With stores everywhere being forced to close, how ‘essential’ are CBD sales?

Expected retail closures will have a significant impact on the distribution of CBD products in most major markets, according to analysis of CBD-Intel data.

Shutdowns of “non-essential” retail, either already implemented or expected in the near future for major markets, will likely limit CBD sales to online, supermarket, pharmacy and tobacconist channels. Health food stores, vape shops, head shops and non-medical dispensaries will all likely be forced to close – though there are movements afoot in many countries to label vape stores as essential providers, as has already been done in France and Italy.

The US and UK have yet to implement mandatory closures. Such moves are expected to happen sooner rather than later.

If this was to be the case then the US bricks and mortar closures could total $375m in CBD sales – around 75% of the offline market.

In the UK such closures would devastate the industry, which is heavily reliant on health food and vape stores for offline sales. In total the closure of those two distribution channels alone would result in the loss of almost 90% of offline sales ($169.6m) and account for significantly more than the total value sold through online channels ($128m).

 

Shortages fuelled by stockpiling

 

It’s a similar story in other European markets such as Ireland and Greece and where the closed distribution channels count for around half of the total value of sales.

Some markets fare slightly better. Italy’s vape store exception provides a small boon for CBD companies. Germany still sees most offline sales through pharmacies ($15m), which will stay open. This still means that around 45% of sales will have to find new distribution channels as about $34m of the $75m in total CBD sales in the country is through retailers that would be considered non-essential.

It’s unclear what impact such a shift will have on companies. But looking at cannabis sales for predictions on consumer behaviour indicates that a certain amount of stockpiling will go on – probably leading to major shortages.

The likelihood of this is increased when the outlook of users is considered. Many CBD consumers consider the product essential to alleviating conditions that otherwise make it impossible for them to continue normal life. As a result associations may try to lobby governments to consider the retail of CBD products to be an essential service.

It seems unlikely there will be enough of a wellspring to push this through, but exceptions are being made.

 

Pressure on delivery services

 

It seems likely that tobacconists will stay open in countries where they have a monopoly on sales. And, as mentioned, there is an attempt to get vape stores also included as an essential service – though at present it is unclear whether such a move will succeed anywhere other than France and Italy.

Meanwhile a shift to online sales will tax postal services – a situation that could grow worse as more and more consumer goods are purchased online and illness takes its toll on the workforce.

Delivery services may recruit significant numbers of new staff to cope with the anticipated demand and to insure against losses through sickness, but delays may still affect both consumers and retailers.

This could mean further stockpiling by consumers afraid of running out and items going out of stock if inventory is not replaced quickly enough and retailers are unable to stockpile items themselves in anticipation of disruptions.

Some areas may see a rise of hyper-local ad hoc delivery services. Gig working companies have promised to continue to supply deliveries (not that workers would have sick days to take off anyway) and other businesses may club together to provide central drop off or door-to-door services.

 

What This Means: Stores selling CBD will likely be beefing up their online presence in anticipation of forced closures of physical stores. But given difficulties in securing card payment services, among other issues, it may be difficult to do quickly.

In all, CBD businesses stand to face significant downturns in revenue – like many other consumer good categories. Government help may be available for some. Though for those in the US that also sell cannabis products, it’s already been announced that federal small business assistance will not be forthcoming due to the continued illegal status of cannabis at the federal level.

Freddie Dawson CBD-Intel staff

Photo: Chris Panas

CBD-Intel does not provide legal, strategic or investment advice. Tamarind Media Limited, the publisher of CBD-Intel, does not accept any liability or responsibility for information or views published.

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