CVS (NYSE:CVS) has begun selling CBD topicals in a small amount of its stores. That gives the company a toe into what could be a $22 billion market. The pharmacy chain may be first among major retailers, but it's not going to be the only big player in the market. There will soon be CBD departments at a high-end retailer, and some top-tier malls are adding stores that sell the hemp-based products.
A full transcript follows the video.
This video was recorded on March 26, 2019.
Shannon Jones: For CVS, personally, I think this does fit well into this rebranding that they're attempting to build right now. They want to be the one-stop health and wellness shop for anyone. I think adding in CBD, you know your consumers want it. Yes, the verdict is still out in terms of all of the benefits, but there are some benefits to CBD that we do know about. And really, the research is just beginning thanks to the 2018 Farm Bill. I think there'll be a lot more that comes out. But, I do like to see that they are being aggressive in trying to build out this whole health and wellness concept in terms of store branding.
What's interesting to me, though, is of course on the marijuana side with Curaleaf. Curaleaf, of course, being the first right now to supply this major supply deal with a retailer of this magnitude is significant. You mentioned Florida being a huge market. Curaleaf has a lot of dispensaries in Florida. This certainly expands their retail footprint a lot further. Like I mentioned, it certainly opens the door for edibles, should that ever come to market. All in all, the CBD market opportunity is huge. Some analysts are actually pegging the market [at] as much as $22 billion by 2022. For a company like Curaleaf, [which] only made maybe a few million in 2018, you can see the long growth runway here.
I like the strategy, here. In terms of Curaleaf actually having [a] long-term competitive advantage, that's a question mark for me. But I do like, ultimately, this play that CVS is trying to brand itself as a health and wellness shop, and a one-stop shop for many, too.
Dan Kline: Well, for Curaleaf, this is a no-brainer. This gives it ultimate brand credibility. One of the reasons I've never used a CBD product is, I don't want to say every CBD store is kind of sketchy, but most of them sell pipes and bongs and other...things that have valid uses, but are also drug paraphernalia. So, I'm not necessarily walking into that shop to find out if taking CBD would calm my nerves or be good for my stomach or, I don't know, help my cat sleep better, some of the many things it's used for. So, for Curaleaf, this puts their product in front of people who would never walk into the places where CBD is being sold now.
That's where CVS has to be careful. They're lending their name to something. It's, in many ways, like back in the 80s or early 90s, when I went to college. You could walk into a CVS and buy those pills that helped you stay up later so you could study more. It later turned out that those were very bad. We shouldn't be taking those. And CVS takes a little bit of a hit. That's why they're going slow here. They're not going to introduce a soda with CBD in it, because kids would drink it, until they know exactly what it does and who it's for. So, baby steps, really good for Curaleaf, very progressive for CVS, but they have to be very careful to not harm their brand.
Jones: Even more interesting is that CVS is not the only retailer going after the CBD. We've also got some other, I guess you can call them high-end luxury retailers as well, Dan, jumping in on the craze.
Kline: Yeah. Coming to Barneys, there's going to be CBD shops. That's putting it in front of an entirely new audience. Going into a hundred, let's call them upscale, Simon-owned malls. That's a very different presentation. It's a concierge-level presentation. "What's ailing you? Here's what might work." It's not exactly doctors, but it's kind of like the way a good wine steward or barista can take you through the coffee or the wine process.
Again, it's going to take CBD and bring it in from the fringes. If CVS is stocking it at reasonable prices, and other people are doing some of the matching and "here's what you need" work, that's going to be good for CVS.
Jones: Who knew CBD and a lifestyle luxury brand like Barneys could be a thing? I think it's interesting. They plan on calling this concept that they're rolling out at Barneys "the high end." I have to give it to them, at least a few points for creativity there. I think you'll see much more of this. Even more so, these are signs that we're hitting peak CBD craze. What do you think, Dan?
Kline: I don't think we're anywhere near the peak. I think as this gets exposed to more people...look, I'm 45 years old. There's aches and pains. There's all sorts of things that don't happen to you when you're 35. If these products prove safe and valuable, there's a market for them. I live in Florida. There's people a billion years older than me. If a cream makes your arthritis hurt less, and your friend got exposed to it at Barneys or CVS or wherever, I think there could be a huge mainstream explosion of CBD, and really a destigmatization of it.
Jones: Yeah. I think the growth opportunity is very long. When I say CBD craze, it's really just the madness. When my mom is asking me about CBD showing up in CVS and all of these department stores, that's where I know we've hit peak madness and craze. But all in all, a lot to watch here.
Check out the latest earnings call transcript for CVS.