Dollar General (DG -0.61%) wants to make sure its consumers are mellowed out by selling cannabidiol (CBD) cosmetic products in more than 1,000 stores across Tennessee and Kentucky. The discount retailer relies heavily on low-income shoppers and African Americans specifically spend hundreds of millions of dollars in the cosmetics consumables space. As Dollar General wades deeper into food deserts and begins to tap into the CBD market that could reach $22 billion by 2022, just how valuable will the Black dollar become for the company’s bottom line?
Why This Matters: Dollar General’s CBD assortment is limited to topical cosmetic products, including bath bombs, bath salts and face masks. If we look at the power of the black dollar across these consumables, African Americans spend nearly $54 million a year in the ethnic hair and beauty space. When it comes to the broader market in personal appearance products, such as grooming aids and skincare preparations, black shoppers spent $127 million and $465 million respectively, according to Nielsen.
Dollar General’s CBD assortment is limited to topical cosmetic products, including bath bombs, bath salts and face masks
On average, discount stores like Dollar General have cut prices between 20-40% when compared to grocery stores, and they are on track to provide those same discounts for CBD products. The company has strong ambitions to win over more low-end consumers by adding a broader mix of food and CBD products to its stores. Their average shopper comes from a household that earns $40,000 or less per year. In 2017, the U.S. Census Bureau released data showing the median income for an African American household was $39,490, putting them right in the Dollar General consumer sweet spot.
“Our decision to offer CBD products is based on customer interests or demands,” Dollar General Chief Merchandising Officer Jason Reiser said.
What’s Next: The U.S. Food and Drug Administration (FDA) published an updated consumer advisory stating there has not been extensive research on the effects of CBD or even what dosages are required to produce medical benefits. Dollar General is planning to expand the availability of its CBD products to seven more states including Colorado, Florida, Indiana, Oregon, South Carolina, Texas and Vermont by spring 2020.
