How a National Crisis Impacts Emerging Industries such as Cannabis Hemp

The Coronavirus (COVID-19) is impacting life for essentially every single citizen worldwide.  The impact is vast, spanning from health related issues to industry and business issues.  How do emerging markets, such as hemp and cannabis fare at a time like this? The impact COVID-19 will have on the hemp and cannabis industry is still to be seen.  Unfortunately, no industry is safe from this worldwide pandemic.
COVID-19 Impact on the Hemp and Cannabis Industry
This is an interesting question.  Especially because cannabis and hemp play in the medical space, as well as recreational space.  Is this a marketing opportunity for these businesses, or is it a disaster?
Let’s take a look at some key factors that are impacting the industry.

Two Types of Consumers.

Medical.

You can theorize that medical cannabis consumers are some of the most at risk for developing serious health issues from COVID-19.  This means that dispensaries, now not only need to follow CDC and other guidelines, but they most likely have to go even further, to ensure the safety of their vulnerable customers.

On top of protecting their customers, there is the unanswered question if medical cannabis dispensaries are considered essential businesses.  Due to the infancy of this industry, and the unprecedented times we are currently living in, there are many decisions being made on the spot.  If the medical cannabis movement was truly to establish cannabis as a form of medicine, than it should be considered an essential business.  This not only impacts dispensaries, but cultivators, processors, distributors, and others in the distribution chain.  According to the Marijuana Business Daily “more states and local officials are declaring medical marijuana dispensaries “essential” services akin to pharmacies.”

This means that the medical cannabis industry needs to enact business processes to adhere to social distancing guidelines.  This may mean at home delivery, curb-side pick-up and other necessary precautions.  This protects individuals’ health, but also creates the need for new business models for many companies that are still in the start-up phase.

Proper business planning now to whether the storm, will determine which medical cannabis companies can remain intact after the epidemic ends. Which it will, the question is when.

Recreational.

Many recreational cannabis businesses may be required to close, or greatly reduce staff, based on mandated laws.   This is currently being enforced at the state level.  New York, which currently does not have a legal recreational program, came out and said that non-essential businesses, can only have 25% of their workforce physically in the office.  California, which does have a legal recreational program, has ordered non all essential businesses to close in Los Angeles, and San Francisco has been on lockdown for days.  It will be interesting to see what decisions come from other states.

As many people are preparing to hunker down, cannabis dispensaries are showing spikes in sales.  This is great for business, but again takes proper planning to meet increased needs in such a short period of time.

As states continue to close non-essential businesses the question remains, can you argue that recreational cannabis is essential?  There are many theories on this one, but I will leave it up to the government officials to decide.

Research and Education.

Because the industry is still relatively new, there is a lot of R&D and educational components happening simultaneously.  Avenues where hemp and cannabis growers could receive information, such as conferences, tradeshows, etc. have been cancelled or postponed.  Although we think we live in a world where everyone is connected digitally, many rural farmers are not.  How do they continue to educate themselves on the hemp industry and best practices? How are they receiving much-needed and valuable information?

Change in Preferences and Supply Chain Disruption.

  • Will people now begin to choose edible products, or more shareable type products, over smokeables?  This may be the case due to the need for avoiding direct contact.
  • People who have been prone to go into brick and mortar stores, to educate themselves on CBD and the evolving hemp industry, will most likely turn to e-commerce and digital educational resources.
  • Those who utilize CBD currently will probably continue to do so.  However, there may be a lag in new customer generation.  Frankly, people do not have the time to research new products.  There is also fear with where products are being manufactured.
  • Getting packages to customers may prove to be an issue, as many of the packaging materials are produced overseas.

On the Bright Side.

Although, there are still many questions without answers, we will continue to monitor the industry and provide updates as we have them.  One thought process that I have seen floating around is encouraging.  Many professionals are saying the disruption in China may lead to more hemp production in the United States.  This would be positive for farmers in America, and all of the hemp and cannabis distribution channels in America.  Time will tell, but it is a conversation I will continue to follow.

If you have any questions please don’t hesitate to reach out to me at mhopkins@teamdkb.com.