By Kim Stewart
ALEXANDRIA, Va.—Until the pandemic struck, 2020 was supposed to be a breakout year for CBD in convenience stores, and although expectations soon were downgraded, in some ways it was as COVID-19 wary consumers turned to c-stores for health and wellness products like face masks and hand sanitizer—and discovered CBD tinctures, creams and other hemp-based non-food goods.
The 2018 Farm Bill opened the door for hemp-based CBD to be sold at mainstream retail—albeit with major legal uncertainties as the U.S. Food and Drug Administration (FDA) works to create an approval process for ingestible CBD. Despite the regulatory gray area, a number of convenience retailers have boldly ventured into this category by experimenting with strategies specific to CBD.
VERC Enterprises, based in Duxbury, Mass., and Sheetz, based in Altoona, Pa., are two of the convenience retailers that have staked a claim in the burgeoning CBD marketplace.
In the “Canna-venience Case Studies” education session during the 2020 NACS Crack the Code Experience, Melissa Vonder Haar, who covers the tobacco, cannabis and CBD segments for NACS Magazine and other publications and is also marketing director, iSEE Store Innovations, talked all things CBD with Tyla Vercollone, project manager, VERC Enterprises, and Paul Crozier, category manager—tobacco, Sheetz.
VERC began carrying CBD products in its c-stores in 2018, starting with 16 SKUs and swelling to more than 100 then shrinking as the company found that in the CBD space, often less is more. “As early as last year, VERC was selling more CBD than gum,” Vonder Haar noted.
From the outset, VERC has sold CBD products on the front counter apart from the tobacco back bar because the store views CBD as a health and wellness product. In May 2020, VERC opened its first CBD Wellness Center store-within-a-store at its 131 Commerce Way, Plymouth, Mass., location.
“We decided, why not create a CBD Wellness Center in one of our gas stations?” Vercollone shared. “We have a seating area where customers can actually come in and chat with us,” and the dedicated space, formerly occupied by a Subway franchise, means the store “can carry multiple brands beyond what they could carry at the counter.” Although VERC is still learning the ins and outs of CBD sales, it’s “so far so good,” Vercollone said.
VERC leans on the expertise of Ceres Natural Remedies of Vermont as a partner for the CBD Wellness Center. Ceres’ products are lab-tested, and the Vermont company offers robust knowledge of retail sales of CBD, medical marijuana and cannabis.
“We recognized that we are not experts in CBD,” Vercollone said. “We realized for the store to be successful we needed reputable companies to partner with,” especially when it comes to information and access to lab-tested products, brand variety and educating staff and customers. “There are many questions about CBD, and we don’t know everything. It’s been so nice to have this partnership in our back pocket,” Vercollone said.
C-stores are all about brick-and-mortar and location, but marketing CBD is quite different, Vercollone noted. “We’ve had to really dive into marketing, which has been a new learning curve for us. The social media has been a great opportunity but also has brought challenges” since CBD is often lumped into the broader cannabis industry in terms of regulations and legal issues. “We realized…that you can’t do a lot of social media promotion,” she said.
One of the main challenges is getting people inside the doors, especially during the pandemic, since VERC doesn’t offer online sales of CBD products. Sales have been steady but shy of what VERC projected before the pandemic hit. Still, Vercollone said, “We are confident that they will continue to grow as the category evolves.”
One surprising thing about selling hemp-based CBD wellness products in a gas station is who buys them. Marketing research indicated the demographic would be women between the ages of 40 and 60.
“What we realized by just opening our doors and letting the business come to us, was that we rarely see a woman age 40-60 inside our doors,” Vercollone said. “It’s not just this cosmetic product for women. CBD as a product we’ve learned is for everyone—anyone who has pain, anyone who has trouble sleeping,” she said. “We get blue collar workers who definitely have sore muscles, definitely have sore joints. What we’re finding is that people who are buying CBD wouldn’t necessarily have sought it out on their own,” but will “while they’re waiting in line for Dunkin Donuts” at one of VERC’s stores.
The Sheetz Experience
Sheetz rolled out a line of CBD products in April 2019, starting with 37 SKUs and growing to 47 SKUs. The products are kept behind the counter, and buyers must be 18 or older.
“We know our customers are busy, and they don’t want to run all over town to get what they need. So,
offering CBD ladders up to that goal of having what customers need when they need it,” Crozier said.
“Finding vendor partners, that’s another key,” he said. And “there’s a lot of legal and regulatory research you need to do,” plus insurance considerations.
In terms of product quality, Sheetz looks for traceability in production, along with certificates of analysis indicating that the products do in fact have what the packaging claims they have. “That comes down to vendor-specific conversations,” Crozier said. “You could have pretty large tincture that only had 100 mg of CBD in it vs. 500. There’s a lot of research that needs to be done with what’s an appropriate amount.”
And watch out for unsubstantiated health claims, said Crozier, who has encountered vendors touting remedy claims that aren’t allowed under FDA regulations, such as arthritis relief.
“One of the first things I’ll do when a vendor sends a [slide] deck, I’ll look for that,” he said. “The health claims shouldn’t be happening. That’s something FDA is looking at. You don’t want to put yourself in that position of an unforced error.”
Vonder Haar asked if Sheetz had any bad experiences with partnering/selecting vendors? Crozier shared that Sheetz took a pass with some vendors early on, “but I’d say it’s been a pretty positive experience so far. Doing the homework really pays off.” He adds that vendors should be willing to show retailers their financials and plant facilities.
That homework includes understanding CBD levels, “THC limits, the Farm Bill, isolate vs. broad, full spectrum, what products are blended with, how the products are grown—the agriculture side of it you’ll learn. Working with tobacco you’re used to local and state regulations…but this is a whole new area of regulations…this is a whole new area of learning,” Crozier said.
“I think if you take your time and really dig into it, you’re going to err on the side of making the best decisions possible and avoid putting the company you work for at risk,” Crozier said.
Advice and Watchouts
In a Q&A to round out the session, Vonder Haar asked Vercollone of VERC and Crozier of Sheetz to share their advice for a retailer just starting out in the CBD space.
Crozier advised: “Do a lot of research. Understand what full spectrum is. Meet with vendors. They’re going to know more about the product than you if you’re just getting started. Work to understand parameters at the federal, state and local level. Develop a go-to market plan you feel comfortable with. Think about limiting inventory risk.”
Vercollone said to “Learn locations’ regulations.”
And the biggest challenge, Vonder Haar asked?
“The biggest challenge is that grab-and-go quick interaction, getting in that education, as well as the stigmatization of getting CBD in a gas station,” Vercollone said. “As that builds, I think our reputation builds. Still you will get those people with hesitation of purchasing CBD in a gas station.”
When it comes to offering foodservice in a gas station, Sheetz took the “category and destigmatized it,” Vonder Haar noted. Now, it is doing the same with CBD.
“Well-vetted products are the starting point,” Crozier said. “That can lead to a higher cost product…that can be challenging in a retail setting, where most products…are under $50.” He advised exploring “pack sizes with your vendor. If you think how vapor started, a lot of it was disposables at first.”
Vercollone agreed. “Try to keep grab-and-go sizes, with five to 10 doses,” she said, for price sensitive customers. “We find that people do like to get the smaller sizes, especially when it’s a counter purchase.”
At VERC’s CBD Wellness Center, customers are more open to purchasing larger sizes when there’s on-site education about the products. “Education is needed; it’s just bridging that gap and educating and making it more normal, which I think we are doing just by carrying it in c-stores and having it on the counter, that’s a start,” Vercollone said.
Looking ahead, both retailers see a slew of new tinctures, salves and other formats in the pipeline, not just with CBD, but with a wider array of hemp-based products. Consumer packaged goods are on the way, too, once the Food and Drug Administration issues updated guidance on food products with CBD.
“When that comes I think a lot of that will open up,” Crozier said.
During the past two years of carrying CBD products in its stores, VERC has learned that less is more. “At one point we probably had close to 50 SKUs…and it got lost in the shuffle. We’re trying to pare it down. Ultimately, we feel it’s our job to vet those top brands, to vet the quality brands,” she said. “You don’t need tons of different sizes, a ton of different flavors. You need a salve; you need a tincture. You don’t want to overdo it too much or it can start to look junky very quickly. Keep it clean and simple.”
Want to learn more about how convenience retailers can leverage growing consumer interest in CBD? Read “The CBD Wellness Era” by Melissa Vonder Haar in the January 2021 issue of NACS Magazine, and download the Convenience Matters podcast #203 to learn about CBD, hemp, THC and how to stay on the right side of the law.
Kim Stewart is editor-in-chief of NACS Magazine and editorial director of NACS. Email her at email@example.com.