Implications for CPG Companies of Kroger Selling CBD Products in Over 1350 Stores
August 27, 2019 -
When Kroger, America’s largest grocery chain, announced that it was initially going to sell CBD topical products in over 900 stores in 17 states, hemp growers and CBD product manufacturers were elated.
Kroger’s grocery stores include Dillons, City Market, Fry’s Fred Meyer, King Soopers, Smith’s Pick ‘n Save, and Mariano’s stores.
Since then, Kroger’s CBD strategy has become clearer. Kroger will sell Charlotte’s Web and Veritas CBD topical products in 1,350 stores in 22 states.
The question we’re repeatedly asked by Consumer Packaged Goods (CPG) food, beverage, and cosmetic companies, is “what does Kroger’s CBD strategy mean for us?”
When national chains, including Walgreens and CVS, announced that they were going to sell CBD products, the Food and Drug Administration (FDA) commissioner, Scott Gottlieb tweeted, “I was also concerned to hear recently that several national pharmacy chains and other major retailers have begun to sell or will soon begin to sell cannabidiol (CBD) products in several states.”
As we’ve indicated in other Phyto Intel, “Market Intelligence” reports, the selling of CBD-infused food, beverage, and cosmetic products will be fueled by legality at the state-level, not in waiting for the FDA to approve CBD products nationally.
We have several conclusions:
Despite CBD not being approved by the FDA as a food additive, we view Kroger’s and other major retailers actions in selling topical products as a first step, in a market that sooner rather than later, will include CBD-infused food, beverages, and nutritional supplements. Instead of waiting for the FDA to approve CBD as food, beverage, and nutritional supplements, we believe that major chains will sell these CBD products as they become legal on a state-by-state basis.
There are an estimated 2,500 sellers of CBD products online. Many of these e-commerce companies were attracted to the industry by the potential of high margins and profits. We believe that most online prices for CBD products will significantly decrease over the coming months as major retailers, including Kroger’s, Walgreens, CVS, and Rite Aid roll-out CBD products in their stores. We anticipate these brick and mortar retailers will sell CBD products at significantly lower prices than comparable products sold online.
Unless online CBD marketers have niche-products or products with unique characteristics, it’s likely that the selling price online of most CBD products will be forced to decrease, driven by the “national prices” set by brick and mortar retailers including Kroger, Walgreens, CVS, and Rite Aid. This will likely reduce substantially the number of CBD companies selling their products online, as the margins and profitability for online e-commerce CBD companies will significantly decrease.
We view Kroger’s actions in selling CBD topicals as a first-step for the chain, with their desired objective, sooner rather than later, consisting of the ability to sell CBD-infused food and beverage products.
About Phyto Intel
Phyto Intel provides strategic assistance to enable businesses and entrepreneurs to enter and succeed in the fast-growing and fast-evolving legal cannabis, hemp and CBD markets in the United States and globally.
Phyto Intel also provides market intelligence, formulation and “go to market” strategies for Consumer Packaged Goods (CPG) companies and CBD producers interested in developing, formulating, manufacturing and marketing food, beverage, nutritional supplement, and cosmetic products containing hemp seed oil and/or CBD.