The Intersection of Technology and Wellness: Upstarts Looking to Tap Vending Machine Industry to Sell New CBD Products

Cannabidiol, or CBD, is a hot topic today, growing in popularity as consumer awareness spreads about the litany of therapeutic benefits coming from the constituent of cannabis and hemp. With the passage of the U.S. Farm Bill in December legally uncoupling hemp from cannabis, the pathway for coast-to-coast commerce widened, not to mention a great deal of validation being lent to the safety and usefulness of CBD.

For about eight decades, hemp had been categorized alongside its cousin, cannabis, as a Schedule I drug per the Controlled Substance Act even though it contains none of the psychotropic agent THC (tetrahydrocannabinol) like cannabis does and differs in function and application. The Farm Bill finally differentiated the two versions of cannabis species.

While marijuana remains illicit at the federal level, many companies are looking to capitalize on the emerging legal CBD market forecast by the Brightfield Group to surge to $22 billion by 2022. Companies are exploring all opportunities to get their product in the hands of consumers, including not only traditional retail and e-commerce outlets, but also leveraging the latest in vending machine technology, like For The Earth Corp. (OTCPK: FTEG), PotNetwork Holdings (OTCPK: POTN) and One Step Vending Corp (OTCPK:KOSK),

Vending and CBD, a Burgeoning Combo

CBD products in vending machines is at the convergence of two rapidly growing markets. Cashless payments are constantly accounting for a larger percentage of total transactions annually and serving as a key growth driver for vending machines. This goes along with technological advancements that reduce our carbon footprint, facilitate greater product diversity and result in better inventory control that enhance customer satisfaction and lead to repeat sales.

To that end, Global Market Insights forecasts that the vending machine market will experience double-digit compound annual growth from 2018 to top $30 billion by 2024.

The Up-and-Comers

Phoenix-based For the Earth emerged on the CBD scene just two months ago and has made haste in its efforts to establish a footprint via an aggressive acquisition strategy. Most recently, FTEG at the end of January inked a LOI to acquire the CBD vending business (known as “Chow”) of Vliso AI. Chow machines dispense select CBD and hemp products and utilize a backend Artificial Intelligence (AI) system that consistently updates inventory, machine health and more. The newest version of the Chow Pod™ has a 50-inch multi-touch touchscreen and is expected to be rolled-out early this year.

Currently, a Chow unit is installed at Canal Street Market in New York City, with two new vending machines and a CBD Kiosk, dubbed “Chow by For The Earth,” expected to be installed at the Boulevard Mall in Las Vegas per a lease signed this month.

The machines will vend zero-THC, pharmaceutical grade CBD-infused products for people and pets.

The pet products stem from M&A activity in December, wherein FTEG completed the acquisition of Macs and Buddy Pet Products, a maker of dog treats that is expanding into CBD pet products, another CBD market segment experiencing strong growth.

FTEG is further looking to broaden its product portfolio as a completely healthy lifestyle company through a letter of intent to acquire Clean Life Corp. The merger would bring under FTEG’s umbrella a lineup of cleaning products using an advanced coating technology. The company has been developing a natural skincare line and various CBD supplemental products that it plans to add to the product bag. It hasn’t been specified if these products will reach vending machines (presumably so), but management did state that Naxum Online Systems has agreed to construct a direct-to-consumer website to showcase and sell the battery of goods.

Additional CBD products are expected to be developed through a partnership with Edison Nation (NASDAQ: EDNT), a vertically integrated innovation aggregation and full-service product development and manufacturing company.

The upstart company is clearly aiming high with its business model, but has been careful to note that execution of the LOIs and marketing of its products are contingent upon securing future financing. To that end, FTEG in January filed a Form 1-A with the SEC to make a securities offering seeking to raise $15 million to fund its growth plans.

PotNetwork Holdings, Inc. (OTCPK: POTN), a holding company with a collection of cannabis brands spanning from vapes to pet food, is also looking to the vending machine market opportunity, showing off the new CBD Wellness vending machines of its wholly owned subsidiary Diamond CBD at the 2019 Consumer Electronics Show in Las Vegas last month. The interactive, high-tech vending machine, developed in collaboration with partner CloudPay Technologies, dispenses a selection of Diamond hemp-derived CBD oils, edibles, and creams. The machine uses advanced age verification and cashless payment systems to optimize security of financial transactions and deter potential abuse.

Management said that it demonstrated its machines to an audience of more than 100,000 at CES, further releasing a video giving a peak at what the new technology looks like.

Diamond CBD’s product portfolio ranges from CBD products for skin care to smokables, according to its website. The company has stepped outside the box with its machinery, recently announcing the arrival of their new Brain Chill Slushy Machines that will be available in stores located throughout South Florida. The 12-ounce slushies will contain 100 milligrams of full spectrum CBD and come in six flavors (Wild Cherry, Cola, Grape, Blue Raspberry, Lemonade And Iced Coffee).

A third upstart player in the hemp-derived CBD product vending space is One Step Vending Corp. (OTCPK: KOSK). In an all-stock transaction, One Step Vending in November acquired all of Sofos CBD, a newly established NY company focusing its business activity on the sales of CBD-infused products through vending machines, electronic commerce, and wholesale.

In November, the Harrison, New York company, which also operates a disruptive micromarket self-serve vending segment for traditional snacks and drinks, kicked off a pilot phase of its CBD kiosks online platform. That was followed by news of One Step Vending penning agreements for the placement of automated dispensaries of CBD products, aptly branded “CBD Kiosks,” in multiple convenience stores located throughout strategic areas of New York, including Queens and Brooklyn. In December, the rollout of 15 CBD Kiosks in the metro NYC area was initiated as part of what the company hopes to spread into a nationwide network.

The vending machines dispense goods such as candies, capsules, shots, and other CBD-related products. Late in January, KOSK management trumpeted more successful installations in NYC, with those installed machines receiving and “enthusiastic welcome” by customers and merchants alike.

One Step is widening its product selection, this week signing an agreement with Acqua Cannabis Corp., a unit of Rimrock Gold Corp. (OTCPK: RMRK). Per the tentative deal, which is expected to move into a definitive agreement by the end of the second quarter, Acqua will deliver CBD products to One Step Vending for placement in the CBD Kiosk vending machines. While the final details are being hammered out, KOSK has already placed an initial order for the product.

Consumer Acceptance No Big Surprise

Technology has made vending machines more appealing than ever to consumers. And what is going on with CBD is arguably revolutionary with prohibition lifted nationwide in the U.S. on CBD extracted from hemp per the Farm Bill. Add in the FDA approving Epidiolex last year, a CBD drug derived from cannabis for treating rare forms of epilepsy, and the medicinal merits of CBD are finally being validated after years of being written off as anecdotal hyperbole. To wit, increasing consumer demand is no surprise, especially when considering that savvy companies are looking to place their machines in high traffic areas that is convenient for all consumers.

The fact is that some, or most, large companies are still steering clear of CBD or only dipping their toes slowly in the water. This has opened up a new market that is ripe for the taking in what is – for a rare occasion – a level playing field where small companies can actually have an upper hand by being nimble and first movers.

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