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Why are Teen Denim Retailers Selling CBD-Infused Products?

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American Eagle Outfitters (AEO) is tapping into the the CBD wellness craze.

The teen denim retailer announced last week that it will begin to sell CBD-infused lotions, muscle balms and aromatherapy products by cannabis company, Green Growth Brands (GGB). The CBD products, developed exclusively for American Eagle, will drop in nearly 500 stores and online in October, complementing the retailer’s range of fragrances, serums, face masks and body scrubs.

“We are very pleased to be partnering with American Eagle, a leader in the specialty retail space,” said Green Growth Brands CEO, Peter Horvath. “GGB provided the expertise necessary to develop the product formulations and packaging to create a really special line of products.”

American Eagle’s purchase order represents GGB’s third major wholesale agreement since the passage of the 2018 Farm Bill modified the way hemp is regulated under the Controlled Substances Act. Following a month-long trial run in 10 of its locations, rival Abercrombie & Fitch announced in June that it would expand the sale of GGB’s Seventh Sense Botanical Therapy products, which include CBD-infused body lotions, lip balms and sugar scrubs, to 160 of its stores.

With brands like Seventh Sense geared toward the self-care consumer, and Camp, which is targeted for the outdoor market, GGB is proving to be the CBD supplier of choice. The company is compliant with the 2018 Farm Bill, meaning all of its CBD products are sourced from U.S.-based, licensed hemp processors and the company sells and distributes topical CBD products only in jurisdictions that permit such sale.

While the U.S Congress ruled that hemp-based CBD is “good to go” when it passed the bill, Khurram Malik, CEO of the Canadian cannabis company Biome Grow, explained that the FDA has not made a ruling on how it classifies CBD. Therefore, it is still an illegal substance to take across borders.

“You can’t ship it overseas and you can’t take it over state lines, technically,” he said.

As a result, an American Eagle store in California can only sell products made from hemp or cannabis-based CBD derived from California. This caveat, Malik noted, can pose a challenge for retailers with wide distribution, which is why it’s essential to find a CBD product supplier with an expansive supply chain.

With BDS Analytics estimating that the U.S. CBD industry will reach $20 billion in sales by 2024, and because it’s touted as a cure-all for everything from anxiety and insomnia to an effective treatment for seizures, it’s no surprise retailers are weighing their options on how to get into the CBD space.

DSW, Sephora and Neiman Marcus have added CBD-infused products to their sales floor. Meanwhile, Barneys New York introduced a “cannabis lifestyle shop” at its L.A. store, called The High End, offering CBD-infused body care products along with novelties like luxury rolling papers and vintage ash trays.

But why are teen denim retailers, specifically, getting behind CBD? Simply put, it’s cool.

“If you look at their target demographics, its teenagers and young adults,” Malik said. “And for teenagers and young adults, CBD is the cool, sexy, new thing on the block right now. It’s a way for these stores to associate themselves with something that is trending.”

And its popularity is being played out on social media, despite the fact that cannabis companies are barred from advertising on popular platforms like Instagram and Facebook. Case in point, Kim Kardashian famously hosted a CBD-themed baby shower in April to fete the arrival of her fourth child. Scenes from the party, where guests made CBD-infused bath salts and oils, were shared across Instagram stories and Snapchat.

In the case of introducing CBD products to its assortment, specialty retailers like American Eagle and Abercrombie & Fitch appear to have a leg up on big box retailers like Walmart and Target. While both retailers are reportedly exploring CBD product lines, Target famously removed CBD products just one week after they were posted on Target.com back in 2017, scared off by the press that came with the little-known substance at the time.

Fast forward to 2019 and CBD adds cache to retailers, especially among those targeting millennial and Gen Z consumers.

“You have smaller chains, these denim stores, hopping in,” said Jamie Schau, head of research at Brightfield Group, a cannabis and CBD marketing research firm. “And from our perspective, it has a lot to do with the novelty of CBD—it’s trendy. Young people and the older people that are accompanying these kids to these stores are interested in figuring out what the heck it is. It makes CBD a bit more approachable.”

And partnerships with retailers like American Eagle and Abercrombie & Fitch are indicative of GGB’s growth plan, which Malik said appears to be targeting shopping mall retailers. The company announced last month plans to open more than 70 shop locations, with potential for more, at Brookfield Properties’ shopping centers throughout the U.S, which will bring GGB’s physical footprint to approximately 280 total locations by the end of 2019.

If CBD is just one in a myriad of gimmicks malls and retailers are using to draw consumers back into their stores, Schau says embrace it, but act fast.

“I don’t know if it’s going to be paraded out as it is today in a year or two from now, but while the phenomenon grows, it is very advantageous for these smaller retailers that can’t normally compete on a lot of fronts with big box retailers,” Schau said. “Here, they can because they are more willing to take risks.”

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