“It appears to us that the two classes of trade that are most successful with CBD are c-stores and dispensaries. Except for e-commerce, we have not seen much sales activity occurring elsewhere, unless you look at vape shops and dedicated CBD shops,” says Burke. “It takes a while for consumers to change their purchase habits, but based on how convenient it is to purchase in c-stores, [consumers will] likely return to it.”
Burke says removing certain items where operators commit too much space to individual SKUs, such as hemp smokables and beverages, is a smart move as they’re only taking up prime shelf space.