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Cannabis & COVID 19
Before the COVID-19 pandemic struck, global cannabis sales reached US$ 14.9 billion in 2019, up from $10.2 billion the year before (source: BDS Analytics). We face the worst global economic crisis since the Great Depression of the 1930s with millions of people out of work. It will be naïve to think that the emerging legal cannabis industry will not be disrupted, surely in the short term.
The most positive development during the crisis has been the official recognition in various states that medical cannabis businesses were “essential” allowing them to stay open.
This also led to closer dialogue between the industry and regulators to jointly formulate protocols to reduce health risks, such as curb side pickups. This collaboration will challenge the negative bias which the industry has suffered from the onset.
Initially cannabis markets experienced a surge in sales since consumers feared they would not have regular access to dispensaries under the lockdown orders. But these early peaks leveled off and, in some instances, there were even declines.
Several reasons explain this drop. Panic buying subsided once cannabis businesses were declared essential. The stay-at-home orders meant that fewer people ventured outside, while legal cannabis cross-border ecommerce remains illegal. It is safe to assume that the black market compensated anywhere the legal supply chain was disrupted.
What can we say about the future? In the medium to long term, the cannabis industry should revert to strong growth. The shorter term, however, remains uncertain. Cash is king these days. Many cannabis businesses were struggling before the crisis due to falling prices and intensified competition. These companies will find it even harder to survive if they are not able to receive government help since cannabis remains illegal on a federal level. Federally regulated banks are also unlikely to come to the rescue. Cannabis markets which depend on tourism to drive business, such as Las Vegas and Amsterdam, are likely to suffer during the coming months.
The stronger players, those with sound business plans, efficient operations, healthy cash reserves and trusted brands, will benefit from the shakeup. Governments facing economic peril may also be motivated to advance legalization faster than before being a source of employment and tax revenue. Last but not least, research underway may reveal that cannabis can be helpful in the fight against COVID-19. That would certainly put the industry in pole position for a strong rebound.