Photograph courtesy of Medterra
CHICAGO — It’s less scary to rub an unfamiliar product on your elbow than it is to consume it.
That’s why consumers who are new to the cannabidiol (CBD) market are more willing to try a CBD lotion than a CBD tincture drop under their tongue, said Hayley Carstensen, senior marketing manager for Lil’ Drug Store Products Inc., Cedar Rapids, Iowa.
“We think that the gummies will be very popular, but what we’re seeing is an increased interest on the retail side on those nonedible SKUs,” Carstensen said.
In summer 2019, Lil’ Drug partnered with Denver-based Precision Botanical to carry its CBD products. Other channels are also interested in the category. Dollar General recently announced it would start selling nonedible CBD products—including creams, ointments, bath bombs, bath salts and face masks—in about 1,100 stores in Tennessee and Kentucky.
The price points on the products will range from $7 to $20, according to the Goodlettsville, Tenn.-based company, and it plans to expand CBD products into more states by this spring.
Convenience stores represent 53% of the $24 million in CBD sales from the convenience, food, mass and drug channels, according to Nielsen, New York. But while topicals and tinctures dominate other retail channels, convenience is more diverse, with more than half of sales coming from gummies; however, some retailers and manufacturers believe nonedible CBD products are trending up.
As Tom LaManna, vice president of merchandising services for Convenience Valet, Glendale Heights, Ill., which carries Medterra CBD products, put it: “It’s going to be big.”
Leo Vercollone, CEO of VERC Enterprises, Duxbury, Mass., has been selling CBD products since 2017.
“It’s a trend that’s continuing,” Vercollone said. “It’s because it’s a health and wellness product, and the consumer today is looking for products that are naturally based as opposed to chemically based.”
The 2018 Farm Bill opened the door for sales of hemp and CBD products; however, uncertainty remains when it comes to edibles, Carstensen said. Consumer research conducted by Lil’ Drug’s partner Precision Botanical found that early adopters of CBD are interested in forms that the public may be less familiar with, such as tinctures.
But other consumers who are not 100% comfortable in the category are more interested in topical forms, which offer an easier way to get familiar with the product and its effects, she said. It took Lil’ Drug about a year to find the right partner in Precision Botanical.
“We found that their commitment to quality, and purity and transparency and all of those things really aligned with how Lil’ Drug Store feels about the category,” Carstensen said.
Jay Hartenbach, CEO of Medterra, said the company’s products for the c-store channel are smaller and less expensive and therefore geared toward trial use and consumers on the go. Consumers can buy a 3.4-ounce CBD cream on Medterra’s website, but the company is selling a 1-ounce cream in c-stores with a suggested retail price of $20.
“Once people try the product, they have such a favorable reaction that we want to drive as much trial and sampling as possible,” Hartenbach said. “Working with Convenience Valet is literally the perfect partnership for us to do that.”
Lil’ Drug also worked with Precision Botanical to drive trial of its CBD products. Customers may enter the CBD category with a $7.99 product, but if they find something they like, they’ll be willing to spend $20 to $30, Carstensen said.
“C-stores represent an opportunity to give consumers that area for trial for CBD at a price point that they’re comfortable with,” she said.
Convenience Valet is not offering edibles, but it has 16 SKUs of creams, roll-ons, pet products and more topicals with Medterra. The pros of working with Irvine, Calif.-based Medterra include its distribution, third-party testing and its ability to help Convenience Valet educate customers and retailers, LaManna said.
“We definitely wanted to partner with someone … that knew what they were doing and could help us educate our retailers and their customers,” he said.
Retailers have been playing with a mix of merchandising approaches to nonedible CBD products. Some operators are placing it behind the counter with tobacco, and others are putting it in easily accessible areas, either on a fixture or in-line in the middle of the store, Carstensen said.
“There’s no universal approach to how to do it, and we want to make sure we’re flexible in how we approach it with our partners,” Carstensen said.
LaManna agrees that the category continues to evolve.
“My personal feeling is that if you put one or two of these SKUs in a section, they will get lost in the mix,” he said. “If you make a dedicated CBD section, a destination for the right mix, that’s how you will maximize sales.”
Hartenbach of Medterra recommends putting the products on the counter because they’re small, have a higher price point and give the employees an easy opportunity to talk to the customer about CBD. Medterra’s website offers informative materials. And it has a 20-minute video series that c-store partners can use to inform employees about Medterra products and what hemp and CBD is in general.
VERC Enterprises increased its focus on CBD in early 2019 when it introduced products to its 30 c-stores and gas stations in eastern Massachusetts and New Hampshire. CBD sales have grown by at least 20 times from 2018 to 2019, Vercollone said, and he expects sales to triple in 2020. He is replacing a Subway in one store with a dedicated CBD shop, which he plans to try at a few locations.
“What we found is lots of our customers who have daily aches and pains really are gravitating to this product because of what it does,” he said.
His store’s premium brand is Burlington, Vt.-based Ceres Natural Remedies, which has a price range of $30 to $40. CBD is worth the space, Vercollone said. A retailer can put a candy bar on their front counter and sell it for $1.29 and make a 40- to 50-cent profit, or put CBD on the counter and sell it for $35 for a $17 profit.
“It’s going to take a little more effort from the store operator to educate and train and understand what this product’s about, which is why [retailers] want to partner with companies like Ceres out of Vermont who can support you on the training,” Vercollone said. “But your profitability is better than anything we have on our register today.”
