The coronavirus pandemic has upended the economic landscape and forced businesses of all sizes and industries to suspend operations, cancel events and furlough tens of thousands of workers. With markets in freefall and states imposing lockdowns across the U.S., some have argued that hemp-derived supplements industry could see an increase in demand as consumers seek alternative means of reducing stress and anxiety.
Hemp Industry Daily spoke with several manufacturers of cannabidiol-containing tinctures, topicals and supplements about how the pandemic has impacted some in the CBD industry so far.
Retail on ice
Some CBD companies are pivoting their focus to online sales as social distancing becomes the reality and many retail outlets close their doors or reduce their hours of operation.
“Retail sales have definitely slowed,” William Spilo, CEO of CBD Luxe, told Hemp Industry Daily. The company saw a 30% decrease in retail outlet revenue during the second week of March compared to its weekly average.
“Immediate effects have been felt through our wholesale purchasers,” Spilo said. “They’ve reduced their orders tremendously to make sure they’re not having too much on their shelves.”
Balanced Health Botanicals, a Colorado-based company selling its hemp-derived products in Albertson-Safeway and 5,000 independent retailers, also noted a dip in retail revenue.
“Our independent retailers are suffering right now in a big way,” and shelter-in-place measures could soon deal another blow, CEO Chase Terwilliger said.
“What we’ve seen is an increase in our e-commerce sales and a decrease in our retail sales,” Terwilliger said.
Elevate CBD, another hemp-derived product manufacturer, said March sales are on track to double compared to February. But retail composes roughly 80% of Elevate CBD’s consumer sales, and the company said it felt an impact from recent coronavirus measures.
“I think retailers from the brick and mortar side are taking things very cautiously,” said Cindy Blum, Elevate CBD’s vice president of marketing. “There are some conversations that have been delayed, or deals that have been delayed as they think about what their next step is.”
As consumers are forced to spend more time at home, CBD Luxe notes that online orders and website traffic have both increased.
“Online purchases are steady with some upswing on the weekends, but I think that’s going to start changing as people are staying home more,” Spilo said. “The last week and this week (March 15-21) has really been the start of people staying home on a large scale.”
“Viewer traffic has increased tremendously,” Spilo said. “I think people are kind of preparing for what’s to come – shopping for brands, and making decisions for what their next order might be.”
Supply chain breakdown?
Many U.S. CBD companies source their hemp domestically, which means some supply chains have not yet been disrupted by border closures and international travel restrictions.
But for companies like Balanced Health Botanicals that anticipate a reduction in demand for CBD products, there is potential for a ripple effect to hit hemp processors and cultivators.
“We’re frankly not ordering the normal amount from our processors,” Terwilliger said, “because we’re not only preparing for a downturn, but we need to manage our cash and inventory more effectively.”
For U.S. companies that use non-hemp materials from abroad, travel bans constitute another supply chain challenge.
Air-freight delivery is an important option for companies like nutraceutical manufacturer Quicksilver Scientific that source ingredients for hybrid CBD products from Europe.
“But you can’t put anything on a plane and fly it over here right now,” CEO Christopher Shade told Hemp Industry Daily. “A lot of those planes were commercial carriers that were also taking cargo, so everything has to come by boat.”
“Now we have to be well ahead of our supply chain to keep up with demand,” Shade said.
Strategy shifts
Some CBD companies have been quick in reacting to consumer demand in the coronavirus landscape, for example by offering immune support-branded CBD products.
One such company is Elixinol, which fast-tracked the launch of its Stress Less CBD Capsules to adjust to consumer demand during the coronavirus pandemic. The product was originally scheduled to launch in April but is now available on the company’s website.
Quicksilver Scientific also sped up the launch of one of its products to consumers based on how it might fare in the coronavirus landscape.
“We’re changing just about every single part of our operation in some way shape or form,” Shade, Quicksilver’s CEO, said.
“We changed our product release schedule to deal with this. We reprioritized what products should be moving to the forefront of R&D and released. We are changing the way we can work in house, out of house. And we’re changing our financial projection.”
“Time will tell,” Terwilliger of Balanced Health Botanicals said. “We’re preparing as a business for a decrease in sales in Q2 and Q3.”
Terwilliger pointed to economic reality – that much of the labor force will be affected by mass closures, unemployment may increase, and so on.
“People aren’t going to have that discretionary spending,” Terwilliger said, noting that CBD products are not a “complete necessity” for most consumers.
“What we’re doing is just being very conscious of capital expenditure, cashflow – because we don’t know what’s going to happen for sure in the future,” Elevate CBD’s Blum said.
Monica Raymunt can be reached at [email protected].
