Walgreens follows CVS into CBD products sales

CVS began selling CBD products in 8 states in mid-March. Now Walgreens is following suit in 9 states. Given FDA concerns, both stores are limiting their inventory to topical CBD products rather than offering edibles or dietary supplements. Neither company has announced their suppliers though specific companies publicized their inclusion in the CVS program. Walgreens and CVS stock responded to their respective revelations but both are weighted down by other factors. Nevertheless, investors now have another big reason to be keeping an eye on all things CBD.

News first broke in mid-March that CVS, a wholly-owned subsidiary of CVS Health Corp. (NYSE:CVS), is now carrying CBD products. Stores in 8 states, Alabama, California, Colorado, Illinois, Indiana, Kentucky, Maryland, and Tennessee, are conducting a pilot program of sorts. The company is said to be focused on "topicals such as creams, sprays, roll-ons, lotions, and salves."

Though CVS did not announce partners in the CBD product rollout, at least two companies have stated that they have or will have products in CVS stores. Privately held Medterra revealed that CVS would be carrying at least one of its topical creams. In an earnings calls, Curaleaf, a wholly owned subsidiary of Curaleaf Holdings Inc (CNSX:CURA, OTCMKTS:CURLF) also revealed its participation. The company said that CVS would be carrying both CBD transdermal patches and hemp lotions from Curaleaf.

Now Walgreens is joining CVS in carrying CBD products. Walgreens will also be selling CBD topicals in almost 1,500 stores including “creams, patches and sprays.” 9 states will be included in Walgreens initial program, Oregon, Colorado, New Mexico, Kentucky, Tennessee, Vermont, South Carolina, Illinois and Indiana. In an email to CNBC, a Walgreens spokesperson stated:

"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."

Though the Walgreens statement is rather bland corporate-speak, the fact that major retail operations are speaking blandly about CBD products is yet another sign of the mainstreaming of CBD. While CBD beauty products are showing up at such retailers as Sephora, Neiman Marcus, Barneys and DSW, even a limited selection of health and wellness products at major drug store chains is a big step forward.

The stock of both CVS Health Corp (NYSE:CVS) and Walgreens Boots Alliance Inc (NASDAQ:WBA), respectively parent companies of CVS and Walgreens, each showed a brief boost from the news, but both companies are weighed down by bigger issues. In addition, analysts do not expect the addition of CBD to significantly affect Walgreens’ upcoming sales, which is likely true of CVS as well. Though long-term sales of CBD products may eventually achieve significance as the market grows and both companies take sales nationwide, public cannabis companies are already benefiting from the news.

Curaleaf's stock jumped up to 17 percent after it shared the news that its products would be carried by CVS and the stock price mostly held those gains in the following week. At least one analyst believes that CBD sales at CVS "could make up a meaningful portion of its 2019 revenue guidance of $400 million." Given that Curaleaf and Medterra are unlikely to be the only CVS suppliers and that Walgreens will likely also launch with multiple suppliers, there should soon be more news of cannabis companies making drug store deals.

One company that has announced presentations to major drug store chains is Diamond CBD, a wholly-owned subsidiary of PotNetwork Holdings Inc (OTCMKTS:POTN). Diamond CBD recently announced its presence at over 10,000 retail outlets nationwide. But as far back as January it revealed presentations not only to CVS but also to additional drug store chains. Though not everyone in such discussions is going to strike immediate deals, CBD is just getting started developing a presence in drug stores so many more companies will benefit.

As MoneyWire Editor Matt McCall points out, CBD sales at retail chains across the board are expected to ultimately make up a large part of the emerging market for CBD products. With pharmacies clamping down on opioid sales and CBD increasingly being identified as an aid for those with pain issues, pharmacies are likely to turn to CBD for long-term replacement of revenue lost to the reduction of opioids and other prescription painkillers. But that's just one trend which will aid CBD companies and McCall sees many public companies beyond Curaleaf benefiting from such developments.