When discussing the burgeoning category of cannabidiol (CBD) products, most people think of edible, supplement-type items such as gummies, tinctures or capsules.
However, given the current regulatory cloud over CBD, it’s not these ingestible products major drug and grocery retailers are bringing in: Kroger, Walgreens, CVS and Albertsons are all carrying topical products in which the CBD is absorbed through the skin instead of ingested.
Nielsen data shows that topicals make up 49% of the CBD products carried by non-convenience traditional retail channels. The segment’s recent popularity took even seasoned CBD companies by surprise.
“This past year, topicals being such a big talk was something we weren’t expecting,” says Vincent Gillen, VP of sales for Tampa, Fla.-based Global Widget, the parent company of Hemp Bombs, Nature’s Script and Pure Paws Hemp.
Analysts are taking note as well. London-based market research company GlobalWebIndex predicts CBD beauty products will hit $1.6 billion in sales and account for 7% of the overall global beauty market next year. And Stephanie Wissin, analyst with New York-based Jefferies, anticipates that market to grow to $25 billion and 15% of the beauty market in the next decade.
Here’s a look at what’s included in the fast-growing subsegment of topical CBD products, why consumers and retailers alike are flocking to the segment and key considerations for those looking to enter this space.
From Pain Patches to Beard Balms
Regarding the topical product mix, the options are seemingly endless. But they tend to fall into the categories of either treating pain and inflammation or general beauty and wellness products infused with CBD. Topical pain treatments include creams, salves, roll-ons, sprays and patches, while popular beauty options run the gamut from eye creams, deodorant, hair products and aftershave lotions to CBD-infused essential oils.
“There is obviously a lot of innovation happening with CBD products,” says Ashley Grace, chief marketing officer of HempFusion Inc., Denver. “We are seeing subcategories emerge that are aligned around functional benefits such as sleep, energy and stress relief.”
As such, bath products are emerging as a big hit with grocery customers, according to Monte Ahlemeyer, chief revenue officer of Smyrna, Ga.-based grocery distributor Accelerate360. “Bath Bombs are blowing it out of the water right now,” he says. “From a price standpoint, it’s a really easy entry for the traditional grocery consumer.”
But manufacturers aren’t stopping at bath bombs. Some, including Global Widget, have found success with uber-niche offerings such as CBD-infused beard balms and after-tattoo salves.
Blake Patterson, founder and CEO of Denver-based hemp product distributor MarketHub, isn’t surprised. “There’s a new product every week,” he says. “It’s going to be in just about everything that we put on our bodies because it’s so good for them.”
What Exactly Does It Do?
During its first hearings on CBD, the U.S. Food and Drug Administration (FDA) questioned the effectiveness of CBD-infused beauty products, asking James Shults—who was speaking on behalf of CBD cosmetic company Wildflower Brands—what exactly it means for a CBD-infused cosmetic to be “more effective.” Shults said CBD cosmetics bring “a higher sense of personal attraction” but admitted that’s “not a clinical definition.”
There are studies that have shown topically applied CBD may help with any number of skin conditions, including psoriasis and acne. An article published by the National Institutes of Health said this is “due to the combined lipostatic, antiproliferative and anti-inflammatory effects” of CBD.
“They deal with the inflammation of the skin, the inflammation of muscles and ligaments or joints,” says Patterson, noting that many of the patches carried by MarketHub break the skin, allowing CBD into the bloodstream. It’s just another way to get at the source of the problem.”
But what about products aimed at beauty and relaxation more so than the treatment of pain and inflammation? Ahlemeyer of Accelerate360 says consumers can still enjoy the key benefits of CBD—like stress relief—through a more beauty-driven product such as a bath bomb.
“CBD is all about getting back to homeostasis,” he says. “Relaxing in a hot bath fits right into that.”
Science-backed or not, consumers are definitely showing interest: Two of the five categories New York-based Nielsen’s Thinking Beyond the Buzz CBD study found would have the biggest penetration are topical and beauty-centric—not ingestible.
Benefits for Retailers
Consumers’ willingness to explore topical CBD products is good news for retailers. While the FDA is still determining how it will regulate CBD added to food, beverage or nutritional supplements, topically applied products are outside its purview, making it a safe space for retailers looking to capitalize on the CBD craze.
“Currently, topicals are being accepted much more rapidly than are ingestibles, given retailer confusion regarding the looming FDA regulation,” says Grace of HempFusion.
It’s not just the FDA. Many state and local governments have made it increasingly difficult to enter the edible market. California law, for example, states that CBD derived from cannabis can be sold only in licensed dispensaries and CBD derived from hemp is not approved as a food additive.
“Numerous California retailers have tried our different topicals because they cannot carry edibles,” says Gillen of Global Widget.
In addition to legal uncertainty around what can and can’t be sold, edibles and supplement products will also likely face a greater challenge when it comes to marketing.
“Brands that manage to achieve long-term success will likely be those that can distinguish themselves from the gray area of healthcare and emphasize more lifestyle benefits,” Sandy Livingstone, head of consumer products for GlobalWebIndex, said during a recent webinar. “Personal care is a clear winner for this. In this space, the benefits of CBD can be touted in a way that’s more focused on wellness and self-care—consumer language that is less open to direct challenges.”
“Brands that produce and market ingestible CBD products will be subject to much greater scrutiny,” he continued.
Legal issues aside, topical CBD products may provide an easier entry point for the more mainstream consumers found in a grocery store who may be leery of consuming CBD. “Our topical Pain Freeze gel has been one of our top-selling items across all demographics,” Gillen says, adding that the company recently added a CBD Heat Relief spray to the line. “Older consumers that we weren’t sure would want CBD tried the topical and loved it.”
Launching a Topical Set
Vetting the correct topical company and products to work with can be daunting—from both sides. “You’re working with a lot of manufacturers who haven’t played in traditional grocery, so they’re learning a lot about how to deal with this space,” says Ahlemeyer.
Beyond the standard assurances of following state and local laws, best manufacturing practices, etc., Ahlemeyer encourages retailers to consider a couple additional factors when it comes to topical CBD products. Those include:
- Ingredients: With any product going on the skin, it’s important to look at what’s in it, both from the perspective of safety and consumer preference. Ahlemeyer notes a lot of CBD lotions and creams developed for dispensaries still have a “hemp-y” smell that may be off-putting to the average grocery customer.
- Price: While customers generally are willing to pay a premium for CBD, a high price point can be prohibitive for grocery shoppers who are still very much in a trial phase. A $100 1-ounce bottle of Lord Jones’ Royal Oil—sold at Sephora and SoulCycle—probably isn’t going to fly. “If you’re a first-time buyer, do you really want to drop that kind of money?” Ahlemeyer says, advocating for more sample-friendly items in the $10 to $20 range.
More than anything, Patterson says it’s fundamentally important for retailers to treat topical CBD products as a true set, exposing customers to the many subcategories that are a part of it. “If you’re going to do a topical-only set, supply the forms: lotions, bath bombs, patches, etc.,” he says. “But also supply the needs: pain, calming, first aid. So when the customer is introduced to the category, they see the breadth.”