Hemp product stores seeing success, uncertainty in pandemic
In 2019, Edgardo Santillan got into the business for a form of hemp oil known as CBD after his wife saw benefits from using such products for her migraines. With “countless hours” of internet research and learning from other sellers, Mr. Santillan launched AgraPharm, a hemp cultivation business in Aliquippa.
A year later, he’s still eager to make it work, though he described 2020 as “difficult” — and not just because of the COVID-19 pandemic. Regulatory hurdles and dry weather have compounded the issues of pandemic-driven business shutdowns, along with customers losing jobs and pulling back on spending.
Mr. Santillan said their CBD products store, Living Well CBD, operated by his wife, has seen sales fall since March, which he believes is related to a lack of disposable income in many households after thousands of Americans were laid off in a matter of months. The couple sought to keep the business open during the shutdown, but CBD products were not considered “life-sustaining,” and so they were forced to close temporarily.
Living Well CBD, which sells oils and creams, was able to reopen when Beaver County transitioned to the green phase on June 12. Mr. Santillan said the store sells products online, though they are in the process of updating the website for easier public access.
“In general, people aren’t spending as much. If the economy picks up, then sales will go up,” Mr. Santillan said.
Cannabidiol, more commonly referred to as CBD, is derived from the hemp plant. While the plant is related to marijuana, CBD products do not produce a high in users. It has been gaining traction across the country in recent years; many people find pain relief benefits in its products, such as oils, creams and edibles.
The 2018 Farm Bill made CBD sale legal in the United States, though the products are not currently approved by the Food and Drug Administration. Nationally, the market is projected to see a 14% growth in sales from 2019, reaching a total of $4.7 billion in 2020, according to Brightfield Group, a CBD and cannabis comprehensive data company based in Illinois.
Since the bill was passed, the United States has seen an explosion of CBD boutique stores, despite some limitations from the FDA.
As a practicing attorney, Mr. Santillan wasn’t necessarily looking for a new source of income but said he was motivated by an overwhelming desire to help others. Since opening AgraPharm, the business has been operating with less than 10 acres of farmland, four team members and a CBD products shop.
“[Beginning] was both exciting and nerve-wracking at the same time,” Mr. Santillan said. “Then it was a matter of just working hard.”
Lindsey French, the owner of Hippie and French in Lawrenceville, opened her store in 2018 — convinced of the value of products that she believed helped her as a recovering addict.
“I saw a hole in the [CBD] industry, and I quit corporate America, and I went for it about two years ago,” Ms. French said. “It’s been the best decision of my life.”
Even if CBD business operators are still committed to the cause, they recognize the challenges.
Before March, the U.S. Department of Agriculture delivered its final interim rules for hemp production, which altered the way farmers apply for licenses. Mr.
Santillan said the rule set many growers back by weeks or even months. According to him, AgraPharm is 60 to 90 days behind schedule compared to last summer.
“It basically took a lot of farmers off this year’s goal of growing,” Mr. Santillan said.
Additionally, the summer’s dry weather has contributed to limited growth and business in the hemp industry, he said. In 2019, the farm saw a much wetter season, which spurred hemp production.
Plus, the impact of the pandemic is not hitting all CBD store operators the same.
Ms. French said CBD product sales through her store are better in 2020 than past years, although she’s waiting to see what the rest of the year holds. She attributes the growth to a rise in stress and anxiety about COVID-19. In a normal year, she said, anxiety is the number one reason people come into her store for products ranging from oils to edibles, and that has only been amplified by the pandemic.
Like AgraPharm, Hippie and French had to close its doors in March under the state’s COVID-19 rules. Ms. French said she continued operating through appointment pickups. While other businesses focused their energy on federal assistance programs, Ms. French said, she didn’t even bother, since the store didn’t need financial support.
“Our sales have only increased. … I’m not sure I love how that feels,” she said.
Ms. French said she would have felt less uneasy about good business if the circumstances were different and sales didn’t seem to be driven by other people’s struggles.
Beth Joliffe, owner of the Washington, Pa., branch of the Your CBD Store boutique chain, said the business has been staying afloat, though the branch has had better days since opening in July 2019.
In the first few weeks of the pandemic, Ms. Joliffe said, the store had to furlough three employees and move all operations to her home in Beaver County with her husband, who is a coowner. While she and her husband have full-time jobs, Ms. Joliffe said, they were counting on a greater profit from CBD sales in the spring for extra income over the amount that they were able to generate from home deliveries.
“We made enough to pay our bills, but it’s been a little tight,” Ms. Joliffe said.
Employees were able to come back to the store in May, and business has continued as close to normal as possible with increased safety measures in place, according to Ms. Joliffe. She added that she had been counting on Washington County’s now-canceled summer festivals such as the Whiskey Rebellion for business promotion, which could hurt awareness surrounding her boutique.
Since the FDA hasn’t officially approved CBD products, retailers are unable to make claims about any specific benefits. Ultimately, most businesses rely on word of mouth to generate sales.
CBD products are widely sold throughout the United States since mainstream retailers such as CVS and Walgreens began carrying them in 2019.
Consulting firm Brightfield reported that many CBD stores nationally have had to shut their doors or have been restricted to curbside pickup as a result of the pandemic. The firm found that 45% of CBD consumers moved their purchases online in June, likely due to COVID-19.
Champion Hemp Farms in Champion, Fayette
County, can confirm that trend, having seen a 240% increase in online sales since the pandemic began while brick-and-mortar sales slowed down, according to farm operations manager Dave Schwartzenberger.
With five months left in 2020, many store owners are simply hoping to stay in business at this point.
“The whole hemp industry has been reduced significantly. Those who can stick around this year, hopefully they will do well because there’ll be less farmers,” Mr. Santillon said.
“You have to survive 2020 to get to 2021.”