COVID-19 has hit the Cannabis Industry with its highs and lows, on different levels. While it is only a matter of time when “normalcy” is restored across all industries, the effects of the pandemic on industrial levels are still a matter of concern. But there is no full and final take on the Cannabis Industry.
The initial stockpiling by consumers saw a sharp rise in revenue of several marijuana dispensaries. Nevertheless, it came down with the same speed as lockdown started curbing down everything but essential services.
The provision of goods in weed shop and online is still upright with mild restrictions. The bigger confusion when COVID-19 hit the market was whether or not Cannabis was an essential item.
It became a major dilemma for leaders of San Francisco Cannabis Market when the county took weed out of the essential service list. Following this chaos, the Mayor of Francisco - London Breed, allowed weed dispensaries to continue operating.
Image Source - Colorado Public Radio
Right from Colorado to Pennsylvania, and Nevada, country officials put out decisions in favor of Cannabis regardless of the pandemic. The same goes for Jared Polis, Governor of Colorado went even to say that weed dispensaries were no different from regular pharmacies. As a positive sign, they were also not included in non-essential items.
However, on March 17, there were amendments regarding the distribution and sale of Cannabis during COVID-19. The states have given rigorous in-store physical distancing and curbside pickup orders. Yet on a larger scale, there are some positive and negative impacts of COVID-19 on the Cannabis Industry.
The fall and rise of Merger & Acquisitions
Bankruptcy hit hard to some Cannabis companies during the fourth quarter of 2019 and even the first three months of 2020, that is when the pandemic hit us in the gut. Even though filing Bankruptcy is not applicable for many marijuana companies (reason - it being a Schedule I drug), the federal courts are looking forward to issuing some bankruptcy relief as times are challenging.
This time, the difference is that the companies are looking forward to state-specific avenues for relief. This tough face also saw the sharp fall of M&A activity, even when every weed dispensary did well during the weed stockpiling. As markets begin to restore to the new normalcy, some marijuana brands have started shaking hands again, giving rise to M&A throughout the industry, sailing through difficult times.
Huge impact on Vape cartridges supply chain
China, where COVID-19 emerged, initially got affected the most. With the number of corona cases rising sky-high, they had to shut down almost all of their manufacturing units. It massively affected the supply chain of Vape cartridges, and even the battery packs, directly impacting the functioning and sales in weed dispensaries.
When China’s manufacturing gets disrupted, it shows in the entire world as almost all countries are heavily dependent on them. But with international politics not looking so great for China with accusations of hiding COVID-19 news/facts, tides in the production industries have begun changing.
Even if this crisis didn’t happen, China would still take time to function in full swing. When it comes to E-cigarettes and Vaping devices, almost 90% of them are produced in China, and some factories reopening will merely do anything to suffice the broken supply chain.
To look towards the bright side, companies will start looking into hiring production units much closer to home or even in the states. With the future of the world so fickle after this pandemic, it is paramount for world production and manufacturing trends to look for alternatives. For weed dispensaries and companies that make Cannabis products, this will ensure the supply chain is not eternally broken.
The rise of Marijuana Tax benefits
The world is not oblivious to tax benefits any industry can provide. Cannabis, as a recreational substance, comes in a time where the government expects tax losses. Potential Tax revenues are enormous when it comes to marijuana, and therefore, states are looking forward to the legalization of this controversial plant.
Even one weed dispensary can generate high sales during such desperate times and incur huge tax revenues. Any opportunity for legalization is being looked into by legislators and state officials. They are aware of how sales of alcohol sky-rocketed with every weed dispensary following the pattern.
Image Source - Crain’s Chicago Business
The crackdown on Fraudulent Marijuana Companies by FTC and FDA
Cannabis, as a plant, is not far from controversies even with its legalization. There has been a history of dishonest medical claims, right from cancer to HIV, by some fraud companies.
Previously FTC and FDA had sent strong, even aggressive warning letters to such sellers. This time, they started cracking down on all opportunistic Cannabis companies putting out marketing claims that CBD oil can effectively prevent and even cure COVID-19 and its symptoms.
The action comes in during crucial times as such. Consumers are gullible to believe any false claim tied up with COVID-19. There have been seizures and even injunctions against many products or individuals and weed dispensaries, unlawfully promoting the so-called “coronavirus cure.”
Clinical trials of Cannabis are still on
As far as the lockdown is concerned, R&D with clinical trials is disrupted as social distancing becomes the number one preventive measure for COVID-19. But there are ways to continue research by virtually checking in with test subjects ensuring social distancing.
FDA gave out a few guidelines regarding the same, which means that Cannabis companies can continue with the research of the medical benefits of marijuana. This comes in a positive sign for the Cannabis industry as a whole.
Image Source - Harvard Health (Harvard University)
The impacts of COVID-19 across all industries continue to fluctuate, but the future of Cannabis, as an industry, still looks bright.