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Walgreens, CVS to sell CBD products as interest in cannabis products grows

CBD, the chemical found in hemp and marijuana plants, is showing up in shampoos, lattes, body oils, gummy bears and dog treats.

It’s being sold in coffee shops and farm markets, mom-and-pops and high-end department stores and, most recently, drugstore chains CVS and Walgreens.

“Literally overnight, you’re seeing CBD all around you and in everything,” said Troy Dayton, CEO of The Arcview Group, an Oakland, California-based cannabis investment and research firm. “This is a product that is going from relative obscurity to being on everyone’s mind: producers, consumers and especially entrepreneurs.”

Walgreens plans to sell creams, sprays and patches with CBD at 1,500 stores in nine states: Colorado, Illinois, Indiana, Kentucky, New Mexico, Oregon, South Carolina, Tennessee and Vermont.

In a statement to CNBC, Walgreens spokesman Brian Faith said, “This product offering is in line with our efforts to provide a wider range of accessible health and wellbeing products and services to best meet the needs and preferences of our customers.”

CVS said it would sell creams and salves with CBD in eight states.

The CBD floodgates opened after President Donald Trump signed the Farm Bill into law in December. Among other things, the bill legalized the production of hemp, which contains high levels of cannabidiol, or CBD.

CBD is non-psychoactive, meaning it won’t get you high. (THC, or tetrahydrocannabinol, is the chemical in cannabis that does that.) Instead, CBD is marketed for everything from helping to relieve pain and inflammation to reducing stress and anxiety.

Yet, the Food & Drug Administration still hasn’t decided how to regulate CBD products. In a recent interview with Brookings Institution, outgoing FDA commissioner Scott Gottlieb said it could take several years before the agency fully legalizes CBD for use in food products and dietary supplements.

So far, little clinical research has been conducted to prove CBD’s effectiveness. Last year, the FDA approved the first drug containing CBD for the treatment of certain forms of epilepsy, but no other drugs have been approved since.

Dayton cautions that there’s also a lack of standardization in terms of recommended doses and quality control.

“As exciting as this is, it gives rise to some challenges,” he says. “Standardization and testing are important. Otherwise, it’s hard to differentiate hype from reality in terms of determining the efficacy of CBD products.”

A lack of access to banking remains another hurdle.

“We’ve talked to clients who are still struggling to find a bank willing to work with them and we’ve spoken with banks and credit unions who want to support the hemp industry, but still feel there is considerable risk attached to the CBD industry,” says Evan Eneman, CEO of MGOELLO National Cannabis Alliance, a financial and tax advisory service for the cannabis industry. “Both sides want clear, actionable banking guidelines from the federal government.”

Despite these roadblocks, the Arcview Group projects sales of CBD products will outpace legal marijuana sales in the United States in five years. Here are some of the entrepreneurs hoping to cash in.

‘We want customers to trust our products’

“For us, 2018 is the year when so many of our big problems started to go away,” says Chase Terwilliger, CEO of Denver-based Balanced Health Botanicals.

Before the Farm Bill passed, many banks and payment processing companies refused to work with his company.

“We had accounts at many large banks and they all shut us down,” he says. “Now, banks and credit card processing companies are calling constantly to lend us money.”

Founded as CBDistillery in 2015, the company initially sold pure, hemp-derived CBD extract in powders that could be added to food and beverages or mixed in with oils and lotions.

Sales have soared as the business has expanded its portfolio to include oils, tinctures, capsules and gummies. In 2016, the firm logged $200,000 in sales, he said. Last year, annual revenue was $41 million and Terwilliger projects sales will double to $80 million by the end of this year.

“We’ve now grown to 101 employees, our products are sold in all 50 states and I have 20 open positions in Denver to fill,” he says.

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Terwilliger says he’s trying to navigate the CBD industry landscape responsibly. He says the company tests each product at three separate labs to make sure they meet standards, such as ensuring THC levels do not exceed 0.3 percent, (as mandated by federal law) and the products don’t contain contaminants like heavy metals.

“We’re doing this voluntarily because there is a lack of standardization in the CBD industry and we want consumers to trust our products,” he says.

High-end retail embraces CBD

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Soon after Katherine, Alison and Juliana Ragusa launched their Lab to Beauty line of CBD-infused face washes, masks and moisturizers, it was being stocked on the shelves at high-end retail chain Barneys New York.

The sisters, who started developing the line early last year, already had in-house expertise on creating and marketing beauty products through their family business, The Advantage Co., which manages a portfolio of beauty, fashion and jewelry brands and restaurants. They worked directly with hemp farmers to source the CBD and with Advantage Co.’s lab and scientists to formulate the products.

By summer, after they had tested the products with a third party lab, they sent samples to Barneys’ beauty team.

“It was exciting for us to see how open they were to trying our samples on the spot,” says Katherine Ragusa.

Jennifer Miles, Barneys’ senior vice president, divisional merchandise manager, cosmetics, says the department store chain had been looking for a CBD skincare line. She says Barneys is trying to address customers’ misconceptions around CBD “as it is becoming more mainstream and customers are learning about the benefits, and how to add these products to their wellness routine.”

The line of eight products is now sold in seven Barneys locations, including its stores in New York, Chicago and Beverly Hills and on Barneys.com.

“The response has been tremendous. Barneys sold out of some of the products online, but we have now replenished the supplies,” says Katherine.

A market for mints, pets and beyond

College friends, Tim Moxey and Chris Abbott, launched BotanicaSeattle in 2012 with a line of cannabis-infused chocolates. Since then, they’ve added Mr. Moxey’s CBD Mints, and a line of CBD products for pets called Austin & Kat that includes biscuits and oils they claim can provide pain relief and calm anxiety in dogs, cats and other animals.

Last year, the company logged about $7 million in sales and Moxey expects sales to hit $20 million at the end of this year.

But getting to this point has required winning over consumers and building trust.

“We’ve chatted with customers who purchased other products they found on the internet and felt they were duped because those products didn’t contain the stated amount of CBD, or contained trace amounts of THC,” says Moxey. “Pushing to build trust and transparency is difficult in this industry where there are so many dishonest companies entering the market every day.”

He hopes the FDA will move quickly to establish quality control guidelines.

Moxey says the company has several new CBD products in the pipeline, including topical solutions and other pet products.

“As we educate people about our products and as research continues, our long-term goal is to make products that bring the cannabis plant into people’s lives in a meaningful way,” he says.

CVS, Walgreens, and Bed, Bath & Beyond are making Million$ off of CBD, why can’t you?

CVS, Walgreens, and Bed, Bath & Beyond are making Million$ off of CBD, why can’t you?

In short, it’s because you’re not rich enough, corporate enough, old enough. While innocent people are rotting away in cages, these companies are laughing all the way to the bank.

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Operating in the current CBD landscape comes with a fair share of grey area that is already shrouded by bureaucratic red tape. Exorbitant taxes, license lapses, product seizures, raids, arrests, etc are the norm for businesses operating in the cannabis industry. Not to mention the retail and eCommerce portion of this space is quite littered with murky merchant processing solutions that are either off-shore or through a few select domestic banks – but ONLY if you’re bringing in a certain amount of revenue.

What’s the threshold? Some banks require you to be doing $50,000 in revenue per month to even be considered, a number that varies based on which broker is doing the deal.

For instance, I was recently approached by a broker about a potential solution, but only if we were doing $200,000 in revenue on a monthly basis. Another broker told us that the same bank was allowing accounts at $50,000 or less!

Here are some screenshots from those conversations:

To which I say this:

How do these banks and brokers expect businesses to compete in the retail and eCommerce arenas if they don’t have a viable processing solution in place, allowing them the opportunity to achieve those arbitrarily high numbers?

My assessment: We are witnessing the market being co-opted before our very eyes.

Make no mistake, this is a deliberate slap to the face of American entrepreneurs attempting to operate in the CBD niches they have carved out for themselves.

Just the other day, I took a trip to Bed, Bath & Beyond, and upon entering, what was the very first product I saw? A water soluble essential oil diffusion containing CBD, with… the dosage of CBD directly on the label. They also sell topical essential oil roll-ons that claim calming, sleep, and energy benefits for humans and “for dogs.” First of all, roll-ons for dogs? Okay, Bed, Bath & Beyond, this is just silly , but I’m willing to wager that some woke corgi with a dreadlocked man-bun who goes by the name of Bodhi, has probably wandered into the essential oil section enough times for this to be a viable product.

Either way, how is it that this large department store is able to offer these vaporization products and topical “pet” products with little to no resistance from their merchant processing solution, yet companies such as Honey Oil , Simpli Hemp , Pink Honey Collective , and about 1500 others have all faced financial barriers to compete in the very same retail and eCommerce arenas?

The dirt: Money talks.

This largely unregulated portion of the banking industry – by design – has forced the up-and-comers to fight for our lives as small businesses, while these Big-Box stores get free reign to sell CBD. This year alone, Honey Oil saw nearly a 250% increase in revenue month over month from February-April before PayPal shut us down. All the momentum generated by a tireless staff of determined individuals is now unceremoniously on pause. But don’t fret – if you’re shopping online with Bed, Bath & Beyond, the option to buy CBD with PayPal is available to you…

The story has almost become predictable at this point. It seems that every 3-4 months, the current processing solution goes down, then the application frenzy begins. Meanwhile, the same rules don’t apply to the big players.

A complex eventuality, not unique to any emerging industry gaining interest from the grubby hands of modern day capitalism.

Again – How are we, as small businesses, expected to see continued growth if we can’t sell our products?

After filling out a dozen different merchant applications, we took the time to reach out to other small businesses via CBD-biz related social media groups. Shortly after posting our inquiry, we connected with Tyler Huerkamp and Tripp Michaelson of Simpli Hemp , a Florida-based company that offers a variety of CBD products online. The two were enthusiastic to recount their experience to us, saying that, “dealing with a handful of shaky processors left them with little confidence to enable competition long-term.”

Not only did this situation affect their own eCommerce business, Simpli Hemp also lost a white label client who dealt with the same issue. While they are currently operating without a hitch, what got them up and running was developing a relationship with a local institution. They told us, “providing full transparency into their operation,” secured the current path to move product through a local credit union.

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So while BIG banks are not legally allowed to open up the floodgates to businesses in the cannabis space and its adjacent markets, there is a glimmer of hope for those companies to operate in some manner.

However to get there, the path is not always as cut and dry as it is for others.

Our path requires metaphorical bushwhacking through the greed-ridden, metro-detritus left by banks and corporations.

Unfortunately, it makes a great deal of sense considering the symbiotic relationship banks and big business share, and the stranglehold they have on the economy. That – and for California-based companies specifically – constant changes to BCC (Bureau of Cannabis Control) regulations on packaging, impending but unexpected license lapses, and exorbitant taxes on anything to do with commerce are just another set of hurdles cannabis and CBD companies have to “put up with.”

Until Federal policy is written to allow big banks to work with us, some companies will inevitably fold in the process – all due to the ignorance of what is now an incredibly viable industry by our governing bodies, which paints a sad picture for any newcomers to the industry.

However, if there is one thing I’ve learned from my experience in the world of biotech, it’s the following: The more noise you make about something, the more likely that relevant regulatory bodies are to respond.

For instance, in the medical lab industry when a new technology emerges that renders a previous technology obsolete, insurance companies are not just going to outright adopt the new tech as standard, until a few things happen first. Often times it takes the voices of Key Opinion Leaders (KOL’s), physicians, scientists, clinicians, other medical personnel, and patients, to sway the right groups.

The process works a bit like this:

  1. Forward-thinking physicians adopt the new technology as a part of their practice.
  2. The physicians then order the new tech in place of the old tech and submit the claims for reimbursement to the insurance companies.
  3. The insurance companies then deny coverage.
  4. Repeat step 2, over and over, and over again, while the case is made by the physicians, scientists, KOLs and other groups, that this new tech should be covered in place of the old tech, or at least offered the same coverage.
  5. Over time, and lots of phone calls, letters, studies, presentations, and other forms of communication, insurance companies eventually respond by writing policy around the new tech.

A similar story is unfolding here, as CBD and cannabis companies continue to fight to achieve merchant processing capabilities with the banks who can’t work with us, but WANT to. Yes, banks want in on the action. Earlier this year, 38 states attorneys general co-signed a letter urging congress to encourage banking regulation for cannabis companies. A survey conducted by Finance-Tech firm, Promontory Interfinancial Network, asked Bankers across the U.S. what their stance was on this topic. The survey yielded majority approval across all regions of the country, according to this Sacramento Bee article . So what gives?

It’s fairly obvious: The opportunity to capture a large chunk of a NEW revenue stream from the legal cannabis industry is a very low-hanging fruit to any bank paying attention. The wheels are in motion at this point, and we believe it is only a matter of time before the policy is written, so long as cannabis companies continue to make noise. Banks stand to gain EXPONENTIALLY from the cannabis industry, and it’s absolutely mind-boggling to know there is nothing yet written in terms of policy that would allow banks to confidently work in cannabis, an industry already worth well over $8b, domestically.

Even nimble, modern merchant companies like Square are getting in on the action, but only a select few businesses are a part of their “invite-only” pilot program, which we’ve been told is full by Square, via Twitter: