Hemp Depot Turns to Hand Sanitizer to Keep Employees Working – Hemp Grower

Hemp Depot Turns to Hand Sanitizer to Keep Employees Working - Hemp Grower

As the coronavirus continues to permeate every corner of daily life, it’s led to a crossroads for the newly developing cannabidiol (CBD) industry.

At a time when consumers are focusing on their health, searching for anxiety-easing solutions and ramping up their self-care routines in quarantine, CBD seems perfectly situated to fit the bill. 

But some alternative forces are at play. As CBD slowly steps into the mainstream, it exposes itself to broader commercial disruptions of closing retailers and supply chain hang-ups amid new economic pressures.

Those who have an online presence have fared well so far, but smaller companies and those without online sales may have greater challenges ahead.

Consumer Interest and Trends

Of all the confusion revolving around COVID-19, at least one thing is certain: Consumers are stockpiling necessities.

The good news is that CBD products appear to be a shopping cart staple for some existing consumers. A new survey from Brightfield Group of consumers who have used CBD in the past 12 months shows nearly 50% have stocked up or plan to stock up on CBD products. 

The research firm has also been tracking social media posts that refer to CBD, both generally and in conjunction with COVID-19 and related terms, since Feb. 14. 

Mention of CBD on social media has generally trended down since then, shrinking from more than 16,000 posts Feb. 14 to about 8,000 April 1, though it experienced many spikes and dips over that period. Of those posts, mention of CBD in conjunction with COVID-19 keywords, such as coronavirus and quarantine, has experienced a large spike since the beginning of March. 

“With so much of the country in quarantine right now, many are turning to self-care indulgences to keep themselves sane and even just pass the time, which is likely to help boost some CBD self-care products during quarantine time,” says Brightfield Group Managing Director Bethany Gomez. 

According to the firm’s social media tracking, consumers are turning to CBD in the age of COVID-19 for three main reasons: self-care (mentioned in 27% of posts), anxiety and stress (20%) and relaxation (12%). 

The insights are in line with observations from CBD retailers and producers around the country. 

“People are just really relying on CBD for anxiety and sleep and stuff like that. We’ve just been seeing a lot of people really particularly need it right now,” says Thomas Fisher, founder of Botanic Alternatives, a Chicago-based brick-and-mortar CBD retailer. “Even before this, there [was] no shortage of anxiety just in general in the world. … I think most people have some general level of anxiety now where it becomes debilitating. That’s a problem, but now more than ever.”

Brightfield’s social media tracking also shows tinctures, topicals and edibles are trending for coronavirus-related needs—another observation aligned with retailers. Conversely, sales on smaller pick-up items like rolling papers and CBD samplers have declined, Fisher says.

Stockpiling buying habits, however, can jolt suddenly in the other direction, leading to a demand shock for retailers. To what degree the industry would feel the aftershock remains to be seen, but Brightfield’s data offers a somewhat promising insight.

Of the nearly 1,700 survey respondents, 39% indicated they plan to use CBD more frequently, a majority of whom are younger consumers. On the flipside, 23% indicated they plan on reducing spending on CBD.

E-Commerce Takes the Spotlight

As cities and even entire states continue implementing mandatory stay-at-home orders, online CBD product sales have skyrocketed.

Brightfield’s research shows one-third of existing CBD consumers plan to switch to purchasing online. (Meanwhile, 31% say they don’t plan to switch, and 36% are unsure.)

The online trend has permeated all retailers. While Kentucky-based Cornbread Hemp products are sold at more than 100 retail locations nationwide, for example, the company’s co-founder Jim Higdon says there has been “definitely more online orders and an uptick on the size of those orders.” 

CBD information platform PuraPhy reports that the CBD brand Gnome Serum has seen a 175% increase of online sales and average order sizes have increased nearly threefold.

“What’s been most interesting to me [is] as the warnings of COVID-19 became more evident to the general public, consumers started buying multiple products in much larger quantities, not unlike what one is seeing in grocery stores,” says Gnome Serum CEO Greg Kerber. “Our average order in March alone is up more than two-and-a-half times our usual. So, if a customer was used to buying one item, now they’re buying three of the same item.”

Derek Du Chesne, the chief growth officer of Exactus Inc., says the company’s online sales have increased 12% as a result of COVID-19. Exactus Inc. is a vertically integrated white label hemp company that sells CBD products through its Green Goddess brand and through nearly 30 other brands globally in CVS, Sephora and more.

In the U.S., general product shipments to consumers appear to be mostly business as usual, according to major delivery services like FedEx and the U.S. Postal Service (though Amazon has asked consumers to use “no-rush shipping” if possible so it can focus on higher priority orders). Virginia Lee, Brightfield Group’s CBD research manager, says the company hasn’t seen slower shipping times yet for CBD products.

Even fears over supply chain disruptions with delays on packaging or hardware from China have been mostly quelled, “as China has been quick to pick operations back up,” says Jamie Schau, Brightfield’s international research manager.

Though shipping has been a lifeline for many CBD companies, it’s also been “detrimental” for some global retailers such as Exactus, Du Chesne says.

“A big issue that we’re having on the B2B side is shipping and customs,” Du Chesne says. “Last week, we had a couple-hundred-thousand-dollars’ worth of products sitting in customs in the U.K. because people just aren’t going to work anymore and they’re backlogged. Stuff is just sitting in customs all over the world.” 

Brick-And-Mortar Hits

Those who haven’t been able to transition to online sales are struggling.

Fisher, who has a sole location in Chicago, estimates Botanic Alternatives’ revenue is currently about 45% what it was prior to COVID-19’s permeation in the U.S. The store, which is offering online ordering for curbside pickup and delivery, is seeing about 20% of the foot traffic it did prior to that time, Fisher adds. “Our sales overall are down significantly just because obviously you don’t have the same ability to see customers all day,” he says.

Though Botanic Alternatives is still open with limited hours, other retail locations are being hit from all sides. Many cities implementing stay-at-home orders are allowing cannabis dispensaries to remain open, but some CBD and cannabis shops are being forced to close, like Fatty’s Smoke Shop near Waco, Texas, according to the Houston Chronicle.

“Some of our retailers that are CBD-only stores had to shut down as non-essential businesses, which is [a shame] because we think they are very essential,” Higdon says.

But CBD shops aren’t alone. Sephora, Ulta, Nordstrom, Neiman Marcus and other mainstream CBD retailers are shuttering temporarily by the thousands, severing a critical channel for brands and preventing them from expanding their networks. 

Hotels, restaurants and other social gathering hubs have taken an even harder hit, closing with little opportunity for online sales. Those that purchase CBD additives for food and drinks have passed their struggles down the line. “With us, what’s really been hurting isn’t so much on the brand retail side, it’s restaurants and hotels,” Du Chesne says. “The hospitality industry is a big customer of ours.”

To combat that, Du Chesne says Exactus has started offering credit terms to its hospitality customers, which he estimates make up about 10% of the company’s sales. “We know not everyone’s been as fortunate [as us], so just to kind of mitigate the risk and minimize their exposure, we’re doing everything we can on the finance side to keep everybody else’s businesses going until everything is back to normal,” Du Chesne says.

Emerging From the Dust

A sense of normalcy may be far off, but when it does arrive, Brightfield estimates fewer CBD companies will arrive with it. Gomez of Brightfield writes in a blog post that the “mass shuttering of retailers around the country is likely to deal a death blow to many of the smaller brands in the market.”  

That’s not to say major players won’t feel a bump or two. During their fourth quarter earnings calls, CBD giants CV Sciences and Charlotte’s Web both revised down their growth expectations for 2020 because of COVID-19. “The duration of near-term pressures facing our business are difficult to predict. And as a result, we will be managing our business conservatively and not predicting when sales may reaccelerate,” CV Sciences CFO Joerg Grasser said during the earnings call.

Still, smaller businesses suffering from the overcrowded market prior to COVID-19 may not be equipped to handle the coming blows. Industry event cancellations have added another layer of loss for already struggling companies, and unknown challenges lie ahead.

But those who can make it to the other side may have a clearer view of new opportunities with fewer players to compete with.

“My labor costs obviously have gone way down [with our limited store hours]. I’m not ordering a lot of products right now, so I don’t have open invoices. If that were to maintain at a reasonable level, and again, it’s meager, we can probably go on almost indefinitely because we’re pretty fine-tuned. We were pretty well-stocked with inventory,” Fisher says. “We’re going to be okay. We’ll be able to keep going for quite a while. I don’t think everybody’s that fortunate.”

Hemp Grower Editorial Director Noelle Skodzinski and Editor Nicole Stempak contributed to this report.

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