The economic turmoil cause by the global pandemic will force thousands of cannabidiol (CBD) businesses to close. According to cannabis research firm Brightfield Group, while many industry players will leave, the CBD market will remain flooded with some 1,500 brands jostling for market share, .
The top 20 over-the-counter CBD companies accounted for just 17 percent of the overall CBD market in early 2020, with some 3,000 other competitors crowding 77 percent of the market, the firm estimated in a report released last week.
The largest CBD producer, London’s GW Pharmaceuticals, makes prescription CBD medicines and accounted for the final 6 percent of U.S. CBD sales, according to Brightfield’s count. The flooded market is a result of entrepreneurial enthusiasm for a booming trend with few established brands, according to an article in hempindustrydaily.com. Throughout 2019, the CBD market saw so many new CBD market participants that those earning less than $1 million in annual revenues occupy over 97 percent of the market, Brightfield concluded.
But the crowd of CBD companies is going to thin substantially in 2020, with COVID-19 driving a likely “extinction event” for half or more of those companies, said Bethany Gomez, managing director of the Florida-based research firm, according to the story.
“A lot of companies that were kind of dabbling in the category have found it to be unsustainable for them,” Gomez said. “A lot of brands that had tried this out, it’s not something that they’ve been able to turn a profit on.”
Not all new CBD startups are discouraged by the flood of competitors. For Jennifer Culpepper, who helped launch CBD skincare line i+i Botanicals in mid-2019, the market was already crowded.
“Our biggest challenge is to find our positioning and where we differentiate ourselves from other brands,” said Culpepper, who is based in Maryland. “How do you differentiate your CBD in a tincture?” she said. “We think of ourselves as a skin-care or self-care company that uses CBD as ingredient. That’s what sets us apart.”
The strategy is proven by Brightfield’s research, which notes that traditional CBD products – tinctures and gummies – are slipping in terms of market share. “The market is no longer entirely dominated by sufferers of extreme pain or epilepsy who must go to great lengths to attain product, nor primarily by cannabis consumers,” Brightfield reported.
Brightfield’s analysis did show some positive signs for CBD makers – notably that sales overall haven’t substantially slipped during the pandemic. The sector’s resilience is especially encouraging given national uncertainty about the economy and the level of unemployment enhancements the federal government stopped paying last week, Gomez said.
VPZ opened a new store on July 31, its first since Covid-19 lockdowns began. The UK’s largest vaping retailer opened the shop in Bruntsfield, Edinburgh, creating five new jobs.
Headquartered in Newbridge, Edinburgh, VPZ director Doug Mutter said the company has had to adapt to the new way of life following the huge change in the retail landscape.
“We are seeing the biggest change in the retail economy in living memory and we as a company have had to be adapt in what we can offer. We understand that not all of our customers are able to travel to our stores. The High Street is having to adapt to much smaller footfall,” he stated in a release. “That is why we have opened this new store within a more residential area to ensure we can still serve our customers, without requiring them to take excessive travel. We believe this maybe a longer-term change to the marketplace and we are investing and committing to serving local communities as best we can.”
Despite the retail sector facing huge challenges the company are seeing more smokers making the switch, with record numbers of quit attempts in 2020.
“Vaping represents a huge public health opportunity and the market will continue to grow as increasing numbers of smokers recognise its effectiveness in helping people to quit smoking,” stated Mutter. “Consumer education is crucial too and our knowledgeable staff are always available with advice and support that helps make it easy for smokers to make the switch and give up cigarettes once and for all.”
Vape Stop is set to launch its e-commerce store and distribution arm in UAE this year. All products sold on the Vape Stop store are approved by Emirates Authority For Standardization & Metrology (ESMA), the UAE government body that governs and approves a variety of products including electronic nicotine products for import and sale in the country.
Anant Jangwal / Credit: Vape Stop
ESMA has put in place a comprehensive procedure for approvals for electronic nicotine products since April 2019, which fosters quality and tested products are brought in the UAE market. With Dubai as its hub, the company plans to cater to the audience in Middle East, Europe and Africa.
Vape Stop will showcase international vape brands from US, Canada, UK and Malaysia in UAE, along with offering a premium buying experience including superior packaging, customer service, post-delivery care etc.
The selection process for these top-quality devices and flavours is rigorous wherein multiple focus groups are conducted to analyse which e-liquids and devices best fit the profile of UAE’s adult smokers. Vape Stop has also curated special combos for novice adult vapers such as ‘Savvy Collector’ and ‘Progressive Adopter’, that come with a pre-set combination of a vape device and e liquids.
“As per studies, over 64 million people will switch to vaping devices instead of smoking traditional cigarettes over the next few years, and we believe that Dubai is set to provide a global platform for an industry expected to be worth $53.4 billion by 2024,” said Vape Stop founder Anant Jangwal, We will also be showcasing some of the latest innovations during ‘The World Vape Expo’ in Dubai which is slated to go online for this year due to the coronavirus pandemic. We hope to replace combustible cigarettes with electronic nicotine delivery systems for a smoke free future by 2030, by catering to adult smokers who would otherwise continue smoking traditional cigarettes.”
Vapor sales are slumping during the Covid-19 crisis, while combustible cigarette sales continue to perform better than expected, according to two industry analysts.
Overall sales volume for traditional cigarettes was down just 0.2 percent for the four-week period that ended July 11, according to the latest Nielsen survey of convenience stores.
By comparison, the sales volume was down 7.2 percent in the four-week period that ended in Aug. 10, 2019, writes Richard Craver in an article for the Winston-Salem Journal.
Meanwhile, sales of electronic cigarettes — down 13.2 percent for the four-week period — have continued to slump five months after the Food and Drug Administration implemented its latest round of heightened regulations on the products.
The FDA regulations have depressed the demand for closed-pod cartridges that provide the nicotine, with No. 2-selling Vuse of R.J. Reynolds Vapor Co. being the lone exception, according to the article.
The ability of traditional cigarette to flatten its sales decline year-over-year represents “a very dramatic change in the market and coincides with the concerted attacks on vaping over the past year,” said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette studies. “It is deeply ironic that the credit for the recovery of the cigarette business from a near-death experience a little over a year ago can be credited to the Centers for Disease Control and Prevention, Michael Bloomberg and the others who pushed an abstinence-only agenda on nicotine. By undermining the low risk alternatives to cigarettes they protected the cigarette business.”
The biggest factor in the most recent report was the list price hike by the major three U.S. tobacco manufacturers in June.
Goldman Sachs analyst Bonnie Herzog reported that Philip Morris USA raised its list price by 11 cents a pack for Marlboro, including Marlboro HeatSticks, and eight other brands. It is typical that R.J. Reynolds Tobacco Co. and ITG Brands LLC raise their prices by a similar amount.
The list price is what wholesalers pay manufacturers for their products. The increase typically is passed on to customers at retail, the article states. The manufacturers also raised by 8 cents a pack the list prices of their traditional cigarettes on Feb. 23.
During 2019, the manufacturers raised their prices by 9 cents to 11 cents a pack in April, 6 cents in June and 8 cents in October. Traditional cigarettes had $60.05 billion in sales at convenience stores over the past 52 weeks, representing 80 percent of all U.S. tobacco sales, according to the Nielsen report.
Moist snuff and chewing tobacco were at $7.51 billion and 10 percent, while electronic cigarettes were at $3.8 billion and 5 percent, and cigars at $3.59 billion and 5 percent.
Overall e-cigarette sales-volume growth has declined steadily since Nielsen’s Aug. 10, 2019, report, when it was up 60.2 percent year over year.
The latest FDA restrictions on the sector debuted Feb. 6. The FDA raised the legal smoking age from 18 to 21 on Dec. 20. Those restrictions foremost required manufacturers of cartridge-based e-cigarettes, such as Juul Labs Inc., R.J. Reynolds Vapor Co., NJoy and Fontem Ventures, to stop making, distributing and selling “unauthorized flavorings” by Feb. 6, or risk enforcement actions.
The menthol and tobacco flavors still allowed for cartridge e-cigarette flavorings are the same as those that are legal in traditional cigarettes, the article states.
Juul’s four-week dollar sales have dropped from a 50.2 percent increase in the Aug. 10, 2019, report to a 31.7 percent decline for the latest report. By comparison, Reynolds’ Vuse was up 62.9 percent in the latest report and NJoy down 14.2 percent.
Juul has a 57.6% market share, down from 58.9 percent in the previous report. Vuse is at 22 percent, up from 20.4 percent, while NJoy at 5 percent, down from 11.3 percent, and Fontem Ventures’ blu eCigs at 2.7 percent, down from 3 percent.
Herzog said that NJoy “refutes Nielsen’s data and methodology,” according to the article.
Avail Vapor has partnered with Fresh Farms E-liquids, the parent company of Fruitia, a premier e-liquid company based in southern California. The long-term partnership adds a fruit flavored e-liquid line to the products Avail carries in the 12 states its stores are located.
The offering includes five island-themed flavors: Strawberry Coconut Refresher, Pineapple Citrus Twist, Blood Orange Cactus Cooler, Apple Kiwi Crush and Passion Guava Punch.
“Listening to our customers’ needs and their request for additional fruit flavored e-liquids, we couldn’t be more excited to partner with Fresh Farms to offer these additional product offerings,” said Justin Murphy, vice president of Retail and Marketing Operations at Avail. “Partnering with companies that share our same vision of offering high-quality products is paramount to our success.”
Fruitia products offered by Avail include 60-milliliter, nicotine-based e-liquids bottles and disposable cartridge-based systems.
“Having the ability to further expand our premium, West Coast products across the U.S. made the Avail partnership a natural choice,” said Tony Devincentis, CEO of Fresh Farms E-liquids. “We pride ourselves in sourcing only the highest-grade ingredients using the highest standards of manufacturing.”
The R.J. Reynolds Vapor Company (RJRVC) launched an updated consumer website yesterday. The enhanced platform is interactive, experience-driven and is designed to enable age 21+ adult nicotine consumers to identify and create the moments they are looking for, according to press release.
“The new www.vuse.com site is designed to be engaging and informative, while empowering creativity and individuality,” the note states. “Through the site, [adult nicotine consumers] will have the opportunity to customize and purchase their ideal vapor product and explore creative passions with engaging content. As part of Vuse’s continued commitment to responsibility, the updated site will continue to require robust third-party age verification prior to purchase.”
Amy Harp, vice president of Digital Marketing and eCommerce for RJRVC said the website may look brand new, but the company’s mission remains the same. “We are committed to responsibly delivering enjoyable vapor products to adult nicotine consumers,” she said “We believe vapor products can be marketed responsibly to [adult nicotine consumers] without compromising on the quality and enjoyment they are looking for. This website was developed thoughtfully and diligently to meet our high standards for responsible marketing while delivering sought-after product access for our consumers.”
Adult nicotine consumers will also now have the option to personalize their Vuse vapor products directly on the site. ANCs can choose to customize their product with options for device colors, device wraps, flavors and nicotine strengths, according to the release.
“The Vuse community is a dynamic one, and we are excited to help foster their creativity in one place. We are excited to see how our consumers interact with this new platform, and we can’t wait to continue bringing them the experiences they want with a brand they trust,” said Harp.
The vote was unanimous. On July 1, the U.S. Senate passed the Preventing Online Sales of E-Cigarettes to Children Act (S.1253) by unanimous consent. The legislation aims end online e-cigarette sales to minors by applying the same measures that are required when traditional cigarettes are purchased online. The House passed its version of the bill last year.
The National Association of Convenience Stores (NACS) said it strongly supports S. 1253, which “ensures responsible retailing of e-cigarettes and age verification across all channels. The legislation would require online sellers of e-cigarettes to ensure the delivery carrier verifies the age of the recipient upon delivery. It would also require online sellers to collect and remit the appropriate state and local taxes,” according to a story on the NACS website.
These rules are already in place for cigarettes and smokeless tobacco products purchased over the internet after Congress passes the Prevent All Cigarette Trafficking (PACT) Act, in 2010. Language for vapor products was not included in the law.
“It’s been long in coming, but finally the Senate has now passed legislation that requires the same proof of age requirement that is needed for tobacco products for e-cigarettes and vaping products, particularly those that are sold over the internet,” stated Senator John Cornyn in his speech on the Senate floor.
After Wednesday’s vote, the legislation is one step closer to becoming law. Last October, the House passed its version of the bill (H.R. 3942) on suspension. Given that the Senate bill is slightly different than the House version, the House will need to pass the Senate’s version before it can become law, according to NACS.
Online UK e-liquid store Vapester.co.uk has rebranded itself. The company’s online e-liquid store, which serves customers across the United Kingdom, has moved to a new domain name to coincide with the change.
As a result, Vapester.co.uk customers can now visit the company’s online store at VapeKit.co.uk to shop online for vaping supplies, according to a press release.
“While the company’s name and online address have both changed, the company continues to provide the same great service to customers across the UK, providing convenient access to e-liquids, vape kits, nicotine shots, and everything else a vaper needs to keep on vaping,” the release states. “Existing customers can continue to use their existing accounts, as login details for customer accounts remain the same.”
Mountain Service Distributors owner says vapor product sales continue to rise in convenience stores.
By Timothy S. Donahue
Refrigerators didn’t exist when Mountain Service Distributors (MSD) began operating in 1929. Situated in the Catskill Mountains of upstate New York, USA, the family-owned distributing company started as an ice delivery service that added candy sales to its portfolio by pure happenstance. Located near where the famous Woodstock Music Festival was held in 1969, Stephen Altman’s—MSD’s current president—father was operating an ice delivery company when a candy manufacturer in Brooklyn, New York, asked the older Altman if he would sell candy along with the ice.
The business was doing well. Then refrigerators started appearing in homes, and no one needed ice deliveries. Candy became the company’s new cash cow. The company kept adding on more and more products such as chips and soft drinks. MSD’s history reads much like the history of convenience stores themselves. As cars became more reliable, gas stations were closing their repair shops, and MSD started using the empty space to sell supplies to travelers and the local community. As the c-store market grew, so did MSD. Stores needed greater varieties of product, so MSD began to increase the number of SKUs it could deliver.
Stephen Altman
“When I was a kid, we sold candy and tobacco and a lot of potato chips. We also had an ice cream business that when my father passed away, his brother, who was a junior partner, had to make a decision [about] because we had all these insulated iceboxes that we would sell ice cream and dry ice [from]. Now he had to replace 500 iceboxes, and he didn’t want to invest in compressor-driven refrigeration for ice cream. He sold the ice cream business,” says Altman. “Twenty or so years later, I became a Slush Puppie distributor. And now I had to buy hundreds and hundreds of machines that made slush. So, it was an interesting turnaround.”
During the TMA digital conference “Unsteady Ground: Shifting Landscapes,” Altman discussed the c-store industry today and how vapor products have become best sellers.
Vapor Voice: How has Mountain Service Distributors faired during the Covid-19 pandemic?
Steve Altman: We’re a convenience store supplier; the reason is not the tobacco element, but we’re able to stay open because we supply groceries to convenience stores. We have had a few issues. Some of the stores that are customers of ours are not allowed to be open, and we have an [accounts receivable] problem where they closed up and didn’t pay their bills. And we’re working through that issue as well.
What we find interesting is that the c-stores that are open—and most of them are open because they carry food—they’re doing very well because a lot of shoppers are afraid to have their bodies in crowded supermarkets. So, they’re buying a lot of groceries in convenience stores where they never did that before.
What has the growth of Mountain Service Distribution been like?
Well, when I started out here full time in 1962, we didn’t do a million dollars in sales a year … There’s only three ways for my kind of business to grow, and it’s probably [the same] for many other businesses. You either get your customers to sell more product, which is very difficult to do, or you obtain new customers. But the biggest growth comes from when you can buy out another distributor and hope to obtain 75 percent of the business. Over [a] period of years, nothing lately, I’ve bought out seven other distributors.
Looking back, was acquisition the proper way to go about your growth?
Oh, absolutely. Some of these were competitors of ours that we always had a high, I guess, business ethics with each other. We didn’t cut each other’s prices. I gained their trust through keeping to that way of doing business … I just bought their inventory, and I helped them collect their accounts receivable. I hired their people.
How large is the complex where MSD is headquartered?
The complex is, at this time, about 100,000 square feet, with 30-foot ceilings, with forklifts and driving around. When I started, it was an icehouse. The walls were a foot thick, filled with sawdust. It was 40 feet by 100 feet, so, that’s what? 4,000 square feet. Now, it’s 100,000 square feet. We [are now doing approximately over $100 million in sales]. It’s not a lot. I am a medium distributor, but we have … one of the highest percentages of bottom line profits there is in the industry. Most distributors’ bottom line isn’t even 1 percent, and ours is over 3 percent.
How many different types of products do you distribute? How many different pieces?
Well, I think we have about 12,000 SKUs. Cigarettes and tobacco, and confectionery, and health and beauty aids, and sundries, and frozen beverage products and coffee products. And we sure sell a lot of water, which I’m not a fan of because retaining and getting drivers with CDL licenses is very difficult. And I don’t like breaking their back with heavy products like water.
We’re really heavy in electronic cigarettes. We have customers all over the country that my son has created because he’s become an expert in the category. And they range from wholesalers and vape shops and even retail chains. Those chains who buy from mega distributors, they don’t pay attention to the category and help the retailer grow it.
Are you only servicing c-stores and other traditional-type brick-and-mortar retailers?
We do prisons. We do vape shops. We do gift shops. We do pizza parlors. We do beach stores when it comes to frozen beverage. And we have six or seven wholesalers that are steady customers. And as I mentioned earlier, we have some chains, and I try to stay away from chains. I can never figure out how to make a profit on them. But we have some chains. We also serve the four casinos that are in the state of New York, not the Indian casinos, but the casinos that were licensed by the state of New York.
What is the state of the tobacco business in c-stores from your experience?
Well, starting with cigarettes, it’s been declining for years, as you are aware. The electronic cigarettes helped the decline. Lately, in the last few months since the pandemic, we’re selling more cigarettes and less vape. But different [rules] of the states we do business with has precluded the vape business a little bit because of the elimination of flavors … Overall, our vape business is up. Our tobacco business started growing a few years ago [when] roll-your-own became popular as the taxes in the Northeast went up dramatically. That’s still alive and doing well. So, overall, in the last 10 years, tobacco was 80 percent of our business; 80 percent of sales, not 80 percent of the profit. Today, it’s about 70 percent.
What types of vapor products are you selling?
We do very little e-liquid. We were selling both open and closed [systems], but now the closed systems have come under the eyes of legislators, and you know what happened with that. In New York state, it’s about to kick in [a flavor ban] on the 17th of May that only allows tobacco flavors. We found that even when we lost the Juul flavors of creme brulee … I had it take them off the market. I guess the steadfast consumer just switched to those [tobacco flavors]. They didn’t give up Juul. They just switched.
Have you seen an increase in sales of other salt nicotine closed systems, such as Leap and Njoy?
We carry them all. Juul has lost some market clout so to speak, but our Juul business is up because my son has created new Juul customers across the country. So, sometimes something happens in the country that doesn’t affect me, such as the flavor ban.
What are the challenges with distributing vapor products?
We constantly debate with United Parcel Service (UPS) that doesn’t like us shipping these things. Of course, they talk about the suit they’ve lost … but that was about cigarette sales to consumers. We don’t ship to consumers. So, we always have an issue with UPS constantly beating us over the head that we can’t be doing this. And we keep telling them we’re not shipping to consumers and blah, blah, blah. We only ship to people that have licenses to carry and sell the product. We are also having supply chain issues with products coming from China.
What have you seen or what do you believe is the issue with the supply chain? Is it mostly shipping?
Well, I think it’s [because of] the [Covid-19 pandemic] that some of these factories had to close up. But, to tell you the truth, Tim, I don’t worry about it. There’s no lack of some kind of product or a plethora of different brand products in my customers’ stores. There’s no shortage at retail. If they’re out of one brand’s orange, then they could a buy something else orange.
Vapor products are starting to overtake your tobacco products business, is that correct?
Oh, oh, it has. Well, when it started out—when Altria and RJ Reynolds went to [a large distribution company] and said, “We’re coming out with these things. What do you need for margin?” that fixed the margin on their products for us [too]. Of course, [the large distribution company] doesn’t have the expenses of most of the distributors. They have no sales force. They don’t have the expense of taking returns from retailers. But [the profit margins on vapor products] were better than tobacco items.
What is the current state of sales growth for vapor products in c-stores?
Other than the customers we have that we ship [to via] UPS Freight or UPS Ground in other states, I think, in my core, where my salesmen call on customers, it’s flat. There’s no decline. There’s no growth. Listen, different consumers get their news in different sources. And this business that happened a number of months ago where vape gets accused of poisoning kids, [the] recent lung disease outbreak found [it] to be caused by black market THC products when it turned out to be illicit home-packed marijuana sticks. The public got turned off. You know what I mean? They read about the problem, but they didn’t read about what the real problem was. Now you have a lot of apprehensive, potential users of electronic cigarettes that won’t go near them because they still think they’re poison.
How are you looking at future growth?
We are also improving [our technology]. If you get the retailer to put his order in with our app on his phone, then the salesman has more time to consult with him, right? And that’s worked. Half our customers place their own orders on our app on their smartphone, and we’re able to show them how to make more money, and then we become more valuable to them.
Finally, some positive news for the vapor industry. The much anticipated premarket tobacco product applications (PMTA) for the Leap pod system and Leap Go disposable were delivered to the U.S. Food and Drug Administration (FDA) on Tuesday. E-Alternative Solutions (EAS), an independent, family-owned innovator of consumer-centric brands, is seeking authorization for the marketing and sale of its wide-ranging portfolio of Leap and Leap Go vapor products.
“We are pleased to take this important step in demonstrating our commitment to the vapor industry, retailers and adult smokers seeking an alternative to combustible cigarette smoking with our Leap and Leap Go vapor products,” said Jacopo D’Alessandris, president and CEO of EAS.
Jacopo D’Alessandris
“At EAS, we have always held ourselves to high standards, from supplying adult consumers with products they can trust to consistently following ethical marketing practices. We are confident in the strong merits of our PMTAs and want to thank our compliance and research teams for developing and delivering thorough submissions.”
The submission of PMTAs by EAS plays an integral role in supporting the proposition that Leap and Leap Go vapor products are appropriate for the protection of public health, according to a press release. The collective 75,000+ page PMTA submissions for Leap and Leap Go are the result of months of hard work and investigation that included an assessment of the stability of the products over time, toxicological formula reviews, toxicology testing, an assessment of abuse liability, label comprehension studies and behavioral studies.
In addition, EAS undertook an extensive review of available literature on vapor products related to health effects, behavioral factors and toxicological end points. Further, an exacting risk assessment was conducted across many areas of potential risk for Leap and Leap Go products, according to the release.
“Our PMTA submissions provide a robust analysis of the Leap and Leap Go products that will enable FDA to conclude these products are appropriate for the protection of public health,” said Chris Howard, vice president, general counsel and Chief Compliance Officer at EAS.
Chris Howard
“From an industry perspective, the PMTA process sets a high bar and holds companies accountable, ensuring vapor product manufacturers follow the rules and act in good faith. Looking ahead, a robust collaboration with FDA will help build a strong future for both the vapor industry and adult consumers.”
EAS continues to establish a leadership role in the creation of sensible industry standards and regulations as member of the Board of Directors of both the National Association of Tobacco Outlets (NATO) and the Vapor Technology Association (VTA), where EAS led the initiative to formulate the VTA marketing standards for membership, according to the release. The company continues to advance the interests of the industry’s consumers, manufacturers, wholesalers, small business owners, and entrepreneurs.
