SAN DIEGO — Always on the lookout for new categories, Drug Store News happened across the Kismet Consumer Product Group, which made its NACDS conference debut this year at the Total Store Expo in San Diego with a line of hemp and CBD wellness products.
Interesting, because more and more states are entertaining legislation that would legalize marijuana, either for medical use or personal use, suggesting consumers may soon no longer associate a negative stigma with marijuana and cannabis products. According to the National Conference of State Legislatures, a total of 29 states, the District of Columbia, Guam and Puerto Rico now allow for comprehensive public medical marijuana and cannabis programs. And recently approved efforts in 18 states allow use of “low THC, high cannabidiol (CBD)” products for medical reasons.
So DSN recently caught up with Kelly Coughlin, president Annex Communication and the executive who represented Kismet at TSE, to get the skinny around the legality of CBD products, the stigma attached to those products and the market potential for those retailers who see past the stigma and embrace what could become a booming new OTC category.
Drug Store News: What was the feedback coming out of your participation at NACDS TSE?
Kelly Coughlin: The feedback from TSE was that there is a huge amount of education that still needs to take place in understanding the cannabis category, the differentiations between hemp, CBD and THC, and their legality on a state-by-state basis. Our company happens to represent a number of products that are non-psychoactive and more wellness driven, and those products, like in the analgesics category, were of particular interest to buyers. Many attendees were fascinated by the range of the product category – from optical to HBA to edibles.
DSN: Where is the de facto market? Is it limited to those states with legalization laws because there is greater acceptance?
Coughlin: We believe that the wellness products are going to transform the way that cannabis products are sold. Currently, in recreational states, patients are receiving their medical advice and products from an 18-year old “budtender” with a high school education, which is ludicrous. There is an absolute demand for these products, both recreationally and medicinally, but the demand also does not have a baseline of sales at retail level.
We are currently having two of our brands tested at national retail locations in the state of California, which has now been dealing with cannabis products for over a decade, and so there is certainly more tolerance in certain states than in others. With the hemp products, there is far more leeway to sell in an intrastate capacity than that of CBD and THC products. Canada is readying itself as a country for recreational cannabis rollout in July 2018, so we will be watching that carefully and have already begun extending our business initiatives to the country. The education and legality of the category will be an ongoing challenge for the retail industry to understand.
DSN: What is the feedback from drug stores in states without legalization laws? Even though hemp products are legal, is there a stigma attached?
Coughlin: Some distributors had a better understanding of the category than others. Those in recreational states certainly had a different perspective, in that the residents of those states have accepted the cannabis category as more of a lifestyle. When our country repealed Prohibition, it took only two years for every state to have liquor laws in place, which also set the stage for President Roosevelt to enact the first federal libations tax on 3.2% beer under the Volstead Act. Since the states have been slower to react to cannabis and hemp than the federal government anticipated, it’s been a slower process, but still a moving one. The stigma has begun to change, and its time for the retail industry to start applying some traditional business acumen to this category.
DSN: How do you overcome the stigma?
Coughlin: Education, education and more education.
DSN: What is the potential for this market?
Coughlin: We believe that it’s medicine meets liquor. The Los Angeles Times estimates that cannabis will bring over $5 billion a year to the state of California, and according to The Cannabist’s analysis of the state’s marijuana tax data, Colorado sold over $127.7 million worth of cannabis flower, edible products and concentrates in May 2017; more than $35.7 million of sales stemmed from medical marijuana purchases, and recreational-use items generated $90.1 million in sales.
So, there is enormous opportunity on the table. The problem in this category is that we do not have a baseline on sales, other than in recreational states like California and Colorado, and we are not accounting for what has operated in a black market capacity. This has been a largely all cash business, and so the substantiating of monetary expectations is still a new process, but looking at the existing sales in recreational states is incredibly encouraging. We believe that the category as a whole is $100 billion plus.
DSN: How should they be merchandised? In line with the appropriate category? Or as a destination center with hemp-based products as the theme? How does the consumer shop this category?
Coughlin: We have had conversations with several retailers, and there are varying answers. With some, they are looking at store-within-a-store concepts that can be themed as “holistic” or “herbal wellness.” With others, they have been adding the products to existing categories as a new product. The packaging and identification is obviously very important. We did have conversations with pharmacy operations, who did recognize that this category had the potential to require more of the pharmacist’s time, so the packaging and education behind the products is extremely important to be clear to the customer as to what they are consuming.
DSN: What was the biggest takeaway you took away from your participation at NACDS TSE?
Coughlin: We participated in TSE in an attempt to set a baseline for the cannabis industry with mainstream retail, and I feel like we achieved that. The feedback was overwhelmingly positive and encouraging, but there is clearly a lot of work to be done before these kinds of products can enter the marketplace on a national and international level. We are looking forward to utilizing the industry resources for collaboration and helping to solidify standards for education, legality and compliance in this category.
DSN: What’s the bottom line? What do retailers need to know about this opportunity?
Coughlin: We feel like retailers and pharmacists have not only an opportunity, but also a responsibility to understand this category. Over half of the states in our country have voted for “Medical Marijuana,” and yet we are treating the category as anything but. The majority of those that are using cannabis to medicate would prefer to acquire the product at their local retailer or drug store rather than a marijuana dispensary. The fact that there is a demand, and people are using cannabis for wellness, should trigger an immediate reaction from our wellness providers.