Cannabis was the leading human herbal medicine for 4,000 years and CBD is the primary cannabinoid associated with wellness and anxiety/stress relief.
With this level of history, you may think that CBD would be a well-accepted remedy today; however, in 1970 cannabis was erroneously classified as a Schedule 1 drug and that prevented consumers from experiencing the benefits of CBD.
Not until the 2018 Farm Bill was passed, just over a year ago, legalizing CBD from hemp for over-the-counter use, did consumers begin to receive news of the potential benefits of CBD. Consumers quickly responded to this news and made CBD one of the fastest growing new consumer products.
Since the passing of the Farm Bill in December 2018, Management Science Associates has been tracking Google CBD search trends and has found the search level peaked around mid-year 2019 – and has shown a rather significant decline since that time.
As consumers often search prior to purchasing, this suggests a possible very recent decline in CBD consumer purchase intent, and we believe the THC vaping crisis could be to blame. It appears that the negative publicity generated by the incomplete and misleading information on the THC vaping crisis has caused consumers to become cautious on the purchase of new, unfamiliar products. This has significantly affected sales of CBD vaping items, but seems to have also cast a negative sales effect across the entire CBD product line, as shown later in this column.
Not surprisingly, MSA’s Consumer Research Around Cannabis data shows that consumer attitudes toward cannabis and CBD are positive, with nearly 67% of the 83,000 adults responding to this research showing they would approve of either medicinal or recreational use.
Further analysis shows the target audience for a CBD item tends to be younger consumers of both genders with above average income levels. Interestingly, the research also indicated that CBD users are two- to three-times more likely to use tobacco than the general population. This is highly encouraging news for retailers that currently have the tobacco consumer as a shopper, such as the convenience class of trade.
C-STORES HAVE A FOOTHOLD
Today, convenience stores are the fourth most popular place to purchase CBD, with 22% of consumers stating they choose to purchase at their local convenience store. The most popular choice for purchase is online, where 29% of consumers not only find the products in which they are interested, but also get the detailed information they may want on these new items.
This is similar to how the vapor category grew, with consumers initially choosing to purchase online, when the product category was in its infancy, and then progressing to brick-and-mortar purchases as the category and their product knowledge and experience developed.
The best-selling CBD item in a convenience store today is the gummie, holding a 27% dollar share of total CBD convenience sales. This is closely followed by tinctures, liquids typically placed under the tongue for quick absorption, with a 22% dollar share.
Then it gets interesting, as CBD vape items, prior to the THC vaping crisis scare, used to be the No. 3 item, but have fallen to fourth place behind topicals (skin lotions/creams). Prior to this crisis, CBD vaping items had a 21% share of the category, but fell to a 12% share later in 2019.
Most recently, it appears that the THC vaping crisis, which started in mid-2019, has had a negative effect across the entire CBD line of products. As shown in the chart, Management Science Associates’ InfoMetrics data exhibited an increase across all CBD product forms in second quarter, 2019, versus the previous quarter.
By third quarter, 2019, the InfoMetrics data, which measures distributor shipments into convenience stores, was starting to show some weakness in the gummies, vape and tinctures product forms. The most recent fourth-quarter results are showing declining distributor shipments across all CBD product forms; it was early in this quarter when the THC vaping crisis was at its peak.
Keep in mind that this decline in shipment data could be an indication that retailers are just ordering less often because of slower consumer demand, but that consumer purchases are still growing, albeit not at the same rate as they were earlier in 2019.
There is likely, however, an upside on the horizon. Sales can be expected to improve with greater consumer understanding that the THC vape crisis was caused by illicit products, and as the general body of knowledge on CBD continues to increase.
Convenience retailers will likely recall a similar slow-down in the sales of vapor items in 2015, only to be followed by a period of robust growth in the following years.
Don Burke is a senior vice president at Management Science Associates, a data management and analytics firm. He has 20 years of consumer packaged goods experience working across the cannabis, tobacco, grocery, confectionery and beverage categories.