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CBD in Retail: What Do Retailers Need to Know? [Update]

Contributors: David Patterson

Since the original publication of this piece, the FDA has issued more information on its position relative to CBD. The content below has been updated to reflect new positioning from the FDA. 

One of the biggest trends in self-care, health, and beauty today is the rise of cannabidiol products, popularly known as CBD. Found in the cannabis or marijuana plant, CBD is a naturally-occurring compound that’s gained momentum for the host of alternative-care therapeutic properties it offers. CBD does not produce any psychotropic or intoxicating effects – that is, CBD users do not experience the high that is associated with marijuana. CBD in retail is becoming more prevalent and many companies are struggling with the regulatory implications.

CBD products are already being sold to treat chronic pain, anxiety, depression, and joint health with a host of other potential treatments touted by brands, consumers, and advocacy groups every day. With the increase of these products in the marketplace, retailers are faced with the decision of joining the bandwagon or staying on the sidelines.

Traditional health product retailers such as CVS have announced the debut of CBD wellness products at more than 1,500 of their stores. The more interesting news is that non-health retailers are getting into the space as well – brands such as DSW and Nieman Marcus have announced that they will be including CBD in retail products this year. Most recently, Dollar General has announced it will include CBD products in more than 1,100 stores, crediting customer demand for adding it to their product mix. With Brightfield Group predicting that CBD will become a $22 billion industry, more retailers are sure to be joining the party.

However, CBD is in an interesting place right now as it’s not currently FDA-regulated. This means there is the potential for an influx of regulation in the area in the coming years. As retailers evaluate whether to invest in adding CBD products to their assortments, it’s important they understand the current state of oversight, as well as what’s on the horizon. To better understand this, I spoke with David Patterson, Consumer Products Quality & Regulatory Lead at Clarkston Consulting and asked some key questions retailers should have about the growth of CBD and how it impacts them.

What level of oversight currently exists for CBD products?

David: Interest in the marketplace to introduce CBD-based products is certainly booming. We saw a spike of interest last December when the 2018 Farm Bill removed hemp from the Controlled Substances Act. While this action certainly clears the way for manufacturers to use hemp in their formulations, Congress explicitly preserved the FDA’s current authority to regulate CBD-based products. Their regulatory purview is outlined in the Federal Food, Drug, and Cosmetic Act and section 351 of the Public Health Service Act.

Though sweeping “crackdowns” of unapproved cannabis-based products aren’t really happening, the FDA seems keenly aware of the proliferation of unapproved products—particularly those distributed online. The issuance of warning letters to companies marketing CBD products with unfounded claims is notably on the rise. These claims are often aimed at vulnerable populations seeking relief from conditions like AIDS wasting syndrome, epilepsy, neuropathic pain, spasticity associated with multiple sclerosis, and cancer and chemotherapy-induced nausea. To date, the required clinical trials necessary to support the application for a new cannabis-based drugs simply have yet to occur.

Without proper FDA approval, any CBD product whether it be marketed as a drug, supplement, or cosmetic cannot be verified as safe. Consumers should question the quality, and therefore safety, of all CBD products at the moment. For example, manufacturers are not held to account for the levels of THC that may remain in the CBD product. THC is known to impair one’s ability to drive safely or operate equipment and may have short- and long-term effects on memory, attention, mood, heart rate, and mental health. While effective CBD treatments likely do exist, confidence in the safety and efficacy of such treatments cannot be established without the FDA’s involvement.

What is the FDA currently doing in relation to CBD in retail?

David: The FDA is actively working to evaluate the regulatory pathways for cannabis-containing and cannabis-derived products to be introduced to the marketplace. On May 31, 2019, the FDA conducted a public hearing with the specific objective to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds.

While the FDA did not intend for this hearing to produce any decisions or new positions on specific regulatory questions, the hearing was an important step in the continued evaluation of cannabis and cannabis-derived compounds in FDA-regulated products. The FDA is narrowing their evaluation to the effects of cumulative exposure, how special populations might be affected, and how CBD may affect animals.

What are we likely to see the FDA do in the future?

David: The FDA is already evaluating the regulatory frameworks that apply to certain cannabis-derived products that are intended for non-drug uses, including how the FDA might consider updating its regulations, as well as whether potential legislation might be appropriate. The information provided to the FDA to date has underscored the need for further scientific study about the safety and potential uses of CBD. Ultimately, it’s the FDA’s position that more research is needed to understand the risks introduced with widespread availability of cannabis-derived products. With the exception of one cannabis-derived drug, the FDA has approved no other marketing applications for specific treatments of disease or conditions using CBD. Drugs must generally either receive premarket approval by FDA through the New Drug Application (NDA) process or conform to a “monograph” for a particular drug category, as established by FDA’s Over-the-Counter (OTC) Drug Review. CBD was not an ingredient considered under the OTC drug review. Much remains unknown about CBD, and until the studies are conducted and reviewed by the FDA, I suspect the CBD hype will remain unsubstantiated. As such, consumers should remain vigilant and discuss all uses of CBD with their primary care physician.

This vigilance also applies to retailers offering CBD products. With the exponential growth of the industry, it’s only a matter of time before consumers begin suing CBD companies alleging defective, dangerous, or mislabeled products. While product liability laws generally favor those not involved in manufacturing defective products, retailers can share in liability. In an industry as new as cannabis, it’s likely that some manufacturers will fall victim to insolvency. In these cases, courts can turn to the retailer to pay damages to consumers affected by CBD products regardless of whether they were involved in its manufacture. Given the current uncertainties in the industry, retailers would be very wise to carefully vet all CBD suppliers and evaluate the scope of their product liability insurance.

With regulatory oversight still being defined, brands should take a cautious but driven approach to CBD in retail. As consumers continue to explore this new trend, retailers can assess their current regulatory and quality strategies to identify potential areas of risk and shore up potential problem areas.

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Tags: Consumer Products Trends, Strategy & Compliance, Services