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HBC products, not groceries Inside Kroger’s push to sell — and regulate — CBD Last summer, Kroger began selling cannabidiol products at over 1,000 of its stores across the country. The country’s largest national grocery Charlotte’s Web, Veritas Farms brands to be sold at over 1,000 locations

Kroger to Sell CBD Products at Stores in 17 States

The Kroger Co. is adding cannabidiol, or CBD, products to its lineup at 945 stores across 17 states. The products containing this hemp-derived compound are in the health and beauty care department.

“Like many retailers, we are starting to offer our customers a highly-curated selection of topical products like lotions, balms, oils and creams that are infused with hemp-derived CBD,” a Kroger spokeswoman said in a statement to CNBC.

For the time being, Kroger will stay away from edible or ingestible CBD products as regulatory challenges persist. The Food and Drug Administration recently had a public hearing on the topic of whether or not to create a legal pathway for cannabis or cannabis-derived compounds.

Kroger will begin selling the topical CBD products in Arizona, Arkansas, Colorado, Illinois, Indiana, Kansas, Kentucky, Michigan, Missouri, Nevada, Oregon, South Carolina, Tennessee, West Virginia, Washington, Wisconsin and Wyoming.

Kroger is not the first grocer to put CBD and hemp products on the shelves. New York metro area grocer Fairway Market introduced its own line under the Fairway Essential Wellness brand in January, and St. Louis-based grocer Dierbergs Markets announced its rolling out CBD products last week.

Cincinnati-based Kroger operates nearly 2,800 retail food stores under various banner names, employing nearly half a million associates. The retailer landed the No. 2 spot of Progressive Grocer’s 2019 Super 50 list of top grocers.

Inside Kroger’s push to sell — and regulate — CBD

Last summer, Kroger began selling cannabidiol products at over 1,000 of its stores across the country. The country’s largest national grocery chain joined the CBD boom in stocking topical CBD products like oils, balms and creams.

Kroger, along with Rite Aid, Walgreens and CVS, has been on a mission to introduce CBD use to mainstream shoppers since the hemp-derived compound was decriminalized in 2018.

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With hundreds of stores, largely located in the Midwest and the South, Kroger has quickly become one of the biggest brick and mortar CBD sellers by footprint, with plans to become the go-to hub for large CBD producers.

The cannabidiol market is expected to reach $20 billion by 2024, so it’s no surprise that large retailers like Kroger find it lucrative to go all in on CBD. Since announcing the decision last July, Kroger has added Charlotte’s Web, The Yield Growth Corp., CV Sciences Inc. and Aurora Cannabis, among other big players in the space to its growing list of CBD brand offerings.

The strategy is presented as part of Kroger’s multi-year plan, Restock Kroger, to compete with Walmart and Amazon and cater to today’s shopper habits. The investment costs, which include building out in-store pickup and delivery options, along with on-trend product additions like CBD, have been reflected in its missed earnings. For example, in December, the company’s bullish efforts to modernize its stores saw it miss quarterly revenue estimates by 0.33%. However, the early success seen by some of the most popular CBD brands around shows promise for Kroger’s long term business strategy.

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Last July, CBD producer Charlotte’s Web began product distribution through 1,350 Kroger store locations across 22 states, which has since expanded to 1,497 locations. The partnership has been credited in helping the Colorado-based company post strong retail sales, which increased by 66.4% during the third quarter of 2019. Shortly after the launch, Charlotte’s Web CEO Deanie Elsner noted that 53% of the company’s revenue came from retail outlets, including deals with national chains like CVS and Kroger.

Tony True, chief customer officer at Charlotte’s Web, confirmed “Kroger has continued to be a strong partner in the development of the rapidly emerging CBD category,” going on to say that Charlotte’s Web has since experienced “significant distribution gains across the Kroger network.”

The Kroger partnership has further raised customer awareness of what CBD is and how it’s used in newer markets, which True said will continue being a big focus moving forward. On this front, Charlotte’s Web and the retail chain plan to continue offering Kroger’s various shoppers “the right products.”

Similarly, last summer CV Sciences also became one of Kroger’s first CBD vendors when it started selling its PlusCBD’s Oil Roll-On at 945 Kroger stores. The company said that its total quarterly retail distribution increased by 18% from June to September 2019, thanks to stocking PlusCBD products at 1,350 Kroger-owned stores. The company’s national retail presence has been a major source of sales for CV Sciences , which posted a $12.6 million revenue last quarter.

CBD industry’s push for FDA’s approval
The lack of regulation is currently a major hindrance for the hemp category as it seeks further growth. With both Charlotte’s Web and CV Sciences having independently advocated for it, it’s confirmed the need for large grocers like Kroger to help push legislation through. Kroger now wants to have a say in the government’s anticipated regulatory. According to a public disclosure this week, first reported by Cannabis Wired, Kroger Co. plans to spend nearly $200,000 on government lobbying in 2020, an effort it first began last year. The funds will go to “issues related to the regulation of topical products containing CBD oils and hemp-derived products following the implementation of the 2018 Farm Bill,” according to the filing . Kroger will specifically target U.S. Congress members, the Department of Agriculture, the Environmental Protection Agency and the Food and Drug Administration, which still hasn’t approved of wellness claims made by CBD brands.

Kroger didn’t respond to a request for comment.

“As more big box and regional chains get involved in selling CBD, policy lobbying is expected to increase,” said Colby McKenzie, principal at Enlighten Wellness, a retail tech startup that creates educational CBD merchandising displays for store chains, including Ray Food Place.

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“Retailers like Kroger want CBD to be categorized like other nutraceutical or ‘ bioceutical’ products,” which are considered non-medical pharmaceutical alternatives , which McKenzie explained would keep CBD from becoming exclusive to pharmacies. This is because as long as CBD remains a dietary supplement, retailers are only required to stay away from labels making false claims, like cancer curing, to be able to sell it legally.

Currently the majority of Charlotte’s Web’s channel partners only sell CBD topicals “while awaiting legal and regulatory clarity from the U.S. Food and Drug Association,” said its last earnings report. “Topicals account for less than 15% of our sales at independent stores that carry both our topical and ingestible CBD product lines,” according to the company, indicating even greater revenue potential from ingestible CBD products being sold at national chains like Kroger. For CV Sciences, “ further regulatory clarity will expand availability of ingestibles, which account for many of our top selling products,” according to the company.

Early investment in CBD regulatory efforts is a longterm strategy for Kroger in order to maintain its position as a retail power player. The supermarket chain’s push for FDA approval isn’t just a safety precaution, it ensures long market share growth down the line. According to McKenzie, when you have an emerging category as lucrative as CBD, “it’s understandable that major beneficiaries like Kroger want to have a voice in regulating it.”

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More Kroger Co. stores to carry CBD products

Two vendors of cannabidiol (CBD) products plan retail distribution to more than 1,000 Kroger Co. supermarkets.

Charlotte’s Web Holdings Inc. and Veritas Farms Inc. said Monday that they’re rolling out topical CBD items to 1,350 of the Cincinnati-based grocer’s stores in 22 states, including the Kroger, Dillons, Fry’s, Fred Meyer, King Soopers, Mariano’s, Pick ‘n Save, QFC and Smith’s banners.

Boulder, Colo.-based Charlotte’s Web said Kroger Co. stores in multiple states have begun carrying its topical hemp CBD extract oils, with a plan to roll out to 1,350 locations in Arizona, Arkansas, Colorado, Georgia, Illinois, Indiana, Kansas, Kentucky, Michigan, Missouri, Montana, Nevada, Oregon, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, Washington, Wisconsin and Wyoming.

Charlotte’s Web noted that the launch with Kroger marks its largest distribution ever through a single retailer.

“Since its founding, Charlotte’s Web has been on a mission to make CBD products available for as many people as possible,” CEO Deanie Elsner said in a statement. “This distribution reach through Kroger’s market-leading network of grocery stores is an enormous contributor to our mission. We are very appreciative of Kroger and all of our channel partners for the continued progress in expanding access to hemp-based health and wellness products.”

Along with CBD oils, Charlotte’s Web’s product line includes hemp-infused balm and cream, CBD supplements (capsules and gummies) and pet products. The company said its U.S. retail distribution includes five mass retailers covering 22 states and 8,000 locations overall.

Fort Lauderdale, Fla.-based Veritas, meanwhile, is expanding its current distribution with Kroger Co. from 945 stores in 17 states to 1,350 stores in 22 states.

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The broader rollout brings Veritas’ topical CBD products to Kroger Co. locations in Texas, Virginia, Georgia, Montana and Utah, totaling more than 400 new stores. Items featured in the rollout include Veritas Farms’ full-spectrum hemp oil, salves, moisturizing lotion and lip balm.

“We are pleased to expand our partnership with Kroger family of stores,” said Alexander Salgado, CEO and co-founder of Veritas Farms. “As a nationally recognized leader in retail, their commitment to growing this category signals the success experienced thus far, the potential for continued growth and the importance of these products’ availability to consumers and retailers.”

In June, Kroger confirmed plans to begin selling CBD topical products at 945 stores in 17 states. The company didn’t name the brands but said lotions, balms, oils and creams infused with hemp-derived CBD would be sold at stores in its Atlanta, Cincinnati, Columbus, Michigan, Central, Louisville, Delta, Nashville, Mid-Atlantic, Roundy’s (Mariano’s and Pick ‘n Save), Dillons, King Soopers, Fry’s, Fred Meyer, QFC and Smith’s divisions.

Last December, the federal government changed its classification of cannabis with the enactment of the Agriculture Improvement Act of 2018, or the Farm Bill . The legislation removed hemp — cannabis or derivatives with a very low content of psychoactive ingredient THC — from the Federal Controlled Substances Act’s definition of marijuana. That meant hemp was no longer a defined by the federal government as a controlled substance, even though marijuana remains a Schedule I drug.

Under current federal law, CBD and THC can’t be added to a food or marketed as a dietary supplement, according to the Food and Drug Administration. The FDA maintains regulatory oversight of food, cosmetics, drugs and other products within its jurisdiction that have CBD, THC or the cannabis plant itself as an additive.

Still, various CBD offerings continue to make their way into stores, leaving many retailers uncertain about the regulatory framework regarding the sale and labeling of hemp-containing products. Scientific research on CBD’s potential health benefits also is still in its early stages. Earlier this month, the Food Marketing Institute (FMI) submitted comment to the FDA urging the agency to provide more guidance on the retail sale of food, beverage and other products containing cannabis or cannabis-derived compounds, including CBD.

The potential consumer market for CBD products is lucrative. Nielsen estimates that overall U.S. sales of all legalized cannabis — including hemp-derived CBD — reached $8 billion, a total that could swell to $41 billion by 2025 as more states legalize marijuana for recreational use, now allowed in 11 states and the District of Columbia.

“The face of legalized marijuana has changed dramatically,” Nielsen said in a report last week. “We forecast much of the same in the hemp-derived CBD sector, which is now invading mainstream retail and grabbing headlines along the way.”

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