As The Economy Falters, Will Demand For Cannabis Continue To Rise?
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Just a few months ago, the cannabis industry was going through a sizeable dip. Now with consumers grappling with the coronavirus, sales are at an all-time high.
We talked to researchers at both BDS Analytics and Flow Hub to understand what is happening in the current market place, why, and what it means for the cannabis industry in the future.
The numbers spike
According to Roy Bingham, the co-founder and CEO of BDS Analytics, a leading source for cannabis industry data and insight, top U.S. adult-use state saw a spike in sales of 28 percent starting on March 13, which was the time of the initial COVID-19 response. On March 16, the day that many counties in California mandated its "shelter-at-home" order, the state had a record sales day. It was over 100 percent above the recent average. This is the same day that the Dow plunged 2,997 points.
A similar trend followed in Denver, Colorado. According to Kyle Sherman, CEO and Founder at Flowhub, which makes cannabis POS, inventory and compliance software, "When the Mayor of Denver said rec dispensaries were going to close, we saw consumers rush to dispensaries to stock up." Indeded, right after the announcement sales skyrocketed.
127 percent higher compared to the previous Monday 3/16/2020 at 4pm.
390 percent higher compared to an average Monday in 2020 at 4pm. (nearly 4x)
392 percent higher compared to the same day (Monday 3/23/2020) at noon.=
"People want their cannabis"
Consumers are turning to cannabis during this unprecedented time for myriad reasons. "People want their cannabis," says Sherman. "It is an essential product for many."
According to BDS Analytics, 65 percent of cannabis consumers consume it on a daily basis. "These are typically medical consumers who are used to making multiple trips to the dispensary per week," says Bingham. For these patients, cannabis is essential to treat serious conditions like stress, PTSD, anxiety, insomnia, nausea, pain, and multiple sclerosis.
On the healthier end of the wellness spectrum, others are consuming cannabis for relaxation, sleep, mild anxiety, and even just fun. Isolated home alone, with their significant other, or family, they are unable to do the things they typically do to relax like go to the gym, a restaurant, or yoga class. As a result, "we have seen that the average order size has gone up significantly go up by about 25 percent, as people added a second product to their cart, or as they bought a larger quantity of the first product that they like.
Will the trend last?
It may be too early to predict a recession for the overall economy but with 3.3 million applying for unemployment insurance, times will certainly be tough in the near future. Still, historically, many legal drug industries such as pharmaceuticals and alcohol have weathered economic downturns. The question then remains: Is cannabis recession-proof?
"Nothing is perfectly recession-proof," says Catharine Dockery, founder of Vice Ventures, a seed-stage capital fund that invests in good companies operating in "bad" categories. "I’d say the performance definitely suggests that cannabis and other vice products definitely act a bit more like consumer staples—with those historically being a safer corner of the market in volatile times.
But Dockery adds that "cannabis is uniquely well suited to the current circumstances—it's consumed at home, it often makes people less social or even sleepy, and people consume while playing video games watching TV or reading. Cannabis is definitely better suited for this specific case than for a typical bear market."
Bingham agrees. "There is an expectation that cannabis will be somewhat countercyclical," says Bingham. Perhaps not to the extent of prescription drugs, but that's why we're monitoring cannabis on a daily basis."