Kroger announced this week that it will start selling CBD creams, balms and oils in 945 of its nearly 2,800 stores. It’s the latest mainstream retailer to cash in on the CBD boom, following CVS, Walgreens, Rite Aid and Vitamin Shoppe’s entrances into the market, which is expected to grow to $22 billion by 2022, according to the Brightfield Group.
Retailers’ interest in CBD products is tilting the burgeoning industry’s favor towards traditional players, and away from DTC startups in the space. The digital marketing engines like Facebook, Instagram and Google that help spur the momentum of direct-to-consumer brands still block companies from advertising non-intoxicating cannabidiol products, as they’re derived from cannabis. These platforms have all blocked paid ads promoting CBD products, under their policies against advertising “drug and drug-related products.”
As a result, CBD-related startup brands like Feals, Recess and Hath, a DTC brand selling CBD patches and capsules that launched Wednesday, have had to work around the typical paid marketing strategies in pursuit of customer acquisition and targeting. Kelley Ireland-Kelly, the co-founder of Hath, said that promoting education-related materials on Facebook can help to drive brand awareness, while loosely tying the paid posts to sales once customers have left Facebook. It’s an exercise in being vague — promoting wellness products that can help relieve pain alongside pictures of serene-looking people — rather than direct in marketing. Other channels, like podcasts, have been attractive alternatives.
Regulations affect operational decisions as well, as cloud companies like Shopify and Oracle often turn away CBD companies to not take on any legal risks. Rick Amari, the founder of Columbus Consulting that works with cannabis and CBD brands, said “The key is staying nimble — you’ll learn processes manually, and without a robust 360-degree view of the customer or heavy target marketing. It takes more time to catch on.”
The presence of CBD products in mass retailers could do more to help shed awareness on the category as it gains traction. Bethany Gomez, managing director of the Brightfield Group, recently told Digiday that “large chain retailers starting to carry these products both dramatically increases the distribution of CBD products and gives it a level of credibility.”
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Ireland-Kelly said that in the CBD category, it’s necessary to “be where your customer is,” but she’s seeking out more specialty retailers in the supplement and grocery category, rather than mass chains.
“Mass retailers dipping their toe in the category is great for the industry because it puts pressure on everyone else and makes others feel safe to carry it,” she said. “But the in-store experience is the product on the shelf and the customer just hoping for the best. We want to be in stores where the retail spaces are more personal and employees have more knowledge of the category.”
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