3 Highlights From CSP’s Tobacco/OTP and CBD Forum

MIAMI — Trips to convenience-stores have rebounded in 2021 as COVID-19 pandemic concerns have eased, up 4%, according to IRI. One driver that kept traffic steady throughout is to buy tobacco products.  

Industry experts shared their insights with c-store retailers and suppliers at CSP’s Tobacco/OTP and CBD Forum, which was held from Nov. 17 through 19 in Miami.

Here are three highlights from their presentations …

Selling cannabis is complicated, especially when cannabis is federally illegal but authorized at the state level, said Johnathan Havens, partner at Washington, D.C., and Baltimore-based Saul Ewing Arnstein and Leher LLP.

Thirty-eight states have authorized the sale of medical cannabis, and 19 of those states also have authorized recreational or “adult use” cannabis, Havens said. Other states are considering establishing such programs; however, marijuana is still illegal under federal law.

Havens described the difference between the cannabis plant family and its species, including hemp and marijuana. Hemp is the strain of cannabis that is grown for agricultural products while marijuana is known for the flowering tops of the plant, which are typically bred to have a high tetrahydrocannabinol (THC) content. Hemp contains 0.3% or less of THC and is what’s typically used in cannabidiol (CBD) oil, he said.

Per the 2018 Farm Bill, hemp was made federally legal under the Controlled Substances Act (CSA). However, one of the biggest misconceptions coming out of the bill is that now that hemp is legal, people can do whatever they want with it and its derivatives, Havens said. Then-U.S. Food and Drug Administration (FDA) Commissioner Scott Gottlieb said the legislation did not change the agency’s authority to regulate products containing cannabis or cannabis-derived compounds under the Federal Food, Drug and Cosmetic (FD&C) Act.

It’s also unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, among other restrictions, he said. But enforcing CBD products is not top of mind for the FDA.

“Essentially, the federal government is taking a hands-off approach as long as it’s not crossing state lines,” Haven’s said.

Retailers are also less likely to hear from the FDA if the cannabis products they sell are not making aggressive treatment claims, Havens said.

Havens laid out the three levels of risk when it comes to selling CBD. No to low risk would be not selling CBD at all, or to only sell topicals in states that permit them.

A low to moderate risk would be selling topicals and ingestibles in states that permit them and to make soft claims regarding products. A moderate to high risk would be selling topicals and ingestibles in all 50 states without regards to state-specific requirements and making aggressive therapeutic claims regarding products, he said.

When identifying what products to sell in their stores, retailers should look for a responsible brand, ask for copies of its licensing documents and third-party testing documents and ask the brand if it offers protection and support, Havens said.

Almost three in 10 c-store consumers purchase tobacco products when they come into the store, said Donna Hood Crecca, principal at Chicago-based research firm Technomic, CSP's sister company. These consumers are nearly evenly split when it comes to gender and more than half are white, or non-Hispanic/Latino, according to a Technomic survey.

Frequent tobacco users are slightly less likely to work from home, “so they had slightly less disruption in their lives than other consumers,” Crecca said.

When it comes to how these customers choose one c-store over another for their tobacco product, the top decision drivers are whether the consumer’s preferred brand is available, if it’s in a convenient location, if there are low prices, quick service and a wide variety of products, she said.

Millennials make up the largest group of tobacco buyers in c-stores at 37%, followed by baby boomers at 28%, Gen Xers at 22% and Gen Zers by 13%.

CBD purchasers have slightly different demographics. About 28% of c-store patrons purchase CBD from any type of retailer or online one time a month, Crecca said. About 46% of the consumers are male, while 54% are women.

Millennials make up most of these purchases at 44% followed by Gen Zers at 28%, Gen Xers at 19% and baby boomers at 13%, she said.

Cost is the primary deterrent to purchasing CBD in c-stores, Crecca said. Forty percent of respondents said the expect CBD would be more expensive in c-stores, 33% said they don’t think of c-stores for CBD products and 30% said they do not trust c-stores as retailers for CBD products.

The top five categories by dollar sales really don’t change in the c-store channel, said Larry Levin, executive vice president of thought leadership at Chicago-based market research firm IRI. The cigarette, beverage/alcohol, energy drink, carbonated beverage and smokeless tobacco categories contribute 63% of sales for the convenience channel.

Cigarettes account for the most sales at $56.4 billion, and smokeless sales were at $8.5 billion for the last year, Levin said. Cigarette growth was only up a fraction though, 0.3%, while smokeless showed 6.2% growth.

Electronic cigarettes, while a smaller segment, showed 20.1% growth. More than other growth leaders like meat snacks, sports drinks, nonchocolate candy and spirits/ale, Levin said.

“These kinds of data really emphasize the importance that the nicotine segment provides to the c-store channel,” he said.

Consumers are coming to the c-store channel more than any other to buy their cigarettes, cigars and electronic nicotine devices, Levin said.

For example, while cigarettes are 75% of c-store’s tobacco sales, 86% of the sales of cigarettes happen in c-stores for the channels that IRI covers, which doesn’t include tobacco shops, Levin said.