Small CBD companies should take notice of CVS.
In case you’ve had your head under a rock this week (totally understandable when looking at the rest of the news!), or you didn’t really pay attention to what you read or heard, CVS Pharmacy is now carrying CBD products on store shelves in many states. If you own one of the thousands of small CBD companies, now is the time to be concerned.
Yes, we know that Walmart has been carrying CBD products online and in some stores for quite awhile now, and no, we didn’t sound the general alarm over this fact. The difference in Walmart and CVS Pharmacy when it comes to public perception is like night versus day; no matter what light you put Walmart in, the demographic (regardless of the actual dollars changing hands) simply doesn’t compete with the small CBD companies making and distributing craft products through smaller distribution networks and channels.
CVS isn’t waiting for FDA approval to stock CBD products on their store shelves.
This can only mean one thing – they’ve run the numbers, they think it’s a HUGE product category, and they fully believe that the grey area between the Farm Bill and the FDA approvals process is not going to be a mistake that costs them as much as they’ll make by carrying the products in the meantime.
This is a double edged sword, however, and owners of small CBD companies who don’t have a definitive strategy for branding and market capture going forward are likely to find themselves in a world of hurt, sooner rather than later. It’s nice the CVS deal legitimizes the CBD products market in a way that no other retailer could possibly do; it’s potentially devastating to distribution and profit margins if the CVS Pharmacy brands are selected and stocked solely on price.
There are two valid reasons for stocking CBD based particularly on price – the first is that CVS has found suppliers, likely Chinese, who can produce enough product under a pseudo white label to flood the market with cheap CBD products. The second is that CVS sees the entire CBD product line as something akin to snake oil, and not as a worthwhile compound that actually helps to alleviate a multitude of problems in humans and other animals.
CBD is not just in your inbox anymore.
We’ve been watching the growing onslaught of spam emails for CBD products over the past year, with mild amusement, or perhaps a light dismay. Obviously bombarding folks with spam ads for a product makes the public perception of that product diminish – think about acai berries, male energy supplements and weight loss tricks (weird much, anyone?).
It’s our fondest hope that CBD products don’t become a parody of themselves, and we also hope that the FDA does step in and mandates that small CBD companies and large ones must adhere to certain practical standards, well above the normal safety requirements.
Gain market share the smart way.
It’s obviously impossible to fight CVS in the traditional ways, they are just too big and have too much reach and funding; the idea of a David and Goliath story isn’t really even on the table in this situation. Small CBD companies that want to remain relevant, grow their business and expand their sales are going to have to look to clever branding and advertising campaigns, in order to build a loyal following that isn’t price shopping the product as a primary driver of purchases.
Using mobile ad campaigns to directly engage and interact with customers, potential customers, referrals and other prospects is where the smart money will be in the next 12-18 months. As the FDA begins to craft a more organized approach to CBD product distribution, it’s quite likely that the bigger players in the market (CVS, Walgreens, Walmart) and the larger producers (definitely not the small CBD companies) will push the agency to restrict the ability of smaller companies to bring product to consumers in as efficient a manner.
[MERCHANT ACCOUNTS: CBD product merchant account processing – FIND OUT MORE]
Expect to see more regulations, more testing requirements, more packaging restrictions, and more onerous burdens on advertising and marketing to the public. All of this will drive the cost of producing finished product up significantly for smaller companies, and many will likely fold due to lack of funding and inability to gain traction in the marketplace.
What about the credit card processing issues?
Right now, small CBD companies also have a secondary issue – Elavon, the largest source of credit/debit card merchant accounts, has exited the marketplace recently and there are not a lot of banks (yet) who are looking to fill the void. This creates a double whammy for the small CBD companies – really the equivalent of fighting a war on two fronts without enough soldiers.
For higher volume sellers, there are currently merchant processing options available, and we always have suggestions for how small CBD companies who are just starting out can work within the existing framework to clear sales and bank the proceeds without running afoul of the card associations.
Drop us a line and let us know if we can help with branding, processing, or advertising!!!