Talking it out: Brand leaders discuss bringing CBD into beauty, personal care
With more mass retailers looking into the possibilities of selling CBD-based health and beauty care products, the overall industry is ramping up for an explosion of products, not to mention marketing and other support systems to propel the segment.
Total sales of hemp-derived cannabidiol products are expected to reach $646 million by 2022 from $49 million in 2014 — expanding at an annual rate of 38% over this period, according to a 2018 study called “The CBD Report” from Hemp Business Journal, a division of New Frontier Data.
That creates tremendous opportunity for any retailer looking to build larger sales in the beauty segment of the CBD business. November insights from Coresight Research, titled “Coresight on Cannabis: The CBD Consumer,” reveals that currently the most used products are oils and tinctures, while beauty and personal care products are less popular. Coresight suggested this is because the major benefits that have been communicated to consumers on CBD is its utility in tackling stress and pain.
Many indications signal that this is about to change. An analysis of Google data from machine intelligence platform Spate and Landing International showed monthly cannabis beauty searches have jumped almost 90% to an average of 1.5 million. That makes cannabis the fastest-growing ingredient in online beauty ingredient searches.
The searches show that consumers still need to know more about cannabis beauty ingredients. In beauty, a path to gaining traction could be to educate about CBD and benefits as far as inflammation, acne and aging, according to Landing International and Spate. Further support comes from studies published in October by The Benchmarking Company. Its “CBD & Beauty” series of infographics showed that 46% of 7,000 beauty consumers polled don’t know the difference in full spectrum, broad spectrum or isolate CBD. Only 27% said they know how to distinguish between hemp and CBD oil.
With the market wide open and a lot of opportunities for education in the space, DSN met with several key CBD manufacturers to get their opinions on the CBD industry, particularly how it will impact the beauty category.
Drug Store News: Why is there such a buzz around CBD? Is it an extension of the natural and, more recently, of the wellness revolution? Will CBD have staying power?
Michael Law, chief commercial officer, Eagle Labs, maker of impirica CBD: There is no category I’ve seen in my 30-year career in CPG that has this potential. Rx-to-OTC switches drive growth in OTC sales, but took dollars from prescriptions down by 90%. I have not seen a category with this kind of early consumer acceptance, brand loyalty and repeat purchasing behavior in my career. CBD is at the intersection of wellness, self-care and natural products. It also crosses demographics very well with strong opportunity from millennials to baby boomers. I’m very excited to be a part of such an industry-changing category.
Nancy Duitch, CEO and founder, Sera Labs: CBD has had an air of mystery surrounding it due to the overwhelming positive health-and-wellness benefits. The critical mass appeal, which continues to expand, is due to the fact the consumer is anti-pharma, wants to feel healthy and do what they can to live a better life, and CBD offers a natural alternative. While we can’t make any quantitative health claims about CBD, we have all heard how inflammation is one of the root causes of many health issues, and most consumers believe CBD is a natural solution.
DSN: On that note, is there a typical consumer?
Dean Neiger, vice president of business development, SkyOrganics: There is no typical CBD consumer. A schoolteacher is just as likely as a veteran or banker to use CBD — regardless of gender, race and age.
DSN: Can you tell us about your company and your different businesses, as well as your distribution?
Ellen Saksen, director of marketing, Criticality: Criticality is an integrated North Carolina-based agricultural hemp company that takes a science-based approach to the extraction, refinement and formulation of high quality, transparent industrial hemp derived products. Criticality partners with Pyxus International — a provider of responsibly produced, independently verified, sustainable and traceable agricultural products, ingredients and services — to source, process and produce industrial hemp and hemp products under North Carolina’s Industrial Hemp Pilot Program. Korent Hemp is Criticality’s consumer-facing brand and Korent Select is our higher-concentration CBD brand, curated specifically for healthcare partners and professionals.
We started our business with healthcare providers in mind, formulating with high concentrations. From there, we are now expanding distribution into independent pharmacies and regional chains with the desire to expand even further in 2020.
DSN: Are consumers still confused about CBD, or are we beyond that?
Duitch: I believe the consumers, while loving the concept of CBD, are still confused. What brand should they trust? What is the right amount of CBD to use topically or for ingestible use? What is the difference between isolate, full spectrum or broad spectrum? There is always chaos and confusion in an explosive growth industry, but time and trust for the brands delivering true quality products will win over time.
Law: Consumer education about CBD is improving every day, but there remains a lot of confusion about CBD and THC. As more and more brands have jumped into the category, and many of them with questionable pedigree, consumers are looking for brands that can be beacons of trust. Eagle Labs launched a brand based on this market gap to help unlock greater consumer trial in the category. Impirica is the most tested CBD brand, with testing throughout the manufacturing process and with two separate third-party lab tests for all finished goods.
DSN: Following that line of questioning, what is the biggest confusion point?
Neiger: That CBD is unsafe and will get you high. In reality, there is growing database of medical research supporting its use and bereft of benefits. CBD is nonpsychoactive, containing low if any THC.
DSN: So how can retailers tackle the challenges facing the growth of CBD?
Kate Lynch, vice president of marketing and product strategy, Curaleaf: CBD products are popping up everywhere in drug stores, natural and health stores, gas stations and more, but not all CBD is farmed and sourced equally. Retailers and consumers should be looking for products that are made with high-quality ingredients, manufactured in a quality manner and rigorously tested. They should choose CBD products from companies like Curaleaf Hemp that are fully transparent with where their hemp is farmed and the ingredients used to manufacture their products. Curaleaf Hemp aims to educate our customers about our products. We test our CBD before formulation and all our products are batch tested before distribution. We share these test results on our website at curaleafhemp.com and on our unique QR code holograms printed on our tamper-proof stickers. Transparency and education ensure our consumers and retail partners are confident in the high quality of our products.
Duitch: I believe the biggest challenge is trust. Differentiating between what to purchase and who to purchase from are the biggest challenges. Therefore, customer service is critical as is full transparency and delivering a quality product that will make a difference. The bad actors selling hemp seed oil, low-quality products and making outrageous disease claims make it difficult for those of us selling a high quality product and following the Dietary Health and Education Act.
Saksen: As this category continues to grow, more and more brands are entering the market. Retailers will need to feel confident with suppliers around safety, transparency and quality. Being able to educate not only the retailer, but the consumer is paramount.
DSN: If you could sit down with a retailer now, what would you want to explain about CBD products?
Lynch: Curaleaf Hemp was developed by an experienced team of product engineers and scientists. Our line of high quality, nonintoxicating products meet the strictest standards in the industry, while supporting a better quality of life. All products are derived from hemp farmed wholly in the United States and are infused with beneficial essential oils. Curaleaf Hemp has partnered with trusted cosmetic manufacturers with a history of supporting top-selling cosmetic brands to develop these new products. Combining Curaleaf’s cannabinoid expertise with cosmetic formulation experts has resulted in one of the best CBD skin care brands on the market.
Neiger: CBD is only risky if you make outrageous claims about its benefits. The market shows that demand and profits for CBD are rapidly growing. Experts state the market will surpass $20 billion by 2024.
Sky Organics holds a huge customer base and is expanding quickly. We’ve achieved this success through transparent marketing, with simply formulated products, and regularly engaging with our consumers. We plan to use these same techniques that are making Sky Organics successful with our CBD line.
Law: CBD is not going away — repeat purchases and brand loyalty in this category are very high. Consumers are buying it because it is delivering on an unmet need. Choose your suppliers carefully. Consider where the brands you want to carry are manufactured and with what kind of process. Impirica and all products made by Eagle Labs have 26-page batch records and manufactures all of our products in an FDA-registered facility. An extremely high focus on quality will ensure your consumers have nothing but a great experience when they try the category. Work with suppliers that have extensive experience in CPG retail. Understanding retailer needs on both the branded and private-label side is critical to any supplier partnership.
Duitch: Selling into retail is great, but selling through is the endgame. We understand branding and how to drive foot traffic. We stand behind our products with proper testing, efficacious products, an aggressive advertising campaign, and are always in product development in order to deliver the right products to the consumer.
DSN: CBD has been big in topicals for pain, etc. Do you see potential for more beauty use — facial masks, foundations?
Saksen: We will continually expand our pipeline built on consumer and category trends. We believe the beauty market is a natural fit for CBD products and we are excited to launch some innovative items in that space early in 2020.
Law: Therapeutic topical skin care for consumer complaints like pain will continue to be a very important segment to target for CBD brands. FDA regulation will help this segment significantly by helping to define the appropriate ingredient profile and application guidelines that can be supported by research. Beauty is also an important segment and Impirica has an expanding line of products in this segment, including an eye serum. Eagle Labs makes a wide variety of beauty products both with and without CBD. Again, research will be key to building this segment.
Combining CBD with other well-recognized ingredients that have established skin care benefits can help drive consumer adoption. Right now, anything with CBD on the label is hot, but a lot of the products that don’t perform to consumer expectations will find their way to the clearance endcap quickly. Brands need to be careful not to get lost in the rush to market for segments or formulas that will disappoint consumers. These “cash grab” items will only hurt the credibility of the category, and retailers can play a key role in filtering these out before they hit their shelves.
Neiger: We see CBD in wellness all the time, but only recently is it starting to be incorporated into beauty. With interest and research around CBD growing, it is becoming a product that’s not just important in the beauty space, but being demanded to be there by consumers. Down the line, we do have plans of expanding our CBD line and getting more creative with products — making sure that CBD always works in conjunction with the desired applications.
Lynch: CBD is enriched with vitamins A, D and E, as well as essential fatty acids — all elements that are good for the skin. Infusing CBD oil into skin care products will give your skin care routine a much-needed boost. Consumers are becoming more aware of the ingredients in their favorite products and how they are manufactured, and, with this increasing awareness, the CBD beauty segment is positioned to be one of the biggest in the market. Makeup infused with CBD is an upcoming segment for the market. With CBD being enriched with beneficial vitamins and fatty acids, the possibilities of makeup with this ingredient is endless.
DSN: Do you recommend merchandising CBD in one spot or breaking out by category?
Neiger: For now, the best route with CBD merchandising is one spot. We need time for consumers to get more educated and familiar with CBD before breaking out.
Saksen: At this point, it makes sense to have a designated CBD section to help consumers easily navigate this new and sometimes confusing category. We think we are still a long way out from placing CBD into specific sections in the store relative to need states.
DSN: Are mass marketers behind prestige in CBD for beauty? If so, how can they advance?
Law: Brick-and-mortar retailers can be split into three segments: The first are the ones who market with strong brand assortment and consumer education; the second are the ones who market with “toe in the water” execution; and the third group are the retailers who are waiting for regulation.
Most of the category sales are via online/direct to consumer today, and with independent retailers that have invested in assortment and consumer education growing rapidly. Anecdotal feedback from some large brick-and-mortar retailers is that they are underwhelmed by the performance of the CBD category so far. We believe this is more likely related to the commitment to the full category versus just topicals, and the lack of in-store education for consumers interested in trying CBD. Consumers need to experience the category and have a chance to engage with an in-store expert in order to drive conversion for at least their first few purchases.
Broadly speaking about the category, our recommendations to retailers are that they play the long game, but get started now. Consumers build their purchasing habits early in the launch of a new category, so ensuring your shoppers know you are supporting this category will be important to ensure you capture the lifetime value of your shoppers’ purchases.
Also, they need to make a statement in CBD if they are going to sell it. Don’t dabble with a few items on the shelf or an endcap. We recommend retailers keep CBD products all together in one primary location, and they break secondary display into other home locations as the category gets more established.
And, finally we encourage them to vet their suppliers carefully.
Duitch: It appears the major drug chains and the grocery trade are front and center with CBD topicals, including beauty. While the mass marketers are behind in all aspects of CBD, due to consumer demand, they will not be able to ignore this category for much longer. I understand taking caution with ingestibles, but beauty is one of the safest CBD categories as there are so many great active ingredients, which work with CBD. The mass retailer would be able to follow the FDA Cosmetic Act rules and have a much safer launch with CBD, and choosing the right vendor partners who understand the rules of engagement with regard to testing, packaging and marketing will make the difference.
Neiger: DTC has the advantage of not having to wait retail cycles. However, mass has tremendous resources and technology at its disposal to help bring exposure to CBD and eventually catch up and surpass DTC.
DSN: What are your company goals for 2020?
Neiger: Right now, a lot of CBD marketing is dishonest. Companies are making widely unsubstantiated claims that CBD can cure depression or cancer. By 2020, our major goal is to be a lead competitor in retail space, provide transparent, honest information to our consumers about CBD, and, most importantly, maintain a reputation for having safe, quality products at accessible price points.
Saksen: Everything we do comes from experience and transparency. We hope more retailers, of all sizes and geographies, commit to working only with reputable CBD companies that can guarantee the efficacy and trustworthiness of their products. If they do that, then the Korent Hemp brand will continue to grow.
Duitch: Our goals for 2020 are to be one of the leaders in the CBD space, launching innovative targeted products with solutions to remedy immediate problems for the customer. We have a very aggressive marketing/advertising strategy, which we believe sets us apart from the pack. Standing out in a crowded market is critical for Sera Labs.