The effects of coronavirus on cannabis and all other businesses are possibly permanent, but we're going to attack this from a very optimistic standpoint. To be realistic, it's almost impossible to put an exact window, or time-frame associated with setbacks without looking hard at what's already changed while suffering the effects of the covid-19 pandemic. The cannabis industry is and will have a new normal post-COVID...
What will this look like?
Changes in Purchasing Behavior
The buyer's behavior has changed. The pandemic has made online ordering the new norm. Curbside, drive-thru lanes and home deliveries that are the new normal are likely to linger even after the pandemic is over. This is partly because customers are also enjoying the convenience that come with this mode of operation. Incentives to buyers to switch back to the old ways will have to be part of a very strategic plan designed by the companies who need buyers back - Companies need buyers right now, not the other way around. The dominance of these non-contact deliveries will mean a limitation to the interaction between the canna-businesses and customers, and therefore, will force more innovation to extract the data necessary to retain customers through these types of scenarios in the future.
Stalled Legalization and Political Setbacks
Governments have focused all their resources on public-health. This has led to stalled legalization, licensing and any other relevant statutory processes in the cannabis industry. These delays will still affect the industry for long periods after the pandemic...barring any executive orders coming from The President, passed by Congress.
In this last election cycle, 6 new states passed legalization propositions. The American People are calling for transparency in clean, green medicine, and companies must be ready to supply them with what they're asking for.
The beginning of the Covid-19 pandemic brought about rapid change in how both people, and the government view cannabis operations: as an "Essential Business."
After the longstanding "War on Drugs," who wouldn't ever thought? Silver Lining?
Faster Industry Contraction
In the post-Covid-19 period, players in the cannabis industry will have to deal with the repercussions of a beaten-down economy. Many businesses are continually failing during this pandemic period, and not because they weren't prepared, but because they didn't understand how the pandemic would be used for political gain. Measures set to remedy the situation have instead accelerated the failure of many businesses in many states.
In California, the cannabis industry was already facing systemic challenges dating back to 2017. The emergence of the virus has resulted in the halting of many business deals and withdrawal of investors. There has also been a major disruption of the supply chain leading to a breakdown in the flow of the day to day cannabis business. Many asset funds have put their plans on hold due to the uncertainty.
All these events will have a long-term negative impact on the cannabis business, but to look on the bright-side, hedge funds and home offices are waking up in preparation for a new wave of business post-covid.
Real Estate Opportunities
There is a likelihood of cannabis business finding better rental terms after this pandemic. It might be the best opportunity for company expansion. Many store owners were spending heavily on renovations and face-lifts to enhance the visitors' shopping experience. There's no time like the present to engage your building owner, or if you're already the owner, to engage your bank in freeing up some capital by deferring payments on your lease/mortgage. These renovations may have been on hold for now without the right information, but after the pandemic following through on a new customer experience will pay dividends.
From another perspective, a significant number of businesses have already closed shop freeing up market share and a number of other opportunities to provide remaining cannabis businesses better rates on their current lease options, or new locations for brand expansion.
Jitters In the Supply-Chain
Companies that distribute vape hardware have realized their vulnerability in terms of the supply chain. Most, if not all Vape companies in the United States heavily depend on materials from overseas markets. At the beginning of the pandemic, China shut down almost all manufacturing and exports as a bio-security measure. This caused major supply jitters in the cannabis industry since there are not many reliable domestic alternatives. Once there is a major breakdown of this magnitude in the supply chain, the ripple effects are likely to be long lasting if immediate action isn't taken to prevent the breakdown in the future.
Fortunately, for now, overseas factories in China and Asia have resumed operation, and American manufacturing companies have stepped up to fill the void, setting up preventative measures should a pandemic like Covid strike the world, and cripple an industry again.
The COVID-19 pandemic has resulted in a rapid evolution in the market and impacted the retailing, legalization, and distribution chain of both medical, and recreational cannabis. Investors and companies should learn how to adjust and train in resilient techniques for sustainability and flexibility to survive the adverse effects of any pandemic on the cannabis industry, present or future.
The disruption may be around longer than we expected. So, brace for it.