Innovating Cannabis Podcast

137_Will Convenience Stores Be The Tipping Point For The Industry?

Episode Notes

As the beverage industry heats up, convenience store operators are debating about embracing this fast emerging category despite its legal gray area. 

Meet Melissa VonderHaar, she is a nationally recognized expert in the convenience store channel . She regularly writes for the sector, covering stories specifically on cannabis, tobacco, vapor, and alcohol categories, and she speaks on the subject at numerous industry events. She is also Head of Industry Relations for iSEE Store Innovations. Melissa shares important insights on why convenience stores will massively benefit from selling THC drinks, and it may be the tipping point for mass distribution and acceptance for this category. 

https://www.iseeinnovation.com/ 

https://www.linkedin.com/in/melissavonderhaar

Episode Transcription

The discussion focused on the potential of THC beverages in convenience stores, emphasizing their importance for mainstream accessibility. Convenience stores, with 152,000 outlets in the U.S., check more IDs daily than TSA. Major retailers like Total Wine and DoorDash are entering the THC beverage space. Single-store operators, who make up 90,000 of the 152,000 stores, are open to new categories. Challenges include regulatory uncertainty and the need for lab testing. Convenience stores serve as trial markets, with 83% of purchases consumed within an hour. The industry is eager for federal regulation to ensure safety and legitimacy.

Outline

Convenience Stores and Age Restriction

• Emphasizes the importance of making THC beverages mainstream and accessible, not limited to the dispensary channel.
• Mentions existing guardrails in tobacco and alcohol sales, suggesting convenience stores can apply similar measures.
• Highlights that convenience stores sell multiple restricted products and cannot afford to be lax on age verification, citing statistics on ID checks.
• Notes that convenience stores check more IDs daily than TSA and are the largest retail chain in the U.S., with many single-store operators.

Single Store Operators and New Categories

• Discusses the challenges and opportunities of single store operators, who are often willing to take risks on new categories.
• Mentions the involvement of prominent retailers like Total Wine and DoorDash in the THC beverage space.
• Hints at Max's potential stance on supporting low-dose THC beverages and allowing vendors at shows.
• Explains Max's past stance on only allowing legal products at shows to avoid federal scrutiny, comparing it to the CBD area at past events.

Regulatory Challenges and Industry Trends

• Reflects on the early days of e-cigarettes and vape, drawing parallels to the current THC beverage market.
• Emphasizes the importance of being proactive and embracing new products, noting the declining margins of tobacco and fuel.
• Suggests writing an article on the case for cannabis in convenience stores.
• Argues that convenience stores are ideal for trial and brand awareness, with high foot traffic and unplanned purchases.

Consumer Awareness and Market Penetration

• Explains the importance of convenience stores in rural areas, where they often serve as the only grocery store and pizza operator.
• Highlights the need for promotions and sampling to increase consumer awareness and trial of THC beverages.
• Notes the challenges of brand loyalty and the need for incentives to get people to try new products.
• Mentions the potential for THC beverages to replace menthol cigarettes in markets like Minneapolis.

Distribution Channels and Wholesaler Roles

• Discusses the typical distribution channels for THC beverages, comparing them to the three-tier system for liquor.
• Notes that some retailers may choose to order products directly, but wholesalers and distributors play a crucial role.
• Mentions the involvement of beer wholesalers in the THC beverage space, helping to service independent convenience stores.
• Highlights the importance of finding wholesaler distributors to add legitimacy and ease the process for brands.

Challenges and Opportunities in the Market

• Shares anecdotal evidence of retailers investing in THC beverages and hemp gummies, despite local regulations.
• Discusses the challenges of navigating the convenience store market, with 90,000 independent operators.
• Emphasizes the importance of trade shows and networking to learn about the channel and build relationships.
• Suggests that brands should consider targeting specific states or regions to gain momentum and build a presence.

Consumer Behavior and Market Potential

• Highlights the trial-rich environment of convenience stores, with 83% of purchases consumed within an hour.
• Notes the high foot traffic and unplanned purchases in convenience stores, making them ideal for brand awareness.
• Mentions the challenges of brand loyalty and the need for recognizable brands to gain traction.
• Discusses the potential for THC beverages to replace declining categories like tobacco and fuel.

Regulatory Framework and Industry Self-Regulation

• Discusses the need for federal regulation to ensure safety and age restriction in the THC beverage market.
• Notes that the industry has learned from past experiences with vape and CBD, asking the right questions about lab testing and policies.
• Emphasizes the importance of self-regulation and the role of wholesalers in vetting products.
• Suggests that federal oversight would help legitimize the market and protect consumers.

Trade Shows and Networking Opportunities

• Highlights the value of trade shows like Canada Con for learning about the convenience store market and building relationships.
• Mentions the challenges of getting involved in the convenience store market, with many brands already invested in the liquor channel.
• Suggests attending regional convenience trade associations and trade shows to gain local insights and build a presence.
• Emphasizes the importance of donating to political organizations to gain access to key events and networking opportunities.

Future Outlook and Industry Growth

• Expresses optimism about the future of THC beverages in convenience stores, noting the growing interest and investment.
• Discusses the potential for major CPG companies to enter the market, bringing significant resources and legitimacy.
• Emphasizes the importance of normalizing cannabis to achieve mainstream acceptance.
• Suggests that convenience stores could be the key to opening up the market and driving federal legalization.