How Does COVID-19 Impact the Cannabis Industry?

READ TIME: 6 MIN

2019 was a momentous year for the cannabis industry. With President Donald Trump signing the Farm Bill into law in December, Illinois becoming the 11th state to legalize recreational marijuana, and CBD exploding in popularity, it was only natural to assume that the momentum built up by the cannabis industry in 2019 would carry over into 2020.

But no one could predict the devastating curveball that the entire world would be dealt practically overnight in the form of COVID-19 AKA the coronavirus.

We’re just a few months into 2020, and the world has been brought to its knees. With people catching the virus left and right and the death toll rising every day, businesses have been forced to close their doors to limit the spread of the virus.

As a result, practically every industry has suffered in one way or another from the rapid spread of this devastating pandemic. We seek to examine how the cannabis industry will be impacted by the coronavirus, both in the present and in the future.

How are local dispensaries being affected by COVID-19?

The United States has been scrambling to contain COVID-19’s spread throughout the country. California, Illinois, and New York have locked down more than 70 million people with shelter in place orders in a bid to “flatten the curve.”

As of the time of this writing, there’s no definitive answer as to how the cannabis industry will be impacted in the long-term. In the short-term, however, the outlook appears to be hopeful.

A report in Marijuana Business Daily found that consumers have begun stocking up on cannabis products, causing a massive spike in sales. For now, the cannabis industry is booming like never before.

Meanwhile, local cannabis businesses have begun doing their part to fight the spread of the virus by taking precautions to keep employees and customers safe. Many dispensaries have implemented social distancing measures to limit physical contact and subsequent spread of the virus.

A growing number of dispensaries have outright closed their doors and have shifted their focus to home deliveries, online orders, and drive-thru purchases.

One cannabis company in Illinois, MOCA Modern Cannabis, has even suspended recreational marijuana sales to primarily focus their attention on more vulnerable patients.

Local cannabis businesses have begun doing their part to fight the spread of the virus …

COVID-19’s effect on the cannabis supply chain

Unfortunately, there are still challenges ahead for the industry. Many cannabis manufacturers and distributors rely heavily on China for packaging and hardware. As we all know by this point, China is where COVID-19 originated.

Though the virus seems to have run its course in China, the country is still recovering. Millions of workers are just getting back to work after months in quarantine. As such, factories that play a significant role in the cannabis supply chain are just coming back online.

The primary issue is that many factories are operating well below capacity. This means cannabis manufacturers and distributors will inevitably experience shortages unless they can find an alternative source for packaging and hardware.

In turn, local dispensaries may also begin experiencing shortages. Even now, some brands have been forced to put off launching new products due to a lack of packaging options. The situation is ongoing.

Is Cannabis considered essential during the coronavirus outbreak?  

Even with trouble on the horizon, the overall outlook appears to be bright for the cannabis industry. Thousands of businesses deemed “nonessential” have been forced to close their doors to the public, putting the livelihoods of millions of business owners and their employees at risk.

Cannabis remains among the lucky few industries that are deemed essential during these trying times. The state of Washington’s Governor Jay Inslee has echoed this sentiment, declaring cannabis dispensaries as essential and therefore allowed to operate during the pandemic.

With millions of people losing their jobs, cannabis businesses may be among the few who are, in fact, increasing hours due to the recent boom in sales. No one knows how long this will last, but for the time being, this is positive news for the industry.

Are cannabis businesses included in the recent stimulus package?

In an attempt to provide relief for workers and businesses that have been devastated by the outbreak, Congress has recently approved a massive $2 trillion stimulus bill.

This is fantastic news for most American businesses. Unfortunately, cannabis businesses won’t be seeing a penny of this stimulus bill, primarily because marijuana is still classified as illegal under federal law.

As of this time, no one has received money from the government. We can only wait to see what impact the stimulus bill has on the economy, and whether or not the cannabis industry will suffer due this exclusion.

Is the cannabis industry recession-proof?

The question that begs to be asked – how will the cannabis industry weather the coming recession?

According to experts John Kagia, Chief Knowledge Officer at New Frontier Data and Michael Harlow, a CPA and partner at Cohn Reznick, the industry is recession-proof.

A recent webinar hosted by Kagia and Harlow for over 500 cannabis business owners, investors, operators, and ancillary services made it clear that the industry has built-in defenses that guard it against the disruptions caused by the current crisis.

Here are the points that were made and the facts that support them.

1) Disruption of the supply-chain 

Even though China is still in recovery mode to get their factories back up and running at full capacity, there’s evidence that the cannabis supply chain is recovering.

2) Global travel bans 

Global travel bans are having a significant impact on thousands of businesses around the world. Cannabis, being an industry that largely relies on local demand, should be largely unaffected by travel bans currently in place.

3) Loss of jobs

Cannabis is a fixed expenditure for a great many users. This means that demand will likely continue to rise, which in turn means that cannabis jobs are stable for the moment. Whether that will change sometime down the line, no one knows. That said, all looks hopeful for the moment.

4) Social distancing 

The vast majority of cannabis users tend to consume alone. Furthermore, dispensaries around the country have begun implementing curbside pickups, deliveries, and online ordering to keep both customers and employees safe.

5) Decline of the stock market

The stock market has hit all-time lows thanks to fears generated by COVID-19. With stocks plunging, ambitious investors are jumping in with both feet in search of deals that will make them money over the long-term. Cannabis may be viewed as a stable investment in a sea of uncertainty.

6) Destabilization of the medical system 

Cannabis has been gaining more and more recognition for its therapeutic uses. Many cannabis users rely on medical marijuana to alleviate pain, insomnia, and anxiety amongst additional medical issues.

Operating your cannabis business safely during the COVID-19 pandemic

Running your cannabis business safely during the COVID-19 outbreak should be your top priority. To ensure your employees and customers limit the possibility of passing the virus to one another, here are a few tips to keep in mind:

• If you haven’t already, consider switching to a delivery model. This limits interactions between your employees and customers, allowing you to fall in line with social distancing mandates. 
• If customers are still coming into your store, enforce a strict six to nine-foot distance rule to limit contact and spread of the virus. 
• Encourage customers to come in early, which decreases their chances of catching the virus from others. 
• In addition to regularly washing your hands, consider wearing personal protective equipment such as goggles, masks, and gloves. According to experts, the eyes, mouth, and nose are vulnerable areas that can contribute to rapid spread of COVID-19.  

Final thoughts 

One thing needs to be clarified – the cannabis industry is not immune to the current state of affairs brought about by the COVID-19 pandemic. While Cannabis may not be hit as hard as other industries, it is not entirely immune from the financial impact that’s affecting not only the country but the entire world.

Still, it can’t be denied that the cannabis industry is uniquely positioned to weather this storm. Though the future is uncertain in the coming weeks and months, the one constant that has always remained true for the cannabis industry is that change is always just around the corner.

COVID-19 is just another change that the industry will have to overcome in its fight for survival. And just like every battle cannabis has been forced to fight thus far, it’ll emerge from the other side stronger than ever before.

Greenleaf HR is here to educate and inform you on the cannabis banking industry while providing you with the resources your business needs to thrive. Whether you’re a current client or a business owner interested in cannabis banking services, we strive to supply you with the best ways a cannabis banking partner can support your business. To learn more about cannabis banking, HR, or financial services, or about any of the services we provide, reach out to us, here. Let us help you take your company forward, faster.