Hemp Producers Battle for Retail VisibilityHemp-infused beverages have arrived, but brands may be having trouble getting them in front of their audience.
According to industry insiders, hemp and cannabis beverage producers are no longer challenged by the infusion technology — now the biggest hurdle is finding retail shelf space.
Fortune Business Insights puts the cannabis beverage market at $8.521 million by 2027. The expected explosion of this product segment is thanks to rising consumer demand for non-smokable solutions, continued growth in the CBD market, and investments by several multinational beverage makers.
But as more products launch, where will they end up? Store shelves only have so much space, and competition in the beverage industry is fierce. How can producers get their products on store shelves and in front of their target demographic?
The Importance of a Distribution Deal
The beverage industry's supply chain is structured much differently from the current model followed within the cannabis sector. Successfully landing new retailers means working within a proven distribution model. A solution for large, established brands is often partnering with a beverage distribution company. These non-cannabis distribution organizations already work with grocery stores, drug stores, convenience stores, and vending machine companies to place beverages. Incorporating hemp beverage brands is a logical evolution of this model.
Good Hemp Inc., a publicly-traded company and maker of several hemp-infused beverages, recently announced a partnership with one such distributor. As per the August 2020 announcement, beer, spirits, wine, and non-alcoholic beverage distributor Premium Brands of Northwest Arkansas would be moving Good Hemp Fizz and CannaHemp through a network of 900 Arkansas stores.
Securing deals within already-established distribution networks allows beverage brands access to new markets and on a larger scale than what would be otherwise available. A distributor has already established extensive relationships with their retail partners and understands each company’s niche.
What's more, as the Good Hemp Inc. deal with Premium Brands suggests, many beverage distributors are eager to have a cannabis or CBD brand in their lineup. With the expected growth of this niche market, everyone wants a piece of the action. Heath Sutherlin, GM at Premium Brand, stated, "Hemp Infused beverages are a growing category, and we are excited to add a solid brand like Good Hemp Fizz and CannaHemp to our non-alcoholic portfolio."
Matching Retailer Aesthetic and Core Demographics
Another key consideration for new cannabis beverage brands is matching the brand aesthetic with that of the retailers'. A product best suited to Whole Foods' aisles would likely not fit on the shelves of a 7-Eleven. Beverage brands must complete significant backend research into each retailer to earn the highly competitive shelf space.
A piece by the Financial Post covering the launch of cannabis beverages in Canada poignantly highlights this issue. Following the legalization of cannabis beverages, retailers like The Honey Pot, a Toronto store, confirmed they would only stock a select number of the newly available products. Why? Because their store aesthetic was strictly minimal and clogging it with dozens of new beverage products would jeopardize that unique style.
Seeking out retailers who have similar core demographics and brand feel to that of the beverage is a big first step. Marketing a bargain CBD beverage to an upscale dispensary won't be as effective as targeting that same product within convenience stores and other lower-cost retailers.
Another hemp beverage company, CBD Living, went back to its roots in 2020. Speaking with company COO Sean McDonald, he explained that although CBD Living had spent several years building their network of over 5,000 retailers, with the reduction in retail traffic, they had to shift their focus in 2020.
By aligning their product with the cannabis industry early on, the company earned increased visibility from the essential industry. “We started in dispensaries in California and Colorado initially and then went to other businesses like smoke shops, health food stores, and chiropractors,” he noted. “With some smaller retailers getting shutdown, we definitely saw an uptick in the sales happening in dispensaries.”
McDonald stated, “In 2020, we simply tried to continue the conversation with all the accounts that we built over the last 5-7 years.”
While he admits, like most business owners, their sales focus had to shift with the challenging landscape of a pandemic. Additionally, the company took advantage of 2020 by refining and redesigning their packaging and preparing for new product launches for 2021.
Finding Space on Crowded Shelves
Only a few years ago, cannabis and hemp-infused beverages were novel, unique products. If they did stock drinks, dispensaries and retailers had one or two brands on the shelves. But these days, it's a crowded marketplace with more brands entering all the time.
Even the word "shelf" is a misleading term, as many beverages require refrigeration. Retailer refrigeration space comes at an even higher premium than traditional shelf space. How many dispensaries already have a refrigerator or are willing to invest in one for a new brand? Within convenience, grocery, and drug stores, most refrigeration units are already clogged with big-brand names, making it even more challenging to sneak a new brand inside.
Understanding which brands are already on the shelves, including their price points, the number of SKUs, and target demographic, is a crucial first step. With background research, it is still possible to find space between current SKUs for new brands and new products. Research ensures a good match between brand and retailer in terms of customer base and also finds areas of differentiation from what's already on the shelves.
Distribution Networks, Differentiate and Find Space
The retail shelving space issue is likely to continue into the foreseeable future, so cannabis and hemp brands must adapt. For larger, established brands like CBD Living and Good Hemp Inc, the best option is through partnerships with distribution companies. Distributors have already established relationships with retailers and are experts in matching brands.
These distribution channels may not be available for smaller retailers or those focused entirely on THC infusions. Smaller, newly launched cannabis beverage brands will need to dig into each opportunity individually. Investigating the retailer and the current competition will lead to discovering openings. It's a labor-intensive process, but if market expectations turn out, one with substantial payoffs.