How the Coronavirus Could Affect the Cannabis Industry

Written by Rita Thompson

 

 

With all the fuss surrounding COVID-19, it’s only right we take a moment to consider how the global pandemic could affect the cannabis industry. 

Regardless of your personal concern about getting sick, coronavirus is having an effect on everyone’s lives. As of now, the crisis has to put a damper on retail cannabis sales, or delivery services. But, as colleges and universities across the country close, and more travel bans are instituted—that could all change. 

Production

Chinese officials have so far confirmed more than 80,000 cases of COVID-19 in China. In order to prevent the spread of the virus, officials are closing factories are all over the nation. These shutdowns could have a tremendous impact on the cannabis industry. That is, in part, because many vape companies in the U.S. and Canada outsource their hardware from Chinese companies.

This affects the goods needed for cannabis production, consumption, and sales. Arnaud Dumas de Rauly, the founder and CEO of the cannabis vape hardware manufacturer, The Blinc Group, explains potential effects to Marijuana Business Daily. “If several key raw material suppliers suddenly close down or are several months late in their shipments, it will constitute a threat to our timely fulfillment capabilities.”

U.S. manufacturers have the potential to offset the shortages. However, the virus is putting a halt to highly populated events, and therefore, major sales opportunities. South by Southwest (SXSW), for example, has already been canceled

The Stock Market

Perhaps the most heavily impacted section of the cannabis industry, so far, is the stocks. Prior to the coronavirus pandemic, cannabis stocks were already dropping due to concern that producers were short on funding after over expansions. Now, as many companies face a possible pause in production, shares are plummeting even further.  

According to Market Realist, the U.S. stock market closed with a loss of 1.6% on March 6. The same day, The Horizons Marijuana Life Sciences ETF closed with a loss of 5%.  

To reiterate, much of the industry’s equipment is produced in China. As a result of production halts there, stocks in companies that are dependent on vape-related sales are suffering. 

KushCo, whose shares were up more than 20% before the virus set in, are down more than 30%.  

Sales

Fears of socialization and public spaces have resulted in decreased sales in some states.

The Center for Disease Control and Prevention (CDC) recommended to Leafly that everyone has at least one month’s supply of medication on hand in the event that supplies are strained. Thus, many are eager to stock up before a possible quarantine, resulting in a prior surge in sales. 

Many cannabis legalization events have already been canceled. If stores begin to close, it will impact not only dispensaries themselves, but signature-gathering initiatives for legalization. 

Overall, no one is entirely sure what to expect from the coronavirus crisis in the coming weeks. For the time being, you’ve got our permission to Bogart your joints!

 

Emerald contributor since June 2019

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