Despite the numerous stay-at-home mandates and shuttering of certain businesses, the cannabis industry remains strong...for now.
Nick Kovacevich, CEO of KushCo Holdings, explains why cannabis has experienced a period of growth due in part to COVID-19. “A majority of industries have been forced to close, but cannabis is one of the few deemed essential. Stores are allowed to say open, and many have opted to allow for curbside pickup and even delivery.” Because of this, there is actually more access to cannabis in some states than before the shutdown.
The second reason is a bit more human. “When faced with the idea of quarantine at home, many have chosen to stock up on cannabis during these times. Alcohol is more of a social vice, where cannabis is traditionally something a little less social. No surprise that people are leaning into that right now,” Kovacevich said.
Although many see cannabis as recession-proof, similar to alcohol or cigarettes, there is still an expected slowdown in the coming months. Because of the widespread economic downturn, many users won’t have the disposable income necessary to make cannabis purchases.
Leaders in the cannabis industry hoped to be included in the nationwide stimulus package, but because use of marijuana is still federally illegal, that for obvious reasons didn't happen. Similar to the exclusion from SBA loans, cannabis-based companies will continue to rely on their own cash flow or private investment.
When asked why the cannabis industry should have been included in the stimulus package despite this, Kovacevich explained, “Cannabis is a great employer. The industry is manual and mostly domestic, but it’s one of the biggest industries to be left out.”
A majority of states have legalized marijuana in some way, whether medical or recreational. When polled, 66–70% of people say they are in favor of legalization, and states benefit from the tax dollars generated by this multi-billion-dollar industry. “Hopefully it will force people to look at the situation and ask, why is it still illegal?” he added.
What’s next for the cannabis industry? Kovacevich imagines the impact on the industry will be similar to other industries that will not receive any of the government stimulus package. “Traditionally, cannabis has relied on outside funding. The coronavirus will impact the investor community and have a negative impact on a risky sector like cannabis," he said. "Companies that rely on this funding are in a situation where they won’t be able to get that outside funding, and I’m worried that a lot of companies will go under. We’ve been fortunate to get this escalation in demand.”
However, there is a bright side to all of this. “Legal cannabis has been growing, but not like delivery for traditional industries which has reshaped retail entirely,” Kovacevich said. In order to educate consumers, cannabis has traditionally had a strong retail environment. In order to purchase flower or edibles, patrons had to come into a store to be educated on dosage and potency. Because of social distancing, states that had initially been only allowed to sell product in-store, are now able to offer delivery or curbside pickup. Education is one of the prime duties of dispensary staff. It still should be, so call first to drill down best options.
As the world changes to adapt to the new normal, the cannabis industry must change right along with it. As COVID-19 accelerates these changes, we can only hope to see the greener side of things.