Article

CBD in Grocery: Innovation and Opportunities

By
Neha Ghai
February 8, 2023

At A Glance

  • The grocery landscape is embracing wellness through innovative cannabidiol products
  • Escalating healthcare costs and consumer awareness about CBD offerings will increase wallet share in weekly grocery baskets
  • Grocers are facing competitive strides from the up-and-coming digital startups
  • Discover untapped latent opportunities to cash in on the burgeoning demand

There is a seismic shift in consumer attitudes toward accepting and awareness of cannabidiol products. Traditional grocers like Kroger, Walmart, CVS Pharmacy, Walgreens, and Sprouts Farmers Market have introduced CBD products in states where it is legal. 

This recreational drug discovered in the 1940s by Roger Adams in the laboratory opened a gateway of possibilities; however, it was left unexplored until the US administration signed into law the Farm bill 2018, which provisions for the production of hemp and hemp-derived products, including cannabidiol. Cannabidiol is a derivative of the Cannabis sativa plant, a non-psychoactive compound, is one of the 100 cannabinoids present in the cannabis plant and does not contain the composition associated with marijuana that usually causes a state of mind alteration. 

According to the US government, any CBD product with less than 0.3% THC (the compound that causes marijuana's mind-altering effect) can be consumed. Research studies suggest it does not cause any impairment to humans. On the contrary, it is effective in pain management, reducing anxiety and stress, and is often used as a sleep aid. Persistent inflation, job insecurities, and mounting healthcare costs have made the American consumer look forward to alternative healthcare treatments. The impetus in the government's efforts towards redirecting consumers' health has seen increased growth in the cannabis industry.

‚ÄćNavigating Headwinds¬†

The cannabis industry is accelerating and is forecasted to have global sales of $57 billion by 2026. According to BDSA (a market research firm specializing in cannabis data), US sales stood at $25 billion in 2021 and are expected to surpass $42 billion in 2026, accounting for 75% of global sales.

The drivers for the emergence of cannabis and hemp products stem from awareness and acceptance of the product in the mainstream as a supplement and traditional medicine. Its capabilities in pharma industries are under trial and are now transpiring into wellness, beauty, pet care, and athletics. 

There has been widespread awareness about the unrealized possibilities of cannabidiol, and the US Administration has been forthcoming in designing frameworks with Congress to formulate regulations about the usage of CBD products. The 2014 Farm Bill authorized the states to establish agricultural pilot programs for cultivating hemp and its derived products. Progressing further in 2015, the FDA allowed researchers to conduct trials on those acquired hemp products. The CBD in schedule 1 of the CSA act was federally legal by the signing of the 2018 farm bill as long as it contained no more than 0.3% THC (tetrahydro). 

The FDA in 2018 also approved the drug marketed as "epidiolex" which has an active CBD ingredient and is used to treat epilepsy. The promotion of such policies allowed for the formation and growth of the cannabis trade associations from a mere 20 members in 2017 to 600 in 2020. The accelerated growth propelled the government to sign into law in Dec 2022 "The Medical, Marijuana, and Cannabidiol Research Act" (cannabis research bill). It's a first of its kind and will lead to the evolution of cannabis research policies. In Jan 2023, the US Food and Drug Administration announced that it would work with Congress to identify a new regulatory pathway that would look into consumers' individual needs and desires while also managing associated risks with a well-defined regulatory oversight.

‚ÄćThe chronology of events presents an opportunity for grocers to dive deep into the market's scalability and become trustworthy partners and significant market shareholders.

There is a latent opportunity being tapped by scores of digital startups in innovating and providing CBD products in oils, capsules, gummies, topical creams, suppositories, teas, vapes, sleep aids, tinctures, and beverages. As per the CBD oracle (cannabis data tracker of news, guides, and products), there are 120 digital startups in the US, and many are waiting in line to be registered, offering a wide range of products to diverse segments of consumers. The US administration's renewed focus on healthcare while adopting the concept of food as medicine in staples and groceries has led to traditional grocers being at the forefront of building a healthy and fit American community that is preventive rather than diagnostic.

Consumer Demographics 

The consumption of CBD products with misinformation surrounding the cohort of consumers is alarming, as nearly four in ten Americans assume CBD is just another name for marijuana.

According to a survey from the consumer's brand association (The Urgent Need for CBD Clarity - Consumer Brands Association), 62% of Americans are aware of CBD products, and 55% have purchased products for self-consumption. However, only 45% of Americans knew that consuming CBD products does not cause intoxication. The most common reason for purchase is pain management (50%), reducing stress and anxiety (50%), and sleep aids (43%). 

The generational usage patterns for CBD show the growing popularity of the product. 83% of millennials are the most likely to buy CBD products compared to 15% of baby boomers. The millennial generation is experimentative, and boomers though skeptical, are more likely to use the products for chronic illness if purchased from a trusted source. One out of seven Americans use CBD daily, and those who use the medical prescription for epilepsy suggest that the seizures have reduced by 51%. 

According to  72 CBD Statistics: Usage Data & Demographics, 68% of American users want CBD to be decriminalized from the DEA's (Drug Enforcement Agency) drug scheduling. About 50% of the consumption of CBD products is for oils, balms, and gummies; 18% preferred use in topical creams,11% in CBD water and beverages, 8% in skin care products, and 8% in pet care products. The consumer base for the CBD industry is diverse and ever-expanding. As more research is conducted on the potential benefits of CBD products, there will be an ever-increasing demand from pharmaceutical companies, beauty and wellness, athletics and fitness, and the petcare industry. 

What’s Driving the Industry Forward?

There is a growing need to bridge the gap between availability, convenience, and educational awareness about appropriate dosage consumption with exponential growth offered in the cannabis industry. Some of the drivers include:

  • The Shift in Consumer Wellness: Increased acceptance and awareness of the use of CBD products in industries related to pharmaceutical, beauty and personal care, wellness, pets, and athletics is helping drive demand and growth in the industry. Studies show it is used to manage pain and chronic conditions like arthritis and fibromyalgia. It's also helpful in treating generalized anxiety and post-traumatic stress disorder. It is also used as a sleep aid, effective in treating insomnia and relaxation.
  • Growing use in the Medical community: In 2022, five million Americans registered as medical marijuana patients. The growing acceptance of the potential benefits by the medical community in the treatment of epilepsy is encouraging, thereby provisioning more research opportunities in the world of cannabidiol.¬†¬†
  • Community and Social Development: According to SAMHSA, 61.2 million people aged 12 years and older have consumed illicit drugs, and nearly one in three zillenials (18-25) have abused drugs. The traditional grocers that have now begun to embrace health and wellness in their on-site clinics, fresh food, and home kits can adapt to becoming a holistic community that provides educational awareness and aid in appropriate CBD consumption by becoming a one-stop shop community neighbor.¬†
  • Diversified Products: - There is a niche specialty of products for different conditions which are being tapped into to drive growth in this market.

Scalable Social Startups 

Digital startups offer a niche of products in pain management, stress management, pet care, and insomnia, to name a few. There are inherent advantages propositions when transacting with startups. They develop tailor-made products personalized to suit your taste, design, and requirements, offer competitive pricing, and are a trusted source of suppliers to curate the freshest products. The virtual world provides access and outreach to multiple customers, and discretionary logistics make for enriched customer experiences encouraging its convenience. A curated list of startups established and nascent in the industry provides a bird's eye view of the untapped potential waiting to be probed.

Networked CBD Marketplace 

  • Charlotte's Web - Founded in 2014, this CBD brand specializes in developing and distributing cannabidiol wellness products aiding sleep, stress management, and overall health. It is an FDA-registered facility with its formulations using CO2 and IPA extraction processes to derive and produce its signature CBD oils. The company is evolving as an educational platform on CBD by launching in-store kiosks and an online "learning platform."
  • Southern Sun - Founded in 2018, this CBD brand came into existence after a former trucker secured a position on the hemp cultivation program, an initiative to treat his dad's arthritis. The brand has launched its proprietary cooling rub, oil, moisturizing balm, dog treats, gummies, and sleep oil.
  • Joy Organics - Founded in 2018, this CBD brand offers premium products in a broad range of full-spectrum products. It's a family business, and its product line includes soft gel capsules, bath bombs, and CBD oil in flavors including lime, orange and tropical sunset. They have two highly qualified doctors on their team to ensure product quality.

Elixir in Floral Flavors 

  • Biko - Founded in 2016, the brand offers a variety of ground flowers curated into pre-rolls and batches that provide experiences in wellness and excelling creativity.¬†
  • Mello Daily - Founded in 2018, this woman-founded CBD brand promises happiness the woman's way. The products offered are caramels, water-soluble oil, and suppositories.
  • Foria - Founded in 2014, this Colorado-based brand offers USDA-certified and organically grown suppositories and oils on women's intimate solutions.¬†

Furry Treats 

  • Dope Dogs - Founded in 2018, this CBD brand delves into oils, shampoos, and edible treats for canines. The brand envisions building a holistic environment and meeting pet wellness demands. Referrals do great for the brand. Reviewed by OPRAH, it bolsters image and clientele.¬†
  • Holista Pets - Founded in 2017, the CBD brand offers products for house pets and horses. Solutions in wellness, mobility, and calmness are available, and they are well known for their CBD cat oils while also offering treats, catnip spray, capsules, and pellets.
  • Elle Vet Sciences - Founded in 2017, Amanda Howland created the brand in response to researching and innovating CBD products for the community of pet parents. The team includes dog lovers, public health professionals, and veterinarians. It launched its¬† Elle Vet Project in 2020 amidst the global medical crisis of COVID-19. They offer well-researched and science-backed products for dogs and cats.

Zillenial Drinks 

  • Recess - Founded in 2017, the brand offers hemp and adaptogen seltzer in six flavors. It promises low calorie and low sugar, helping users ease into their natural environs, pushing back stress and anxiety without mind-altering effects.
  • Cann - Founded in 2019, the cannabis-infused drink brand supplementing the evening drink with non-alcoholic intoxicants like THC and CBD infused is millennials' go-to party drink. Offered in 5 different flavors at 35 calories per 100 ml bottle, this CBD brand has packs of 6 available for under $19.¬†
  • S* Shots ¬†- Founded in 2019 under the parent company K-ZEN beverages, this CBD brand offers a packed punch in a tonic bottle under $19 and is recommended for those that want euphoric moments at the end of the day.

Grocers and Challenges in the CBD industry 

Legal and Regulatory Framework - The cannabis industry is ever-evolving and fast-changing in its legalities and frameworks. The US administration has signed laws to legalize cannabidiol products federally; however, the FDA disapproves of CBD products marketed as food and supplements. Functioning in omnichannel operations and navigating and complying with guidelines will be challenging for grocers.

‚ÄćEmployee Training - Training programs for employees that ensure periodic checks, quality assurance, fraud management, and best practices for the products are necessary.

‚ÄćQuality Check - Supplier and vendor management ensures the freshest and certified products are stocked to maintain ingenuity and authenticity.

‚ÄćInventory Management - The unique needs of cannabis and hemp products will need a strict address. As cannabis is a potent absorber of lead, its security and protection to avoid frequent perishability would need to be regulated.

‚ÄćSocietal Evolution - Legalizing the industry would also contribute to holistic development while enabling reduced consumption of illicit drugs. Weeding out illegal suppliers and aiming to promote a mentally fit America will be an untapped market and a challenge for the grocers.

Recommendations for Traditional Grocers

Traditional grocers should evaluate customer demand for the growing CBD products and basis, which should integrate the sale and education of CBD products and health services provided by on-site clinics and registered dieticians. 

  • Wide variety of cannabidiol products - Expanding the hemp-derived and CBD products in wellness, athletics, and chronic illness will increase revenues in a burgeoning market share.
  • Telemedicine - Once the FDA's regulatory framework is in place, adopting this model would enable customers to access education on CBD products and usage from medical professionals or registered dieticians at the traditional grocer's wellness clinics.
  • In-Store Experience - A clear advantage for grocers will be to demonstrate the use and potential benefits of using CBD with the help of health practitioners.
  • Building Community Trust - The sourcing and authenticity of CBD products always needs to be improved. With resources and brand equity, traditional grocers are a source of ground conformity for authentic CBD products.

Conclusion 

The cannabis industry is highly regulated yet fast-evolving with emerging new technologies. Grocers must be vigilant and track the pulse of the breakthroughs in the CBD industry to incorporate innovations and stay attuned to the consumer's preferences.