Questions/Answers: Navigating suppliers of CBD
When it comes to selecting a CBD manufacturing partner, retailers need to do their homework, maybe more than in other categories. Michael Law, chief commercial officer for St. Petersburg, Fla.-based Eagle Labs, a producer of CBD products, spoke with Store Brands on what retailers need to look for when teaming up with a CBD-based private brand supplier.
Store Brands: What should a retailer consider when choosing a CBD manufacturer partner?
Michael Law: Retailers need to ensure that their potential partners meet some key criteria. They are:
- Having an FDA-registered manufacturing facility — this is important because it helps ensure that the manufacturer is a legitimate operator and not just opportunistically mixing products at an unregistered facility;
- Following current good manufacturing practice, or cGMP, guidelines — cGMPs provide for systems that ensure proper design, monitoring, and control of manufacturing processes and facilities;
- Experience making CBD products — ideally a minimum of two years of manufacturing experience to ensure quality and knowledge with formulating products;
- Certificates of analysis — from independent labs testing for potency, pesticides, microbials, residual solvents and heavy metals;
- High-volume capacity — this will ensure best prices on raw materials and an ability to keep up with growing customer volume requirements;
- Manufacturing flexibility and agility — the ability to turn around samples quickly as well as to do smaller batches if required to facilitate test marketing;
- Experience in CPG with brick-and-mortar retailers — this is important as the needs of brick-and-mortar retailers are often very different than pure e-commerce sellers (for example, the ability to do EDI transactions);
- Fulfillment capabilities — ability to offer fulfillment for retailer online orders if requested; and
- Other services — category management support, pricing recommendations, consumer research, graphic design, label design and printing are some of the additional capabilities that can add value to a relationship with a manufacturer.
SB: Why should retailers choose Eagle Labs?
ML: Our mission is to manufacture the highest quality and most rigorously tested nutritional supplements and skin care products in the United States. Eagle Labs checks all of the boxes listed above and has a very experienced leadership team, including 30 years of experience in CPG with brick-and-mortar retailers. We offer high-quality manufacturing of the most popular CBD product forms including tinctures, topicals, capsules, gummies, and pet products.
SB: What do retailers need to do to maximize sales of private label CBD products in terms of merchandising? Marketing?
ML: The first priority is for retailers to decide their strategy for the CBD category. Will it be a destination category where they want to gain disproportionate share or just a convenience offering that isn’t a strategic category? Consumer demand is already present, yet the category is in its infancy. A large percentage of Americans have still not tried CBD and they are thirsty for education on what to buy and from what source. While there aren’t any strong national brands, there is a tremendous opportunity for retailers to leverage their own trusted store brands to bring CBD to their customers.
The most successful retailers will have in-store educators and, if that’s not possible, strong in-store educational material. Also, we continue to recommend that retailers keep the category in one easy-to-find location, merchandised by brand. With the newness of the category, we don’t believe consumers are ready to go to separate categories to find different types of CBD. The possible exception would be to have two locations — one in health/wellness and one in skin care/beauty for appropriate products.
Initial focus needs to be on simply promoting availability of the category. Promotional pricing is less important as it will erode category margin dollars and lead to price wars. Savvy retailers can use “Compare to” signage and product-bundling offers to convert consumers into the category and then to trade up to a broader product assortment. Different product forms can be combined to deliver stronger consumer benefits (e.g. tincture and a cream).