EULESS, TX – Greg McGough discovered Cannabidiol (CBD) about three years ago when his wife began suffering from pain due to disc degenerative disease. She gained a measure of relief with the help of CBD oil, a hemp-derived extract, and McGough wondered; What could it do for his customers at Euless, Tex-based Medical Xpress?
Research followed and a certain realization donned. “CBD is the next gold rush,” said McGough, director of Retail Operations for Medical Xpress’ multiple locations in the lone star state. “It kind of fell into our laps that this was the next big thing in health care. We realized that there are true benefits to CBD. It is not snake oil.”
With Founders Hemp, Miracle Nutrition Products, and Purwell all signed to exhibit at Medtrade, scheduled for Oct 21-23, 2019, in Atlanta, Medtrade attendees have a chance to explore the possibilities. For Medical Xpress, CBD sales may take the form of a store-within-a-store concept that physically (and legally) separates the main business from the CBD side.
Why take such a strategy? The reasons are numerous and vary from state to state. Whatever providers do, McGough implores everyone to complete their due diligence and use caution. Medtrade Monday sat down with McGough to get a better feel for the concerns and potential of CBD in the coming years.
Greg Thompson, editor, Medtrade Monday: What have you learned about the business side of CBD over the past two to three years?
Greg McGough, director of Retail Operations, Medical Xpress, Euless, Texas (plus additional locations in Texas): It has been an eye opener to learn about the banking aspects of CBD and how you can’t co-mingle funds with your other businesses. From there, I spoke with different manufacturers and began getting our game plan together. It just kind of fell into our laps that this was the next big thing in health care. We realized that there are true benefits to CBD. It is not snake oil. However, not all CBD is created equally.
Thompson: How would you characterize the environment now surrounding CBD sales?
McGough: CBD is the wild wild west right now. CBD is the next gold rush. There are a lot of companies that are in this just to make a quick buck and they won’t be around for long. That’s what scares me when I think about a lot of people in our industry getting into this. Find the right product with a company that has been around for more than a year. A good CBD company should be around a minimum of three to five years.
Thompson: Do you see parallels between CBD and other equipment/products over the years?
McGough: It’s similar to the vape industry five years ago. Remember five years ago you couldn’t drive a block without seeing two vape shops. CBD is going to shoot up like a rocket and then come down. If you work with good vendors who have been in this industry a long time, and they are going about it the right way, you are going to be there when the dust settles. This is a long-term bet for us. This is the next big thing in health care. We have found the right vendors and done our due diligence.
Thompson: What other signs do you see that indicate CBD is on the rise?
McGough: Coca-Cola just bought 20,000 acres to grow hemp, and I think we are going to see CBD-infused drinks from Coca-Cola in the near future. Moulson in Canada just signed with one of the big cannabis growers to do CBD-infused beverages. It’s going mainstream, but for our industry you need to be doing it the right way, so when it does crash and burn, you are there when the dust settles.
Thompson: What are the particular challenges in your home state of Texas?
McGough: Texas is different. The 2018 Farm Bill was signed, but Texas said that the U.S government could not dictate Texas law. Texas legislators basically said that hemp was still illegal in Texas because it has trace amounts of THC.
Thompson: If and when you begin selling CBD, what will that look like for you?
McGough: We intend to protect the other two businesses—Medical Xpress and XMed—and have a store within a store. Our CBD shop—called CBD Xpress—will have its own entrance, different LLC, different tax I.D., and that is all a way to mitigate the risk in case of varying legal situations. We wanted the ability to simply lock a door until things change.
Thompson: What would you say to providers in other states?
McGough: Understand that the laws could be different from state to state and county to county. Unfortunately in Texas, CBD is still illegal [as of June 10, 2019], so we still can’t launch our stores even though there are CBD stores popping up all over the place and you can buy CBD just about anywhere now. There are CBD stores all over Texas.
Thompson: Wait, you said CBD is still illegal in Texas.
McGough: They [Texas law enforcement officials] are not prosecuting people. They are not arresting people. But in another county, law enforcement may indeed go in, raid the shop, and arrest employees. It’s a county-by-county thing.
Thompson: When you think of Medtrade attendees going to Atlanta this year with an aim toward possibly selling CBD, what is your biggest fear?
McGough: My biggest fear is that people who are trying to get into this may just go with the info they hear from a salesman who simply wants to sell them CBD. They could get themselves into real trouble.
Thompson: Tell me more about your due diligence.
McGough: When we were starting this, I sent e-mails and called local law enforcement, prosecutors, attorneys and I asked questions. My phone eventually rung and it was a prosecutor from one of the counties and she said: ‘Do you realize that you have sent us an e-mail asking us if it was ok for you to commit a felony?’ I responded that I was just trying to be as transparent as possible, and she said: ‘I want to let you know that this went to about 50 people before one of us decided to pick up the phone and call you.’ She said, ‘We have CBD stores popping up all over the place and you are the first person to ever reach out to us. We are not going to come in and shut your shop down, but what you’re asking us about is illegal.’
Thompson: When can you legally start selling?
McGough: We have House Bill 1325 in Texas. They voted on it, and I think the vote passed with more than 90% in the affirmative. The chambers erupted in applause. That was May 25, 2019. The governor [Republican Governor Greg Abbott] has not signed it into law yet. As soon as he signs it into law, we should be good to go. We are keeping our fingers crossed that we can hopefully open sooner rather than later. We are trying to follow the letter of the law, as opposed to some others.
Thompson: What legal counsel have you engaged?
McGough: We hired an attorney who only does cannabis law in Texas. She has been a guiding light. Since we sell FDA-approved items, we are going to be scrutinized more than just the CBD shops.
Thompson: What are the confusing aspects of CBD banking?
McGough: Hemp and cannabis are the exact same thing when it comes to banking law. There is no difference. It took us a long time to find a bank that would take our money and a long time to find a credit card processor. You need to make sure you are in the right to sell this.
Thompson: What are some other confusing aspects?
McGough: I could put a hemp plant in front of you and a cannabis plant and the untrained eye can’t tell the difference, and neither can law enforcement. If there is a misunderstanding and you are not following the letter of the law, you are taking a chance of the bank seizing all of the money that is in your account.
Thompson: What is the latest on the opening of your store within a store?
McGough: Until our attorney tells us we are good to go, we won’t do anything. We originally thought this would be a 12×12 foot space in our showrooms, but if the law passes and goes into effect, the setup will depend on what our attorney tells us. We are waiting for Gov Abbott to sign it into law.
Thompson: For others who wish to hire a cannabis-focused attorney, where do you recommend they go?
McGough: Look at web sites such as norml.org. They have hundreds of attorneys they can recommend.