How The Cannabis Industry Pivots, Shows Resilience In The Face Of Uncertainty
"Our business strategically pivoted from being 50 percent online and 50 percent in-person, to now being 90 percent online," says Veriheal's co-founder Joshua Green.
The cannabis industry is a dynamic industry that is used to operating in times of uncertainty. Over the past decade, a widespread stigma around cannabis and regulatory limitations have slowly eased to produce a growing industry that is expected to hit nearly $74 billion by 2027. Despite what appeared to be an unstoppable run in recent months, the cannabis industry has not been immune from the economic impacts of the COVID19 crisis.
Challenges include retail stores being closed, logistical and transport issues, and less buying power amongst consumers in general. Even with these problems, data has shown that there has been a steady increase of anxiety amongst people during the current lockdown. 59 percent of Americans say COVID-19 is having a severe impact on their day-to-day lives, with 48 percent citing anxious feelings. This could be one reason to explain why many Americans are spending their $1,200 government stimulus checks on cannabis products.
To dig deeper into what segments of the industry are economically healthy during the crisis, this article will highlight a few sectors and insights from respective executives.
Cannabis retailers as essential businesses
At the beginning of the lockdown back in March, the state of California reported a 159 percent spike of legal cannabis sales. In most states, cannabis distributors were listed as essential businesses that could remain open as lockdowns started going into effect.
It is important to note that alcohol stores were also on this list, so this was not a cannabis-specific exception. This trend was similar in Europe, where Amsterdam cannabis retailers reported extremely long lines and stock selling out. This was attributed to a general stockpiling that was occurring across the country.
Back in the US, the pandemic has opened up telemedicine options in many states that previously had not allowed the method for medical cannabis recommendations. While doctor visits were largely deemed essential across the country, fear has played a big part in the demand for any in-person business operation. Thus, it has been pivotal for companies to act quickly and accommodate for this wave of online users.
Veriheal, a canna-tech company that helps people easily apply for a medical marijuana card, has seen a surge in applications since the pandemic started. Veriheal’s co-founder Joshua Green describes, “Our business strategically pivoted from being 50 percent online and 50 percent in-person, to now being 90 percent online. It’s been a huge jump of responsibility for our daily operations, but luckily our in-house software allows us to scale without any hiccups. So how have we adjusted? We leaned on our teams and our current technologies to solve complex problems during this time.”
Non-THC products leading the industry
One of the benefits of the cannabis plant, with growing research to back it up, is its ability to help anxiety through the use of various cannabinoids. Arguably the most well-known, CBD has exploded in popularity and has morphed into a $5 billion industry.
One of the reasons CBD is popular is that it does not contain THC or the main psychoactive compound that is considered most problematic with laws and employment contracts. This means remote workers that are still under strict drug policies in states where cannabis is not yet legal, can enjoy the benefits of CBD without worrying about violating any company policies.
David Smith, Head of Customer Success at Verma Farms, a fast-growing CBD brand, noted that April was the best month for the company, which primarily sells D2C through its e-commerce platform. Smith explains that CBD is “much easier to consume” and more accessible across the country. You can consume it as a tincture oil, gummies, or even as a cream. Smith adds, “CBD is an attractive first entry point into the industry for people that are too nervous to try cannabis but still want to experience the natural benefits that the plant can offer.”
Is the supply chain impacted?
Cannabis cultivators and suppliers are the lifeblood of the industry and largely determine what other products can be produced and at what scale. When cannabis production or demand is down, demand for the whole industry can be impacted. Thankfully, this is not common and the issues within the industry are usually related to shortages or changes in macro factors such as regulation.
Ancillary products in the cannabis industry include hardware, flavoring, accessories, apparel, and other products that are not made from cannabis directly. These types of products are often sold in marketplaces, retail stores, or direct to consumer channels.
Daniel Gordon, Founder of True Blue, a leading producer of terpenes based in Los Angeles, also noticed a general uptick of sales across the industry. “We are mainly a B2B supplier so we deal with distributors and brands more than end consumers. My observation is an increase in sales across the industry as a whole. People are stuck at home and leverage cannabis products and accessories as a way to cope with ongoing uncertainty in their lives due to the virus.”
What is next for the cannabis industry?
Despite strong sales figures being reported, there are still some geographies being impacted by COVID19. Statistics show that sales have increased by 17 percent from 2019 in California, but the month was growing slower than previous months in 2020, which locked in 75 percent month over month growth. This was to be expected with everything going on, but the entrepreneurs in the industry are hopeful this will pick back up when the situation normalizes. It will be business as usual.