Highlights from our hemp and CBD webinar… ‘Ultimately brands are going to win’ – FoodNavigator-USA.com

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Here are some of the highlights from our event, which featured The Vitamin Shoppe, Recess, Mood33, Ojai Energetics, and Eversheds Sutherland.

COVID-19 and CBD:

We’ve been very fortunate as in most of the states we’ve been able to stay open, but there’s no question that foot traffic has been impacted with the shelter in place orders. However, our direct to consumer e-commerce business has seen record demand, especially in the immune support categories. Curbside pickup and contactless payment have also been very important during this time… Sharon Leite, CEO, The Vitamin Shoppe

There’s been a rush on vitamin C and zinc and elderberry and things that support immunity, but from a CBD standpoint, the business does continue to perform well. We were the first national retailer to carry ingestible CBD and we are very passionate about this product, and will continue to stand behind it and expect to be a market leader out there in the industry… Sharon Leite, CEO, The Vitamin Shoppe

We are seeing interest in other supplements that support mood, stress and sleep, and so if you think about CBD, some of the products that have dual purposes have been selling quite well. So we are very bullish about this category and expect to continue to see growth…Sharon Leite, CEO, The Vitamin Shoppe

Our retail business has been hurt by COVID, but our ecommerce business is up 4x…Ben Witte, founder and CEO, Recess  

We set out to create six different SKUs for six different mood states. Going into COVID-19, energy was our #1 SKU, but in April and May, calm has become our #1 blend…Eric Schnell, CEO, Mood33

On the consumer brand side, brick & mortar is down, e-commerce is up, and from the ingredients supply side​ [Ojai supplies water soluble CBD to beverage brands such as LifeAid], things are steady, although the bigger brands are gated by FDA lack of clarity…Will Kleidon, founder and CEO, Ojai Energetics

COVID-19 is eating up all the bandwidth at the FDA. However, I think there’s an indication that they are very interested in information and data on CBD isolate vs full and broad spectrum hemp extracts and I think they are considering that as a potential path forward ​[permitting the latter in foods and supplements with high doses of CBD isolate sold as drugs]. The red yeast rice example is a good one ​[red yeast rice can be sold as a supplement if formulations are not standardized i.e., without artificially increased levels of lovastatin – a cholesterol-lowering ingredient in red yeast rice that has been approved as a drug]… Greg Kaufman, partner, Eversheds Sutherland

CBD Central Vitamin Shoppe
Sharon Leite: ‘For our [CBD] buyers, 52% said they were looking for a solution for pain, 49% spoke about anxiety, 47% spoke to stress, 47% spoke to sore muscles and joints, and 41% sleep…’

CONSUMERS AND CBD:

I think this category is bigger than CBD and there are going to be more products with CBD and other functional ingredients such as nootropics, adaptogens and magnesium that will be delivered together in a stack…Ben Witte, founder and CEO, Recess    

I’ve never viewed Recess as a CBD company. Our tagline is ‘an antidote to modern times,’ and when I started the business, the thesis was that the world was becoming increasingly unsettled… and people would increasingly be seeking out solutions to feel calm, balanced and centered. CBD was bubbling up on the periphery, and I started using it myself, and I felt a lot better…Ben Witte, founder and CEO, Recess   

The key insight we had was that the user experience of putting CBD oil onto your tongue is not a great one. CBD is one of a few compounds that can serve as the basis of a new ready-to-drink beverage and supplements category designed to help people feel balanced, centered and calm just as caffeine and taurine work together to deliver a stimulation effect. But importantly they don’t call the energy drink category the ‘caffeine category,’ they call it the energy category, which has led to our marketing strategy, which leads with establishing consumption cases, ‘taking a recess,’ and defining a feeling – call calm, cool and collected –  the ingredient [CBD] kind of fades into the background…Ben Witte, founder and CEO, Recess  

Enduring brands transmit an emotion and have established usage occasions in people’s lives… Ben Witte, founder and CEO, Recess  

One of the most interesting insights we’ve had is just how many use cases there are, a lot of people drink it first thing in the morning to start the day calm, or before bed, during the day at lunch or at the office, or before and after a workout, as a substitute for alcohol or a mixer for alcohol. Recess competes with LaCroix, Red Bull, Budweiser and coffee, so I think based on what we’re seeing 18 months in, and some of the velocities we’re seeing, it’s just incredibly promising for how big this category can be. I think it will be bigger than energy in a 10-year period because people don’t generally drink energy drinks after 5 o’clock… Ben Witte, founder and CEO, Recess  

We found that 63% of consumers that were purchasing CBD were getting their sources ​[making their decisions about what to buy] from friends and family, and after that it’s online and customer reviews…Sharon Leite, CEO, The Vitamin Shoppe

I see opportunities in supplements and foods and beverages. For us it’s really about providing solutions. We recently did a very detailed consumer research study, and for our ​[CBD] buyers, 52% said they were looking for a solution for pain, 49% spoke about anxiety, 47% spoke to stress, 47% spoke to sore muscles and joints, and 41% sleep, and the others were things like inflammation, depression, headaches and migraines… Sharon Leite, CEO, The Vitamin Shoppe

One reason we carry CBD foods and beverages is that CBD supplements can be pretty pricey; it’s less of an investment to purchase a beverage vs a jar of supplements for $59 – it’s a way to get into the category without incurring a lot of risk… Sharon Leite, CEO, The Vitamin Shoppe

Capsules are the #1 sellers, but gummies and other formats are growing.  We had CBD products in 572 doors by the end of March 2020 and our goal is to be in all stores as the regulation evolves…Sharon Leite, CEO, The Vitamin Shoppe

We’re in a category that has an ingredient that definitely changes the way you feel and to me that’s the magic of this category. We chose to partner with Evo hemp, we use a full spectrum extract …we did a lot of testing of 10mg up to 40 or 50mg, but 33mg was about right. If you drink a 12oz can of Mood33, you get a noticeable effect within a few minutes. If you’re going to try and sell a $4-6 beverage you have to make sure that people feel something so they come back for more. You can’t just do the flavor of the day with CBD sprinkled in… Eric Schnell, CEO, Mood33

Recess CBD cans
Ben Witte: ‘I’ve never viewed Recess as a CBD company…’

THE REGULATORY PATH FORWARD FOR CBD:

Is it safer to market CBD supplements vs foods and beverages? Right now from a regulatory standpoint there is not a significant difference. What the FDA is going after is not how CBD is categorized, but how it is marketed…Greg Kaufman, partner, Eversheds Sutherland

However, I think retailers are making risk-based judgments​ [eg. some carry supplements but not foods/beverages] as people in the supplements category are more educated about what they’re buying, they are coming in for specific things, they are going to read labels and follow dosages… Greg Kaufman, partner, Eversheds Sutherland

What we’ve heard from the FDA back in March is that they are still looking for data on safety, unfortunately a lot of what progress was being made has been stymied by COVID-19. At the beginning of the year they announced a public meeting to be held May 31, and that never made it onto the calendar. They do have a Congressional mandate to produce a report on adulteration and contamination in sampling of CBD products and that’s due June 17, but I suspect it will be delayed… Greg Kaufman, partner, Eversheds Sutherland

I think there’s been some good messaging from the FDA on their ability to create an exemption for dietary supplements containing CBD through a rule writing process, so they have to propose a rule, take notice and comment, and then respond to all the comments and issue a final rule, so that is not a simple process…Greg Kaufman, partner, Eversheds Sutherland

The risk of class action lawsuits still exists even if you’re not making any health claims, although interestingly some of these cases have been stayed on primary jurisdiction grounds…Greg Kaufman, partner, Eversheds Sutherland

lawsuit-GettyImages-zimmytws
Greg Kaufman: ‘The risk of class action lawsuits still exists even if you’re not making any health claims…’

WINNERS IN THE CBD MARKET:

As the market matures we’ll see consumers and retailers demand more rigor in terms of efficacy and safety and quality…Will Kleidon, founder and CEO, Ojai Energetics

Ultimately brands are going to win in this market; the biggest caffeine companies in the world don’t market caffeine, they market Starbucks or Red Bull or Coca Cola, they market the feeling and the use case… Ben Witte, founder and CEO, Recess   

I also think brand building is increasingly shifting online and there’s a certain type of marketing strategy that transitions well to online audience building and in my opinion, that’s not sharing just facts about hemp, it’s about how Recess fits into your life and lifestyle…Ben Witte, founder and CEO, Recess  

I assume there will be acquisitions by large strategic acquirers. Two years ago, when one of those large companies talked to me, they said brands like yours and Recess and others are already on our radar… we’re not going to do this ourselves and take the risk, but we’re going to watch you guys play it out and then we’ll buy the winner.  The magic number in beverages is if you get to $25m in revenue… Eric Schnell, CEO, Mood33

mood33-range
Eric Schnell: ‘Going into COVID-19, energy was our #1 SKU, but in April and May, calm has become our #1 blend..’

ROUTES TO MARKET FOR CBD PRODUCTS:

E-commerce for beverage has typically not worked well because beverages are heavy to ship; however, it costs the same amount of money to ship a can of LaCroix and a can of Recess, and we’re five times the price, so it makes e-commerce a viable channel…Ben Witte, founder and CEO, Recess   

One good thing about CBD is that the margins are typically much better than you see in ice teas or other functional beverages, and margin is critical in this business…Eric Schnell, CEO, Mood33

We originally built out a model for a national rollout with UNFI and KeHE, large specialty product distributors we’ve worked with for many years, but we had to pivot and go down the DSD route as  buyers who thought they could bring in these products at the warehouses found they could not ​[owing to a lack of clarity from the FDA]… Eric Schnell, CEO, Mood33

We also had to pivot with second production runs in Florida and put QR codes on our products because that’s what that state wants, so being able to adapt and pivot quickly will be really important until the FDA weighs in… Eric Schnell, CEO, Mood33

More than anything, right now it’s just important to get in the game, whether it’s e-commerce or working with DSDs in select geographies, because when the floodgates open… we’ve spoken to Walgreens and CVS and Wegmans and Whole Foods, and they are already creating dossiers of which brands they will bring in as soon as the green light is turned on…Eric Schnell, CEO, Mood33

lifeaid and ojai
Will Kleidon: ‘The consumer is starting to demand that more and more, which is great…’

VETTING SUPPLIERS, DOSAGES, AND QUALITY CONTROL:

There are certain checklists to go through. Getting 3rd​ party testing beyond just cannabinoid and terpene content is really important; you need to look at heavy metals, volatile organic compounds, pesticides, herbicides and microbial count, that should be the gold standard. The consumer is starting to demand that more and more, which is great…Will Kleidon, founder and CEO, Ojai Energetics

There are a lot of formulations out there where the dosage is too low, so a lot of consumers are getting a combination of placebo and the effect of trace amounts of THC if they are taking full spectrum extracts. But bioavailability is also a huge factor​, and the different delivery systems change the bioavailability. The first step is getting it into the blood and the second step is once it’s in the blood can it actually be utilized by the cell?Will Kleidon, founder and CEO, Ojai Energetics

 We just added a QR code to each of our cans that leads you to a landing page on our website where you’ll see test results for each batch of Recess produced…. Ben Witte, founder and CEO, Recess   

We have to have a trusted source all the way back to where the plant is grown and for every manufacturer we do business with we look at​ [compliance with] GMPs, the facility needs to be registered with the FDA, and all products have to come with a certificate of analysis… Sharon Leite, CEO, The Vitamin Shoppe

 

 

Source: https://www.foodnavigator-usa.com/Article/2020/05/28/Highlights-from-our-hemp-and-CBD-webinar-Ultimately-brands-are-going-to-win