The COVID-19 coronavirus outbreak triggered a severe economic crisis that affected almost all industries, including the medical cannabis niche. One of the main problems is the reduction of deliveries from Asia and the transition of operators to the local mode of operation. This, in turn, leads to a shortage of much-needed medical marijuana and related products.
The supply of drugs is declining both on the West and East coasts of the United States, and it forces many cannabis buyers to stock up on the herb for at least 1 month. This is largely motivated by the reluctance of people to leave their homes once again without a serious reason. As the dispensary vendors say, patients choose their entire legal limit at a time and only plan to visit dispensaries again if they run out of supplies.
Today, there is a trend of active buying up of all forms of medical cannabis. We are talking about food products containing CBD, as well as marijuana and hashish. As soon as the first cases of COVID-19 were detected in the United States, demand for absolutely all items presented in specialized dispensaries increased. In particular, according to information from the Seattle company Costcos, sales of medicinal herbs in February 2020 increased by 12%. Approximately the same trend is observed in all states loyal to medical cannabis.
Despite the fact that the detection of cases of coronavirus infection in the United States caused an increase in the demand for cannabis, many dispensaries can observe empty shelves and no queues. Moreover, many businesses in the cannabis industry have switched to home-based work in connection with several coronavirus deaths among US citizens, in order to maximize the opportunity for their employees to self-isolate themselves and wait until the epidemic ends. Both patients and businesses suffer because of it. Producers are less affected, as demand for cannabis remains high, despite general economic stagnation (both local and global).
Rising demand against the backdrop of a supply failure from Asia is the main trend that has been observed in the cannabis industry with the advent of the coronavirus. Retailers try to motivate people to continue visiting dispensaries by sending notifications about various promotions and sales. In general, the market is relatively stable compared to other niches, despite the fact that the medical cannabis industry in the United States is currently estimated at $ 10 billion and provides just under 250 thousand jobs.
Although there is only minor turbulence today, market operators are confident that they are not yet able to assess the risks that COVID-19 poses to the industry. However, many stores are already preparing for the so-called instant sale, if suddenly the whole country or some states will be quarantined. It is assumed that in this case, many dispensary visitors will want to “stock up” and self-isolate themselves in their homes for quarantine, along with large stocks of marijuana.
Let’s talk about the supply of products for the use of cannabis. Given that most of these products are shipped from Asian markets, including China, there are currently disruptions in logistics. We are talking, first of all, about all kinds of smoking and vape devices, packages, and other important things intended for smoking and vaping marijuana. This forces customers to switch to locally produced products or place pre-orders. In any case, there is a certain deficit in this area, and the problem of the lack of related products will also worsen with the development of the epidemic.
Another niche that is directly related to the cannabis industry is all sorts of events dedicated to medicinal marijuana. We are talking about exhibitions and conferences which were planned for 2020. Naturally, most of them were indefinitely postponed or canceled due to the coronavirus epidemic. This has also significantly slowed down the development of the medical marijuana industry since it is the scientific and industrial international collaboration that makes it possible to develop business intensively and effectively implement innovations. Unfortunately, today there are problems with it.
Eight Capital analyst Graeme Kreindler says that licensed cannabis producers in the US and Canada supply most of the equipment from China. Disruptions in shipments from Asia caused by the coronavirus can significantly harm trade. The expert is confident that the downtime of production facilities that produce vape equipment and other related products will definitely lead to a shortage of goods on the shelves in the United States and around the world. However, according to the expert, large operators in Canada (CGC, CRON, APHA) and the United States (Curaleaf Holdings) have accumulated enough equipment in their warehouses to mitigate the failure in deliveries.
Indirectly, problems caused by the coronavirus can also affect the cannabis production process, since staff on cannabis farms and dispensaries use gloves and masks that are literally swept off the shelves today. Naturally, this creates problems for production processes. However, Graeme Kreindler says that the risk of disruption of logistics chains due to the coronavirus epidemic is minimal at the moment. However, it would also be wrong to underestimate the economic impact of the epidemic.
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