How Convenient, Episode 25: Cannadips Makes the Case for CBD

Wondering what’s the buzz on CBD?

 

As convenience retail takes the CBD craze to an all-time high, CEO of Bodlt Runners Corporation-Cannadips CBD Pete Diatelevi joins Gregg Augustine to share actionable category insights for brands and retailers. From profiling the broad spectrum of CBD consumers to dissecting the state and federal regulatory environments, this week’s episode breaks down all the buzz on this emerging age-restricted category.

 

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Gregg Augustine: In this episode, we discuss a category that holds great promise for convenience stores.

 

Welcome to how convenient a new podcast about the essential role convenience stores play in the busy lives of consumers. Our hope is to equip innovative C-store leaders as they seek to earn lasting shopper loyalty. In each weekly episode, we briefly share an update on C-store sale trends and what we're learning from billions of in-store purchase transactions. Today's episode was recorded on July 9th, 2021.

 

I'm Gregg Augustine with Koupon. Our guest today is Pete Diatelevi, the CEO of Boldt Runners and the product Cannadips. I've known Pete for a long time and have great respect for both Pete himself and his experience. So, Pete, welcome to the show and would you please just introduce yourself and give our listeners a bit about your background and experience.

Pete Diatelevi: Gregg, thanks for having me and thank you to Koupon for having me as well today.

 

As you mentioned, you and I spent quite a number of years together at Altria where we both started our careers, think probably about the same time and as I reflect on my background, it really started as a sales rep in stores and I think for you, that's probably the same path I did, and we've all started the same time. And I would tell you that having started at the entry level position and in stores, I think for any down the road executive is a very important thing because it really allows you to really get your feet wet and building relationships at the store level with the store associates, understanding at the point of purchase, what it takes to get awareness generated for your brand, trial for your brand and ultimately purchase and repeat purchase of your brand and especially in the convenience store space, that's not easy to do. There's a lot of SKUS, there's a lot going on in the store, store associates are very, very busy. So I think having had that experience for me anyway, I think set me up for success.

 

As I really progressed my career throughout Altria, I had the fortunate opportunity to live in a lot of different locations and a variety of different positions from management positions to key account positions. I had a variety of different vice-president positions there as well, including heading up all the sales operations for all the tobacco operating companies at Altria. I also was very fortunate that I had some time spent out at the winery St. Michelle Wine Estates, the senior executives at Altria asked me to go out and really lead a performance improvement plan, where we really focused on the three and five-year strategic planning for St. Michelle Wine Estates. So, it was a great experience having been in tobacco, really all of my career, getting a chance to spend quite a bit of time out in the wine business and learning the business and actually building the plans for St. Michelle.

It was a terrific, terrific experience. And then post my career at Altria, I really began consulting for a lot of different CBD companies as well as a lot of both retailers and wholesalers in that convenience space. One thing that I found in that consulting role was we did quite a bit with CBD companies, and I think that's really what led me to Bolt Runners and ultimately Cannadips was one, the quality of the product, the brand. There are a lot of consumers out there that are dipper, that are looking for non-tobacco, non-nicotine dip alternative and it's tough to find one that hits the mark. And when I first tried that product, I was blown away. I've obviously tried a lot of non-tobacco, non-nicotine alternatives at my time at Altria and really never really tried one or used one that I felt hit the mark to allow consumers a different experience of being nicotine and tobacco free. And so having had the opportunity to work with them for a period of time, understanding the brand and the product quality and just the outstanding team of people there, I joined the company back in July of 2020, and we're off and running.

Gregg Augustine: Awesome. Well, Pete, you have a tremendous amount of experience and thanks for sharing the background. In today's flash, we're comparing store sales of this week versus the same week last year, there are three categories that are up. Food is up 11% candy is up 2%, and snacks are up 1%. We have three categories that are down. Alcohol is down 5%, beverages are down 4% and tobacco is down 2%. However, all three of those categories are up versus 2019. In tobacco vapor and moderate oral nicotine products are leading the growth. At a brand level Monster and Red Bull or each up 5% and Gatorade and Body Armor are each down 5%. In previous episodes, we've talked about tobacco and alcohol trends and we've discussed in episode eight, that growth in restricted categories was one of the major trends we saw during 2020. Today, we're going to expand our horizons a bit and discuss emerging age restricted category, CBD. So, Pete, you described your unique perspectives and experiences, you've worked in tobacco, alcohol and now CBD. But can you help those of us who might not know a ton about CBD, learn a bit more? What is CBD and who is the CBD consumer?

Pete Diatelevi: Yeah, thanks Gregg, CBD is essentially short for cannabidiol and it's unique in that people try to get the understanding that the different THC in fact, it is, well it comes from the hemp plant. I think the important component for retailers, as they look at bringing these products in, these CBD products contain less than 23% THC and that's obviously very important to be able to be sold in traditional channels as such and to be labeled appropriately and tested appropriately. And people have found benefits relative to pain relief, reduced anxiety, helping with sleep relaxation and overall, really general wellness. The forms of CBD, it comes in primarily two forms that being topicals, things like creams and bombs and things like that, roll-ons well as edibles things such as gummies, et cetera. You also see CBD in a vape format as well. And then the other component you're seeing is some innovative product formats coming out.

 

I think Cannadips is a product that really is one of those innovative product formats, it really doesn't fall into the topical or edible space and so I think you're going to continue to see an emergence there as well. Relative to the consumer, what's interesting because you love to say, well, this is exactly who the consumer is. Unfortunately, the consumer is very broad, and I can give you two examples. My parents are almost 80 years old. They use CBD products and they use them for general wellness and they have found huge benefits from those and they're 80 years old and very active people. The flip side of that is my nephew was a professional baseball player, he's now retired. He's still very active in general wellness as well. So, you look at that spectrum of folks in their eighties that use the product for their general wellness and general wellbeing and you look at someone who is [inaudible 06:54] one and then professional baseball player that is in their mid to late twenties and is using the products as well, it's a pretty broad spectrum of consumer. And so, I think that's important primarily for brands to understand actually in that broad stretch of consumers who actually is the consumer your product.

Gregg Augustine: So, Pete, you described a whole bunch of different types of CBD. You talked about topicals and edibles and vapor products and just the variety of consumers who use the product. With so much differentiation in the marketplace, how do consumers discover these products and get educated about the category?

Pete Diatelevi: That's a great question. One thing that's important is with the overall boom in health and wellness, and the focus on health and wellness really that's come on the scene let's call it the last 10 years, not only in the U.S but I think around the world, consumers’ willingness to understand the benefits of CBD has really accelerated exponentially. When you look at that just simply with online searches and things like that, consumers are actively looking to understand more about what CBD is, what the benefits are that could be provided to them so I think you have active consumers that are really looking and the data would tell you that. That said, there's still a long way to go there in consumers understanding of the product. And I think most importantly, as consumers are actively looking to understand more about CBD and how it mixes into their life, it's really ensuring that you going to trusted sources to gather that information.

And there's a lot of trusted sources out there online, there's a lot of obviously well-known institutions that have done a lot of research on CBD that they post that information for consumers to read, as well as your doctor or physician. Doctors and physicians today, they understand CBD, some are big fans of it, some of them may not be, but I think it's important that you're going to trusted sources to really understand what CBD is.

 

And then also is it right for you? Does it fit into your life? How does it fit into your life?

 

And also understanding the formats of the product. As I mentioned before, there are a variety of different formats and also types CBD. There's a lot there to unpack and I think that consumers going to the trusted sources to understand more about how it fits in with their lives, the types, the formats and how it can benefit them is incredibly important before they make that choice.

Gregg Augustine: Excellent. You consulted for several startups in the CBD space before joining Cannadips. So, what is Cannadidps and why did you choose to join that company?

Pete Diatelevi: So Cannadips it's pretty straightforward. It is a non-tobacco, non-nicotine dip alternative. We know that quitting the use tobacco is pretty hard to do and having an alternative for consumers in that journey is something that I felt very passionate about and the team feels very passionate about. This is a product that if you think about the tobacco and nicotine products on the market today that are in pouches, it's a very similar format. It's in a round can, it's a pouch product, 15 pouches in the can, and it's similar to how you use powder. You put it between your cheek and gum, it's still that same ritualistic experience, but it does not have tobacco and it does not have nicotine in it. So, it's really that alternative for the dipper or tobacco user that's looking to have an alternative to nicotine and tobacco and have a great experience with it.

You had asked, why did I join? I think seeing and trying and using is believing. And for me, that was exactly the case. Back in, I think it was the fall of 2019, I was in my office with Brian and he had come in with the product and I had been a dipper for a long time. And again, it started as a college athlete. It's kind of what you do. And next thing you know, you're in your mid-thirties and you're still doing it. You're trying to quit and it's very difficult. And for me, I had tried every one of these alternatives and I just did not find them desirable. I didn't find the taste profile desirable. I didn't find the mouthfeel, et cetera. And ultimately what that leads to is relapse and you go back to using the product that you use with nicotine and tobacco.

And I remember putting this product in my mouth, the first thing I was blown away with was the overall mouthfeel of the product. It was really nice when you put it between your cheek and gum, it didn't deteriorate and I think the second component was the flavoring system was incredible in this product, and the flavor in the product lasted for 30 to 40 minutes with no degradation in that taste. I remember putting it in my mouth and looking at Brian saying, wow, I think this is an absolute winner. And ultimately over time, what I found from my own personal journey and that experience was I didn't quit using dip immediately, but I started to really reduce my consumption of it by using Cannadips. And ultimately, fast forward a month and a half after I had started using their product, I no longer was using a moist snuff tobacco product. I never honestly thought I would be there and then actually continue that for a period of time.

And I have in this product again, in my own personal journey has really helped me do that. And we hear that from thousands of consumers that we interact with online and they're thanking us for helping them on their journey. I think the important thing is we don't make claims about the product. We don't say this is guaranteed to help you quit, scientifically proven to help you quit. All we're suggesting is if you're looking for an alternative that does not have tobacco and nicotine, we think we have a great product for you. And as I mentioned myself and many others that communicate with us have found that this product has helped on their journey. And for me again, it was really seeing, is believing, adding a lot of different opportunities, I felt really passionate about this space and I felt really passionate about the product.

I think the other thing that really gravitated me to this brand and to this company was really first and foremost the product. The product is a great product. And then secondly, is it a great brand. Because that's a pretty important and pretty good place to start, and for me, it was checkoff on those two boxes.

 

The next component of it really was, does the brand really know who their consumer is? As I mentioned before, Gregg, there's a lot of consumers you can shock and approach and you can be way out there and scattered all over the place trying to find your consumer. The nice thing about this is we know exactly who the consumer is, and we know exactly where this consumer is so it's a pretty linear process and certainly a world that I've come from I know pretty well so I felt very comfortable about that. I think as we began to build out the brand, the other component is, does this really fill a need for consumers? And also, does it fill a need for the trade? We viewed it as absolutely yes.
With the decline of tobacco volumes out there, you've referenced 2% earlier. The trade is looking for new alternatives that are financially in line with what they expect, and they want to be able to have these types of products and make really good money on these products. And so, I think when you looked at consumers, is it good for the consumers, is good for the trade? The answer was, yeah, you bet. And then I think the last component of it is the team. You and I have had a chance in our careers to work for many different teams and the folks you work with and the teams you work with are really important. Again, I'm really fortunate to work with a world-class team of folks. And I think the important component is they're all, like-minded, we're all focused on compliantly manufacturing and marketing the best non-tobacco, non-nicotine alternatives on the market and everybody's really focused on that, and that's the goal. I know there's a lot there, but I think those components all collectively are really what led me to want to be a part of Bodlt Runners, run Bolt Runners, was to work with such a great product like Cannadips.

Gregg Auguatine: I know, Pete, you mentioned in your intro, just your vast experience and you've been working inside and out of convenience stores for 20 plus years. And you've worked with some really, really big brands and Cannadips is certainly a very unique brand as well, but this is a startup versus a more established brand. So can you talk a little bit about some of the challenges that emerging brands like Cannadips have when you're trying to gain distribution or awareness and ultimately get consumers to try and ultimately convert to the product, like you did.

Pete Diatelevi: When you think about companies that are just starting up and you don't have the big brands behind you and the big resources behind you. You don't have armies of people and lots of resources, I think one of the most important components is as you think about launching new types of products in the market, and you're a startup company is really the reason to believe. As you have conversations with wholesalers and retailers, you have to have a reason for them to believe. Why should I carry this product versus the 25 other products that someone's come to the door out last month? It sounds easy, but it's not right. Especially when you think about the CBD consumers they again, a very wide set of consumers. So, I think when you think about the reason to believe, one is, who is that consumer? Does the brand really understand who the consumer is and exactly where they're targeting? Is that consumer a consumer that goes into the convenience store space or is likely to go into the convenience store space?

Does the product provide differentiation? We hear that a lot. If I were to have this product six months before somebody else, does it provide differentiation to me? Does it drive consumers to my store? Does it bring again new folks to my store, but also increase the basket size in my store? Is the financial package compelling? That's obviously a very important part to the trade as a new product comes in, which is financially, does this make sense for me? So, I think those, I think at a top level are very important as you think about being a new product cracking into the space. I think the other thing I would say is, when you get to a place where the trade, whether it be wholesale or retail, say, yes, we're interested in this product. It's very important to work with the trade partners and not just have your package and say, here's what we have.

It's going to be very important to have work with them hand in hand, to understand what is the best way for us to generate awareness? What is the best way for us to generate trial and repeat purchase? How do we keep this product in stock? The retailers know their stores better than anyone, and they're so willing to obviously help in a product being successful in their stores. And if you work with them, you're going to learn a lot and ultimately, you're going to be in a better position for success as you move forward, really across those fundamental elements of awareness price, and ensuring that the product is in stock in stores. And then I think Gregg, the other component is what are you doing to build the brand outside of retail? Especially in the convenience store space there are obviously a lot SKUs in the stores and the store managers and associates, they have to focus on a lot of things.

And so, I think if you're hoping to holistically build your brand in the convenience store and be able to generate all the awareness, that's going to be hard to do upfront because you're going to be one of many. For example, if you're in the beverage space, you're going to be two or three SKUs, hundreds, if not thousands of SKUs, and it's going to be hard to break through. So, it's really about what type of digital assets are you using outside of retail to really build the brand, generate awareness of the brand actually generate trial of the brand so that when consumers come into the store, they're already aware of the brand. They're asking for the brand; they've potentially tried the brand already. And I think it's important as you build that brand awareness and you really build your brand in the digital format and the digital world, it's also, how do you then begin to marry that with the physical, which is retail.

What are the mechanisms you're using to one, get that awareness, get that trial, and then actually drive consumers into retail to purchase the products?

 

Cannadips as an example, it is a high velocity item. We want the consumer when they're at home and they run out of Cannadips to be able to go get that product at their local convenience store. For startup products they're not going to have the scale of distribution where the consumer can find every corner store down the street from them to have the product immediately so it's really about how do you build that digital awareness? How do you allow consumers to try your product through your e-comm network, but then eventually really be driving those consumers into retail? We use a number of different mechanisms, obviously store locators as new stores come on, we're plugging those into the store locator, we're driving consumers to the store locator. But the other thing we do is we actually work with a lot of retailers, where we'll geo-fence consumers that are in their markets or near their stores and send out email to those consumers letting them know that Cannadips is on sale at XYZ convenience store because from our perspective, we view success as this product being highly successful and being a high velocity item in the convenience store world.

Gregg Augustine: Excellent. You've told us about your experience working with tobacco, with alcohol and now CBD, and these are all regulated products. So, what can you tell us about the regulatory environment for CBD?

Pete Diatelevi: I think to start with the passage of the farm bill in 2018 was a big step forward. That said, as it stands today at a federal level, the FDA has asserted authority over the regulation of CBD. There hasn't been a tremendous amount of kind of guidance, the FDA is certainly working through that and working with a lot of different stakeholders and building that framework. And there really has not been a tremendous amount of enforcement at the federal level of the FDA I would say with the exception of products making claims. Making overt health claims relative to CBD, they're on that pretty quickly and that's a good thing. Obviously, when we saw with COVID some really outlandish health claims from CBD companies and not good, and the FDA jumped on that pretty quickly. So, folks that are really out there with health claims, the FDA certainly will step in.

We've really found is more at a state level, the states are really taking on the framework for their particular state as to how CBD should be sold in the states and [inaudible20:28], most states allow retail sales of CBD in many forms. States such as New York and Colorado and Utah are really coming up with their own requirements for both retailers and manufacturers. It's really important for manufacturers to understand certainly at a federal level, but at a state level, how does that state operate? What are the expectations of those states and what do you need to do in working with the trade to ensure that you are compliant and selling your product in a particular state? And I think the second half of 2021 and 2022, there'll be a lot more to come and a lot more information, hopefully at the federal level, but certainly at the state level.

Gregg Augustine: Great, Pete you've shared so much information about CBD, the different forms, who the consumer is, where you can buy it and the regulatory environment, but I want to end with retailers because you mentioned retailers and the importance of convenience stores, in the longterm vision and journey for candidates, especially. So, what should retailers be thinking about as they're exploring the CBD opportunity?

Pete Diatelevi: I think first and foremost, it starts with the company that you're working with or you're thinking of working with. Is it a compliant company? I think first and foremost, that's what you need, you want to start with and focus on. Whether they're co-packing or whether they're manufacturing the product themselves, is being done in a CGMP manner, is their product labeling, right? Do they understand the state's position on CBD? They're asking you to do something that's not in line with the state? It's really ensuring that and knowing, the companies that you're working with or you're thinking about working with and do they have really a focus on a platinum level of compliance relative to many aspects of how they manufacture, market, sell, et cetera. So, I think it starts with that. I also think it's about being comfortable with the people you're working with.

Do you know the people you're working with? What are their reputations in any new startup product or space there's going to be ups and downs and the ups are great, but you want to ensure that when the downs come, which from time to time, they will, that the folks that you're working with and the companies you're working with are going to stand by your side? So, I think those are really the first two to start with. I think the other aspect, and we talked about this earlier is, is the company really clear on who their consumer is? Do they really know who that person is that the product is intended for? Or are they just hoping for happy accident that the consumer is going to maybe find their product somewhere? That's important. And ultimately is that consumer that shops in your store today, or is likely to be able to be driven into your store based on you carrying this product?

As a startup company, it's hard to have proof points because you're starting distribution, you're starting your promotions, you're starting to try to generate trial and awareness and repeat purchase. So, to say, well, immediately you should have all these proof points of retail. Well, you should certainly have some, but I think it's absolutely fair for retailers to say, tell me the proof points of your product. Tell me about your kind of digital ecosystem. What type of following do you have? What a consumer says about your product? What does your database look like? How many followers do you have? I think it's to understand, gee, is this a brand that once consumers see, they understand they like, and then do they purchase? And even more importantly, once they purchase, do they actually repeat, purchase your product? So, I think those proof points, and then even though they may be small and just getting into retail stores, what type of proof points do you have at retail? What type of cans per week in our case, are you driving through retail when you're on promotion versus off promotion?

 

So those are fair questions for retailer and ask, which is how viable is this product? How viable is this brand for me to bring it into my store? Because I have a lot of choices. And then I think the other aspect is how are these companies going to work with retail to merge this digital world as well as this physical world together? And how does the brand and how the retailer use those two aspects to complement each other, again, drive more consumers into retail and ultimately more retail sales? We all know that most companies have e-comm websites and sell product online. That's great. Well, is your focus to try to sell everything online to potentially have a higher margin for yourself, or is your goal really to use that as a springboard to drive consumers through retail? I know in our case, that is absolutely what we want to do, but I think again, those are fair questions for a retailer or a wholesaler for that matter to be asking brands they're potentially looking at bringing in.

Gregg Augustine: Pete, you've shared so much today about CBD and the category, the emergence of these new products, but how can people learn more about Cannadips and its unique offering?

Pete Diatelevi: Yeah, I appreciate that, Gregg. To learn more about Cannadips, you can take a look at our website, it's cannadipscbd.com. You can go onto the website, learn a lot more about the product, really get the feel of the brand as well. In addition, you can email me at any time. My email is pete@bolt runners.com. So at any time, reach out to me, if you have interest in the product, we're certainly here to serve and we look forward to working with folks.

 

Before we end, I think it's also important for me to just state that we are very fortunate, not just our internal folks, but I'd be remiss if I didn't thank all of our trade partners, both at the wholesale level and retail level, as well as a lot of different folks, suppliers, et cetera that we work with for startup company, they've been absolutely incredible to work with and incredibly helpful for us.

 

Gregg Augustine: Well, Pete, thank you so much for being our guest today. I really appreciate your time and your insights. Thank you for listening to How Convenient we want to hear from you. You can reach out to us at Koupon.com. Don't forget to subscribe, rate us and give us a review. You can find more insights and blog.koupon.com.