America's largest drugstore retailer confirmed that it will soon be carrying CBD products from Curaleaf last week. Although hemp-derived products have been sold through Amazon for years, placement in CVS retail stores somehow gives CBD products a bigger boost. Why would this benefit other companies not names Curaleaf?
1. CVS is a disruptor
Yes we are talking about the 55 year old retailer being a disruptor. In 2014 CVS took a bold step to stop selling cigarettes. Most analysts believed top line revenue would decrease as others would spend their money and transfer prescriptions to other drug store chains providing tobacco cigarette purchases. However, in 2015 data showed people actually purchased more smoking cessation products such as nicotine patches and overall 95 million less cigarette packs were sold in 2015 than in 2014. This shows CVS is a market mover.
2. Reaching new markets
CBD transaction sales have been done mostly online in the past few years. Although there have been an increase in retail outlets and product presence mostly in vape shops most purchases have been made directly online. What the CBD market may have missed is the consumer that fills their prescription at a local drug store chain and purchases Biofreeze or other supplements at the same location and doesn't care to too much to peruse online for supplements. Since over 90% off all transactions are outside of online channels it is important for products to be consumer facing in brick & mortar locations.
3. CVS provides legitimacy (to certain products)
Although CVS is not needed to provide legitimacy in the CBD industry, having shelf space in the largest drug store chain doesn't hurt. According to CVS representatives it will be selling the products that are topical applications...salve, lotions, and roll-ons. Sorry no jellybeans or gummies!
4. Educates consumers
Many people still conflate CBD with the psychoactive element in cannabis, THC. Although 10% of the 36 million people who are cannabis consumers use CBD for medicinal purposes many outside of the 36 million still think hemp derived CBD is illegal and do not understand the health benefits of CBD. Many big-box retailers only purchase from industries that aligns with their brand. In CVS's case they will have to educate the people outside of the 36 million on the benefits of the new product taking up shelf space in their stores.
5. Opening new sales channels
Similar to reaching new consumer markets, CBD will now be in a better position for retail distribution with other major retail chains. As we said before CVS is a market mover. The move actually breaks down barriers to distributors, buyers, and placement channels for CBD companies. If properly positioned we may see a variety of CBD products at every major retailer in a few years.