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How Topicals Are Bringing CBD To Mass Retail Customers

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How Topicals Are Bringing CBD To Mass Retail Customers

Even before the vote on the 2018 Farm Bill, the industry was swirling with talk of the implications of the legalization of hemp and hemp-derived cannabidiol — CBD. Many conversations focused on CBD-infused edibles and their mass availability, not only online or in dispensaries, but also in big supermarkets and retail chains.

The CBD products segment is seeing some moves that hint at mass commercialization.

Green Growth Brands Enters CBD Mass Market

The introduction of CBD into a mass market started Jan. 10, when Green Growth Brands Inc (OTC: GGBXF) announced a deal with shoe retailer DSW Inc. (NYSE: DSW), under the terms of which DSW will sell Green Growth's Seventh Sense Botanical Therapy topical CBD products in 96 locations across the United States.

“Putting a brand-new CBD personal care brand, with no marketing or store associate training, into the middle of a shoe store may not sound like the ideal setting, but it has surpassed our expectations,” Green Growth CEO Peter Horvath told Benzinga.

As part of its expansion strategy, Green Growth Brands announced plans to open a chain of CBD stores in malls operated by Simon Property Group Inc (NYSE: SPG). The company also opened its first stores in malls in Kentucky, Indiana and Tennessee.

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Other Brands Follow Suit

Less than a week after the Green Growth Brands-DSW announcement, two other partnerships were rolled out.

Major Canadian cannabis producer Tilray Inc. (NASDAQ: TLRY) and brand development company Authentic Brands Group said they would work together on developing a line of CBD-infused foot creams, cosmetics and other products. Tilray will become the preferred supplier of CBD products for Authentic Brands, which gives the former a large consumer base and opens it to a vast distribution network in the U.S., Canada and elsewhere.

Meanwhile, Neiman Marcus said it would carry a number of CBD beauty products as part of its Trending Beauty initiatives. The company will sell some of the top CBD brands — including Sagely Naturals, Cannuka, Cannablis Organic, Code of Harmony, Ildi Pekar, Vertly and Yuyo Botanics — online and in five stores in Beverly Hills, Boston, Denver, San Francisco and Newport.

See Also: Martha Stewart Joins Canopy Growth In Advisory Role To Develop CBD Product Line

Why Topicals?

Green Growth Brands’ launch of CBD products in DSW stores was a bit of a surprise, mainly because a lot of the chatter around CBD products prior to the Farm Bill surrounded CBD-infused beverages.

New Age Beverages Corp (NASDAQ: NBEV) said last September it would launch a line of CBD-infused beverages, and on several occasions said it was working with some of the largest grocery and convenience store chains in the U.S. to launch products as soon as the Farm Bill took effect.

Other beverage makers such as Constellation Brands, Inc. (NYSE: STZ), Heineken, Anheuser Busch Inbev NV (NYSE: BUD) and Molson Coors Brewing Co (NYSE: TAP) are also engaged in the CBD beverage segment in one way or another.

Topicals Are The Logical First Step For CBD

While on the surface it seems like the CBD industry was focused on CBD-infused beverages, topicals may be a more logical first step. For one, CBD topicals are much more popular than edibles and beverages.

CBD topicals are the second most-popular category after tinctures, cannabis guru Scott McGovern told Benzinga, with edibles ranking third.

The Brightfield Group also estimates that consumers prefer topicals over edibles.

In a study, Brightfield estimated 54 percent of consumers prefer oil cartridges for vaping, while 45 percent prefer high-CBD flower. Topicals are the third favorite product, with 43 percent of CBD choosing this medium. Edibles are preferred by 33-38 percent of users, but beverages are only preferred by 15 percent, according to Brightfield.

It’s interesting to note that the preferences of CBD users are disparate from a more general group of cannabis consumers.

An analysis of branded cannabis products conducted by BDS Analytics found that concentrates and edibles are the most popular product after flower itself. Topicals are only the third most popular-segment, with most consumers citing health and medical reasons for their purchase of topical products with THC or CBD.

Related Link: Hemp Is A $3.7 Billion Global Industry, But Where Does The US Fall In The Blossoming Market?

Retailers Cautious About CBD Beverages

In this way, it shouldn't be surprising that the first CBD products to break outside the realm of online stores and dispensaries are topicals. The fact that shoe stores are their first destination is more circumstantial than anything.

“We are really lucky to have strategic investors that were able to give us access to DSW,” said Green Growth Brands' Horvath.

Larger retailers are still assessing the value of CBD products, particularly food and beverages, said Lisi Willner, VP of marketing at CBD-infused beverage manufacturer Sprig.

“Given that CBD just recently became a mainstream ‘category’, I think retailers are starting slowly. They’re dipping their toes in (quite literally with DSW) to gauge public reaction. Food and beverage retailers are naturally more cautious about what they put on shelves. They want to make sure that their brand represents the highest quality suppliers and that the products are safe and beneficial to their customers."

This status quo is likely to change. The Brightfield Group estimates that the hemp-derived CBD market could reach $22 billion by 2022. This means that the market could even surpass cannabis sales — and many large retailers would want a piece of the action.

When it comes to beverages, Cannacord suggests that sales of CBD-only beverages could amount to $260 million by 2022. For that to occur, national chains would have to start carrying CBD-infused beverages, and mainstream beverage producers would have to launch their own products.

Posted-In: Authentic Brands Group BDS AnalyticsCannabis REIT Top Stories Markets Interview Real Estate Best of Benzinga

 

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