Selling CBD Products at Retail: A Q&A with Pharmaca’s Dave Janowicz 2/12/2019
ECRM’s Hemp/CBD Health & Beauty Care session featured a panel discussion, moderated by Chain Drug Review VP and Editorial Director Jeff Woldt, during which retailers, suppliers and other industry experts discussed the challenges and opportunities of selling CBD at retail.
One of the panelists, Dave Janowicz, VP of Merchandising & Retail Operations at 30-store Boulder, Colo. pharmacy chain Pharmaca, sat with ECRM VP of Content Joseph Tarn owski during the session for an in-depth interview on what his company’s stores are doing in the CBD arena, and how retailers and suppliers can best prepare to get into the business of selling CBD products.
ECRM: During the panel discussion you used a phrase that I believe sums up the current state of CBD at retail. You said, "Everybody is racing to the starting line, but they haven't crossed it yet." What did you mean by that?
Janowicz: In talking to other retailers, and seeing what's happening in the industry, there's a lot of buzz and a lot of excitement about the CBD category, and what we can do around it. There's also a lot of confusion. There's a lot of speculation about what you can and can't do as a retailer, especially a retailer that has a pharmacy. With recent developments with the Farm Bill that was signed into law in December, there's a lot of people now sitting there wondering, "Okay, now that that's happened, what can we do?" The FDA since has come out with some statements post-Farm Bill that says, according to the FDA guidelines, it's still not legal for CBD-based dietary supplements, food items, cosmetic items to be sold. So, a lot of retailers are in the position that we are in here at Pharmaca. We've got a demand from our customers. So what can we do? Retailers are positioning themselves to be ready to dive in as quickly as possible once they're comfortable that they’ve vetted out all the risks, and understand where all the opportunities are, and what some of the hurdles may be.
I think in Pharmaca's case, as well as with many other retailers, everyone is developing their strategy. How am I going to present the products? What am I going to carry? Where am I going to carry it? Are there security issues? Are there training issues? Are there education issues? Getting all those things buttoned up, so they’re ready to go as quickly as they can once the switch is flipped. This way they are not starting from scratch."
ECRM: So, some retailers may jump into it realizing there still might be some risks?
Janowicz: Correct. I'm seeing that kind of there's a wide spectrum out there right now. Some people are taking on the risks, and some are taking more of a wait-and-see approach to see where all that lays out. We're kind of in the middle. We've brought in a couple of brands that don't have any CBD claims or labeling on them right now to kind of test the water. It's been very successful, but we're also really anxious to see what the FDA's position is going to be, and hopefully that happens here real soon. When it does, we'll react very, very quickly.
ECRM: Tell us a little bit about your stores.
Janowicz: We're a 30 store chain with full-service pharmacies based in Boulder, Colorado. We're a mission-based health and wellness platform. Our whole belief is helping customers make better choices about their healthcare and well-being. Whether it's on the beauty side, or supplement side, or our full-service pharmacy. Our staff is really what makes us a little different. The staff that's in most of our stores are licensed practitioners, or estheticians, so when you come in and you have a question about CBD for example, or a supplement, or a beauty product, you've got a licensed practitioner that you can talk to, who will help understand what fits your need very specifically.
That's where I think this whole category lends itself very well to us, because the general public doesn't really have an understanding of the CBD as a category. They know the term CBD, and they hear a lot of good things about it, but I think there are many out there who don't really know what it means, so they'll come into the store and say, "Hey, I want to try CBD. I've heard all those great things about it. What can you tell me?" You've got to have an educated staff, or pharmacist if you don't have a staff like Pharmaca, that can really help talk the customer through it.
ECRM: What are some of the things you're doing to prepare for the potential explosion of CBD in the market?
Janowicz: I've gotten my team together, both on the merchandising side and the operation side, and we've talked at length and at detail about the current landscape, so everyone's on the same page. We've gone through every one of our stores and mapped out where the category is going to be positioned. We want it to be in a high profile area. We want it to have ample space to be able to grow and expand. We're taking security into consideration in some stores where there might be a security risk. We’re developing signage and educational materials to help wayfind the customer to this section. And then, within the merchandising team and the category management team, we’re developing a list of questions and strategies that we want everyone to kind of stay consistent with.
Pharmaca's world consists of vetting products, ingredients, and vendors that fit our model, and our customer views us as the trusted resource. So, staying away from known harmful chemicals and ingredients that we would in any other brand, that same methodology would apply to the new CBD products. Our category managers will be talking to our manufacturers about their ingredients, their sourcing, their supply chain transparency. We’ll examine the testing that may have been done to verify and validate what is actually in the products and make sure that they're not making any claims that are against the guidelines that have been set forth.
'Our category managers will be talking to manufacturers about their ingredients, their sourcing, and their supply chain transparency.'
ECRM: What kind of hemp or CBD products do you have in your stores?
Janowicz: We've started with two brands, and we’ve got a full array of products from both of those brands, including tinctures, capsules, pills, and some ointments as well. The early results have been phenomenal.
ECRM: As far as merchandising, are you keeping hemp or CBD-related products all together, or are they spread across categories?
Janowicz: That was one of the places that we started with our strategy -- how do we want to present it to the customer? I believe, and our team believes, that because it's kind of a new phenomenon, people are going to come in and they're going to be drawn to CBD as a concept. So, our strategy is to merchandise it all together in one planogram. We're creating that planogram now. We've assigned each of the category managers their space. So, for example, we'll probably have two or three shelves of supplements, and two or three shelves of other products, but it'll all be in one section. Then I think as the category matures and things develop, you may see that branch out back into the categories.
ECRM: So, the supplier will still have to deal with separate buyers, or separate category managers, even though it's all merchandised together?
Janowicz: I think in most retailers that's going to be the case. Most retailers are going to be set up where it's two or three different category managers that the suppliers will have to call on. Some may choose to have one category manager that's the lead, but I suspect that most will be doing multiple category managers.
ECRM: What are you doing on the legal front? Have you been vetting all of this with lawyers, and how does that factor in?
Janowicz: We've got our own legal advisory team that we kind of vet things through to kind of chart our course of action, so we're constantly getting updates from them on where our risks are, and what’s probably okay and safe to do. I think just as important is staying on top of all the articles and updates that come out on a daily basis, getting the latest updates from bills that are going through the Senate, when the FDA is going to talk about a certain topic, or when they're going to come out and make a statement. So, doing your research, staying abreast of current events, I think that's really important because there's a lot of confusion, even amongst the vendor community. We talk to 40 vendors and I'll get 40 different points of view.
ECRM: Working with mass retail is different than working with dispensaries and independent natural food stores. Some of these newer CBD suppliers are not used to working with distributors or brokers, and now they're going to have to start doing that, so there may be some growing pains, correct?
Janowicz: Yes. They're going to find that it will be a whole different set of questions, and more importantly, different education needed in going to a mainstream retailer that's just learning about the category versus going to a dispensary, where experts are plentiful. It's going to be flipped the other way. The analogy I use is if you're a category manager for shampoo or oral hygiene and you have a new toothpaste brand that comes out, or a new shampoo brand that comes out, you know what to ask. You know kind of how to lead them. When it's something this that's new to everyone in the company, you're kind of developing your own set of questions. You're going to have to learn a lot to ask the right questions.
ECRM: Since you have some experience with CBD already, what would you recommend to retailers entering the space?
Janowicz: My recommendation for retailers -- and what I've told my team to do -- is to make sure that you understand who the vendor is, and where their products are coming from. Do they have a transparency in their supply chain? Do they seem like they've got really good educational materials? Have they thought through their plan to go to retail? Those are the partners that we'll probably launch with first. There's going to be so many vendors out there, and so many different product categories that you're going to have to make some decisions on what categories you want to be in, as well as how deep you want to be in those categories. So, I think it's really important for you as a team to understand and be consistent across different category managers taking the same approach and asking the same questions. Stay away from those vendors whose answers are vague or ambiguous, or if they don’t really know the supply chain, or doesn't have a good grasp yet on how they're going to help educate people about their products.
ECRM: What are your recommendation to CBD vendors for dealing with mainstream retailers?
Janowicz: They need to define how they are going to help educate the stores, how they are going to help the retailer pass that education through to the customers coming through the door. I think the next thing that is helpful if suppliers can provide solid background information. Where are the crops being grown? How are they vetting their sources? How are they ensuring quality control? Because quality control is going to be another really important aspect of this as time goes on. What are they doing to ensure that the quality of the crops is where it should be? The final output of those that gets ultimately into the products is what the labels say. A lot of the vendors we met with today have done a nice job of kind of showing through the third party audits and results of testing things that they've done, and it's really important.
Full interview with ECRM's Joseph Tarnowski and Pharmaca's Dave Janowicz