NATIONAL REPORT — CBD is arguably the next emerging category for retailers across all channels.
With hemp-derived CBD gaining in popularity — in line with overarching health, wellness and anti-pharma trends — and product availability and variety increasing, the market is on track to grow to $23.7 billion through 2023, according to a new report by Brightfield Group, a predictive analytics and market research firm for the legal CBD (cannabidiol) and cannabis industries.
That is a sales projection that seems too good to pass up for convenience store retailers, who are facing continuous declines in cigarette sales and a slowdown in foodservice growth.
Consumers today often confuse CBD with cannabis, but there is a difference. CBD is one of the many compounds found in hemp. The Agriculture Improvement Act of 2018 legalized CBD, derived from hemp, but with a 0.3-percent THC threshold. THC is the principal psychoactive component of cannabis. CBD products are not psychoactive like cannabis is.
As with any emerging category, there is a learning curve and consumer education is needed.
CBD products span multiple categories, which could make for a merchandising headache.
John Cochran, chief operating officer of Harvest Health & Recreation Inc., believes it is best for merchandising and marketing purposes to keep all CBD items displayed together.
His company is partnering with the Asian American Trade Associations Council, one of the largest associations for independent c-stores and gas stations in the country, to roll out CBD products to more than 10,000 retail stores nationwide,
"I don't think anyone knows yet what consumer adjacencies are strongest for CBD products. Near or on the checkout area and with other CBD products makes the most sense now. But water and healthier beverages would make sense as a strong secondary placement," Cochran advised.
There are some challenges that must be overcome when merchandising CBD products in a convenience store, according to Paul Eifert, vice president of development at Great Northern Instore, a designer, manufacturer and service provider of in-store displays.
"Space is usually at a premium and room for graphics is often required to educate and help shoppers navigate the various product forms and strengths. … The small packages and limited brand recognition require extra attention to ensure the display glorifies the product and stands out to the shopper,” he explained.
Providing security for the products is also important due to their high price points and small package sizes that can easily be prone to shoplifting, Eifert added.
"In some instances, the display needs to be on the front counter and locked so that only the clerk can remove the product,” he said. “Product can be merchandised inline or on endcaps, but a locking case is recommended to secure the product.”
Given CBD's new presence in mainstream retail channels, Eifert agrees that there is a strong case for grouping the products together and creating one destination where shoppers can see and compare all the brands and product forms at once.
"CVS has created an endcap in its stores for this purpose, and I believe others will follow. As the category matures and dominant brands emerge, individual branded displays with complete lines of CBD products will become more common," he said.
Great Northern Instore is currently working with several CBD product manufacturers to develop in-store merchandising strategies. Educating the consumer about the product and the brand are common asks from clients, according to Eifert. Care has to be taken with the language used on the graphics to highlight product benefits without making specific medical claims.