CBD’s National Rollout Requires Execution, Not Just Excitement

With CVS, Walgreens and Rite-Aid all moving in lock step
with CBD products, general retailers are now required to develop their own CBD
related strategies. Such was the focus at last week’s CBD and the Future of Cannabis
conference, where convenience store operators learned more about the
opportunities with CBD. And for a group that has seen their already slim
margins shrink due to lower cigarette sales, CBD offers a new high-growth item
to stock.

The ubiquity of drug stores and c-stores will almost assuredly accelerate the growth of CBD. In research conducted for The CBD Consumer Experience: Part One, accessibility was identified as one of the key factors holding back consumer usage. Even among current CBD users, 43% reported that they would use CBD more frequently if they had easier access to products, while 30% of non-users reported the same. In the more general cannabis market, inconvenient dispensary locations is one of the key drivers for illegal cannabis usage, cited by a quarter of recreational users in 2018’s Adult Use Consumer report. With many consumers in adult-use and medical-states living in cannabis deserts, sparse dispensary coverage is obviously a limiting factor.

While CBD products are available online, for new customers
who are not familiar with CBD, seeing these products in a well-known and
trusted store lends credibility and assurances. Even for those customers who
regularly use CBD today, opening the market by another potential 21,000
locations (combined CVS, Walgreens and Rite-Aid footprint) will undoubtedly
lead to greater consumer acceptance and usage.

CBD’s Gain May Cause Dispensary Pain

Current cannabis dispensaries should take note here. It’s
true that CBD has been sold in many health food stores over the years, but
those stores do not have the same general consumer audience as drug and
c-stores. The stores’ massive footprints and no requirement for either a
medical card or ID scan makes it ideal for consumers looking for a convenient
outlet, without the layers of security and checks required in cannabis
dispensaries. For the CBD segments identified in The CBD Consumer Experience: Part One, notably Goop-y Gwyneths and Dosing
Dads, the combination of convenient locations and purchase experience will be
appealing.

Growth That Needs Management

The prospects of CBD’s mainstreaming into general retail are
certainly positive but there are risks that these retailers need to navigate, including
the sales and usage of CBD products among those under 18 years old. With a
number of c-stores already under watch for sales of e-cigarettes to minors, CBD
and cannabis operators need to push their retail partners to strictly adhere to
the letter and the spirit of local laws regulating CBD product sales.

But the larger concern that these new retailers must address
is actually a fairly simple one—where to stock these products. Do they belong
on shelves, mixed in with their adjacent product categories, like snacks,
candy, beauty products, etc.? Do they belong behind the counter, the “back bar”?
Or do they belong at the checkout but behind lock and key?

Due to shrinkage concerns and risk averseness to sales to minors,
it’s likely that CBD products will be placed behind the counter. In time, it
may be that CBD products make their way onto the shelves, mixed in with general
wellness products. But as an entirely new product category, operators should be
pushing for checkout location with select high-volume categories that make
sense at such a location—food items, beverages and concentrates. Each retailer
will determine the best level of security for these products, but placement in
a high-traffic zone is key.

Employee Engagement is Necessary

Lastly, product placement may not matter if the people meant
to provide customer service know little about the products. And for the CBD
industry, that will be a challenge that will require long-term investment and
clarity. As consumers learn and read more about CBD, they’ll likely ask about
derivations, intended effects, usage occasions and comparisons to other CBD
brands. Vague or noncommittal answers are not a good experience for any
party—the sales clerk, the customer or the CBD brand. In this regard, the
challenge for CBD is a universal one for brands in drug stores and c-stores,
but it does not diminish this challenge’s importance.

CBD’s introduction into mainstream retail is not without
peril, but the growth opportunity for manufacturers and retailers is significant.
Getting this right is not only important for the opportunity at hand, but also
for the long-term push to end cannabis prohibition nationally.