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CBD formula

CBD retail need-to-knows

Should you get in on the "biggest natural product in the history of natural products," or safely see what happens first?

A certain gold rush mentality surrounds the industrial hemp-derived full-spectrum oil market (you know, CBD). Entrepreneurs are flooding into the space, trying to formulate products that are effective, disruptive and different from their competition. Cannabidiol-based products now have the distinction of being a consumer product sold in the biggest variety of sales channels. Think about it: You can find CBD in brick-and-mortar retail outlets, in physician’s offices, online, in boutique stores, in bookstores even, and in both medical and recreational marijuana dispensaries.

Everybody, it seems, wants to get in on the gold rush.

Natural and specialty brick-and-mortar stores represented about 14 percent of the $190 million in U.S. hemp-based CBD sales in 2017, according to Hemp Business Journal. By 2022, those stores are projected to account for 28 percent of the $650 million sales.

Chains taking up hemp oil is one reason for the outsized expectations going forward. The other reason, however, is consumer satisfaction with everyday wellness. And it’s in those everyday health concerns like pain, stress and sleep where bricks-and-mortar stores are finding wild success.

“It certainly lifts the basket size,” says Marieke Cormier, owner of Roots Natural Foods in Leominster, Massachusetts. “The people who I thought would buy it is totally different. It’s not that young crowd; it’s older people who have a lot of pain and sleep issues. When they get over that thing that ‘I’m not buying weed,’ then it’s totally normal.”

“For retail, it’s a really good product with good margins,” says Mark Retzloff, founder of Alfalfa’s in Boulder, Colorado. “It’s something people use every day, so they come back in.”

Every time stories about authorities coming in to stores to seize product or close stores hits the media, two things happen: after the initial hullabaloo, the media promotes the story, then sales skyrocket.

“The first big explosion last year was the excise police raiding stores in Indianapolis,” says Jordan Fink, who works at Adele’s Naturally in southern Indiana. “That made people aware that CBD was available for purchase in Indiana. One journalist in town put us on the news, and everyone said, hey this is the store that’s selling it.”

So what does a store owner do if authorities demand product be removed from shelves?

“You take them off the shelves, initially,” advises attorney Justin Prochnow, from the Greenberg Traurig law firm, who specializes in issues including hemp oil between dietary supplements companies and the FDA.

Fink says that from his perspective at retail, he would remove products from shelves as requested—but that would not be quite the first thing he’d do.

“Probably the very first thing would be to call my journalist friend and tell her to bring a camera,” Fink says. “Then I’d let them have it. And make a big story about it. Product gets returned—there are public policies—and that only helps sales.”

Fink says that at Adele’s Naturally, they’ve been proactive at reaching out to local authorities to let them know they’re selling a legal product legally.

One retailer not concerned is Annie Rouse, owner of Anavii Market in Lexington, Kentucky. “If someone were to come after me for selling CBD, I would look at them like, really?” Rouse says. “There’s an opioid epidemic under way. I think you have other things to worry about.”

Retail must-knows

Retailers have questions. Shoppers have questions. Actually, pretty much everybody in the value chain has questions, from growers to manufacturers and marketers and even law enforcement and regulators. Here are the main ones for retailers to ponder.

Source. This is the most important one. Make sure the products you stock come from the plant source outlined in the 2014 Farm Bill: industrial hemp-derived, full-spectrum hemp oil. This means it contains less than 0.3 percent THC. It also means no CBD isolates.

“You always want to make sure you have a protected defense,” says Josh Hendrix, business development manager for CV Sciences. “Reputable companies are testing and can produce a C of A (Certificate of Analysis) on their product.”

This is seconded by Bo Becker, VP of marketing at CW Hemp, makers of the famous pioneering Charlotte’s Web strain of hemp-derived CBD. “Know where your hemp is coming from,” he says. “Know where the fields are. Know the soil health, what’s put on the plant. We intentionally grow in the U.S. on family farms. We’re vertically integrated and grow in Colorado and Kentucky with a pilot farm in New York. The hemp needs to come from a place you can track and source.”

Differentiation. Your first product may well be a national brand that has straight-up full-spectrum hemp oil and is known to treat its business like a quality dietary supplement manufacturer. When products were seized from store shelves in Tennessee in February, many of them were gummies that featured prominently displayed marijuana leaves, “to make them look like something they’re not,” Hendrix says.

“I knew I wouldn’t buy just anybody’s CBD,” says Cormier. “We started with PlusCBD Oil. The staff was gung-ho about it and we filled up a cabinet, then another cabinet, and we sold a ton of it. Now we have a couple of brands. My staff wanted to do private label but I didn’t want to put my name on it.”

Some companies, like HempFusion, put together carefully considered formulations that would stand alone as quality botanical supplements for conditions like stress or sleep—and then supercharge them with full-spectrum hemp oil.

“When we expanded, we knew it would be something different,” Fink says. “So we went with a topical.”

With Alfalfa’s in three Colorado locations, the retailer differentiated by selecting products that also aligned with community values in a region that is muscularly liberal and full of conscientious consumers.

“We have a number of hemp companies in our area, so we’re carrying local ones, and that makes a difference to our customers,” Retzloff says. “We’re really trying to focus on people producing it sustainably and growing organic hemp. That fits with who we are in our community.”

Product placement. Where should you place your CBD products? With adaptogens? Healthy aging? Stress? Sleep?

At Roots Natural Foods, they put it on an end cap and a side wing to an end cap leading to the supplements aisle. 

“It’s pretty prominent,” Cormier says. “It’s its own category, not in any condition-specific space.”

Creating its own category seems to have some cachet.

“I say you create your own category—hemp for your health is going to be the future of the natural products industry,” Hendrix says. “The hemp for your health category is coming and hemp extracts will drive that train. Then market the hell out of it. The only way we’ll mitigate the risk is public opinion.”

That’s an idea that Fink saw at first, but then saw an even better way that has certainly paid dividends at Adele’s.

“It’s all over the store right now,” Fink says. “It is what people are looking for. I like to put it in places where if I’m busy someone can find it on their own.”

The other thing stores are doing is putting it in locked cabinets. Part of that is it’s a pricey product, which makes it a target for thieves.

“That was the thing people told us to do,” Cormier says. “It’s the only thing we have in a locked cabinet. It is weird but it’s selling great.”

Customer questions. Shoppers have questions, but as time goes on and CBD spreads via word of mouth, the questions have changed. At first, people were asking for the “marijuana supplement” and wondering if they could get high off of it. Those kinds of questions have been tapering off.

“We still get the question now and again but nowhere near where we did six months ago,” Fink says. 

He says that after that, customers want to know if they might fail a drug test. “Our default is to talk to H.R. or your doctor,” Fink says. “Everyone’s official line is if you’re worried, then abstain.”

Rouse says when customers express concern about getting drug tested, she first asks where they’re working. “If you work for the Department of Transportation, they measure nanograms of metabolites of THC and they will pick up on it unless you have zero THC,” she says. “If you have to take a drug test, then take an isolate or something with zero THC.”

Other questions are around the proper dosage to take for specific health conditions.

“I wish I had a better answer than just take it and adjust it to your needs,” Fink says.

And for shoppers who wonder which specific SKU to buy, that leads to strategic product selections that are diverse in product type and dosage quantity.

Bullish

The stories of lives being changed are palpable. And it’s not just from the rare cases of children suffering from profoundly debilitating seizure conditions. People have a new way to cope with stress, sleep issues or everyday pain, the top health concern of repeat customers who report hemp oil’s utility in dealing with it.

“I do think the future in the hemp and CBD category looks incredibly bright as we continue to see mainstream acceptance with more and more retailers,” Becker says. “It’s great to see the level of enthusiasm from the families as well as retailers that have chosen to trust us in the whole plant hemp extract space.”

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