CBD in the C-store

While product popularity continues to shift, c-stores are still primed to benefit from this category

By Tammy Mastroberte

WHILE CBD LAWS are still not standardized nationwide, consumer products derived from hemp became legal as part of the 2018 version of the U.S. Farm Bill, and 2019 saw explosive growth in the category. At the end of 2019, however, the category suffered slightly when the Food and Drug Administration warned consumers to stop using products with THC and CBD following an outbreak of lung injuries associated with the products.

Many consumers instead turned to topicals and other CBD products as replacements, according to Don Burke, senior vice president of Management Science Associates Inc. (MSA), a Pittsburghbased company focused on analytics and informatics. In fact, sales of topicals soared to No. 1 in the CBD category for a time; they recently dropped to No. 2 with gummies taking the top spot. “In 2021, gummies have returned to the best-selling product form in c-stores, followed by topicals and tinctures, and vape is starting to come back fairly strong as well,” Burke told Convenience Store News.

Overall, CBD sales in the convenience channel have declined from where they were in 2019, and the COVID19 pandemic drove people online to shop for these products, which hurt c-stores, noted Mike Luce, president of Chicago-based High Yield Insights, a provider of data-driven insights about the cannabis market. The good news, though, is that awareness of CBD and hemp products is higher than ever, and sales projections are still on an upward curve, he said.

“None of the spaces are saturated the way mainstream beer is,” said Luce. “There is a lot of competition within individual categories, such as gummies, but there is still room for growth, and CBD drinks are ideal for the c-store industry. Right now, CBD drinks are ranked among the highest categories that CBD consumers are not using but interested in using in the future.”

Looking at the total adult population in the United States, only 16 percent are current CBD users, meaning they used a product within the past three months. The potential for growth in the category is revealed in the 84 percent who are not current users, Luce pointed out.

“If you drill down, of that 84 percent, 46 percent expressed interest in trying CBD, and 13 percent are former CBD users that may come back,” he explained.

Additionally, once the pandemic has passed and shopping patterns return to normal — with consumers commuting to and from work again — CBD sales are expected to grow once more in the retail space, along with the introduction of new cannabinoids such as CBG and CBN, said Burke.

“There is also the emergence of Delta-8, which is a cannabinoid that offers similar effects as THC, but it’s not THC so it’s legal to sell in a c-store — although this is likely to change,” the MSA executive noted.

There are some states that have already banned or restricted Delta-8 products, including Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Kentucky, Idaho, Iowa, Michigan, Montana, New York, North Dakota, Rhode Island, Utah, Vermont and Washington.

“Connecticut, New York and some other states banned the products completely, and others like Michigan say they will treat it like marijuana,” said Luce.

The CBD Shopper

Females are actually the majority of CBD users (60 percent) vs. males, with the bulk falling in the Generation Z age bracket (45 percent), according to research from High Yield Insights. Generation X makes up 28 percent of users, while boomers and seniors represent 26 percent.

According to research from Management Science Associates, which surveyed more than 100,000 people in the U.S., the specific age range for male CBD users is between 18 and 49, while female CBD users fall within the 18- to 34-year-old range.

“The typical CBD shopper is good news for c-stores because they are typically younger, liberal, and either students or blue-collar workers in skilled trades, such as plumbers, electricians and landscapers,” Burke reported. “It’s also far more likely that a tobacco consumer would be using CBD, which is more good news for c-stores as tobacco users are walking through the door several times per week.”

In terms of the reasons CBD users shop for products, as of the research conducted in 2019 and 2020 by Management Science Associates, the No. 1 reason is to temporarily relieve minor aches and pains (77 percent). Other reasons include relieving chronic pain (75 percent), helping with anxiety and stress (73 percent), and helping with sleep (71 percent). Additionally, 67 percent cite using it for increased general wellness, and 66 percent use it to improve their physical health, showing there is a wellness component to the product, according to MSA.

“Most people think of CBD as a wellness item, so if a c-store has a wellness or healthier options section in the store, it would make sense to market CBD with these items,” Burke advised.

In fact, recent research by The Integer Group, a growth marketing agency that offers data-driven insights, suggests that consumers are shifting their CBD usage from ailment-based reasons such as pain and anxiety, to more wellness benefits such as an improved workout, and social occasions. This is especially true among younger consumers, noted Armand Parra, senior vice president of insight and strategy at the company, based in Lakewood, Colo.

“The typical CBD shopper is good news for c-stores because they are typically younger, liberal, and either students or blue-collar workers in skilled trades, such as plumbers, electricians and landscapers.”

— Don Burke, Management Science Associates Inc.

“Quality and trust are the most important decision factors, and consumers are looking for credentials like certifications, grower information and testing results to verify product dosage and efficacy,” Parra pointed out.

What Are They Buying?

MSA’s research shows convenience stores as the fourth most-popular retail option for those purchasing CBD, as 29 percent reported shopping for CBD in a c-store. The top choice, at 45 percent, was from a natural or specialty retailer, followed by a smoke or vape shop (39 percent), and direct from manufacturers (29 percent).

Within the CBD category, there are many different product forms available. These include edibles, such as gummies; topicals, such as creams and lotions; tinctures and oils; vape pens and smokables; drinks; and even beer.

Right now, gummies are the No. 1 product being sold, followed by topicals, tinctures and oils, vape pens and smokables, and drinks, according to Burke. Within the drinks category, which only represents 21 percent of the total space currently, non-carbonated water, fruit drinks, cola and energy/recovery shots make up 74 percent of the beverage dollars.

Burke also noted that although topicals account for only 10 percent of the SKUs available, the category accounts for 26 percent of dollars, compared to vape, which accounts for 21 percent of the SKUs available, but only 3 percent of the dollars.

“The products that best fit the c-store shopper and environment are edibles, beverages and oils/drops and tinctures,” said Parra. “Vapes/smokables, patches and alcoholic beverages are the CBD product forms that shoppers are currently least interested in purchasing.”

While CBD beverages currently fall lower on the list in terms of demand, the category is seeing more products and options and, in some chains, is selling very well. At Betterment Retail Solutions, a West Des Moines, Iowa-based health and wellness company that connects up-and-coming brands with retailers, its No. 1 selling product in the category is flat CBD water.

“There is infused coffee, energy drinks, and any type of beverage you can think of with CBD,” said Tony Sparks, the company’s senior vice president of marketing. “In the cold vault, I recommend grouping all CBD into the same space, at least initially. Since vault space for certain categories such as energy and sport are hard to cut into prime shelf space, splitting CBD beverages up by segment will not get them the visibility they need.”

Sparks is seeing the smokable CBD segment perform well in c-stores as well, including products that look like actual cigarettes but have no tobacco, such as Vance Global CBD, which tested well for the company in c-stores, he noted.

The Most Popular Forms of CBD

According to data collected in 2019 and 2020 by Management Science Associates Inc., the most popular forms of CBD purchased at retail are:

• Edibles, such as gummies (36 percent) • Topicals (32 percent) • Tinctures (29 percent) • Vaporizers/vape pens (22 percent) • Drinks (21 percent)

Best Practices for CBD

C-stores that may have tried CBD products but didn’t find success should consider changing their approach and how they are marketing the products in their stores, according to Sparks. Many may have tried a turnkey program from distributors, but he recommends a multivendor approach to CBD.

“We take a multi-vendor approach with floor and counter displays that are not just CBD, but may also have other functional products and brands in it as well,” he explained. “It doesn’t have to be all CBD or nothing.”

He also suggests retailers “call out CBD” in their marketing so that customers know it’s available there — and do so in a big way. In fact, Betterment Retail Solutions tested neon signs that say CBD, aiming for customers to notice them when they walk up to the cold vault door. Every store with the sign saw an increase in sales, Sparks shared. CSN