In states across America where cannabis is legal, dispensaries and pot boutiques have been deemed essential during the COVID-19 pandemic.
It’s a decision that may have baffled those who don’t partake but it made perfect sense, from a public health perspective.
With hospitals filling up with coronavirus patients, it’s not difficult to imagine that they would be totally overwhelmed if they had to admit people who were going through detox, for lack of access to alcohol or marijuana.
Not to mention, many people were able to manage their COVID-induced anxiety thanks to access to cannabis.
In fact, it’s the essential service designation of cannabis businesses during COVID-19 lockdown that has ensured that many of them have been able to stay afloat.
Of course, the way business is being undertaken day to day has changed a lot, but the businesses who were able to pivot and work with the protocols have done well, and in some cases, have even seen business go up.
Despite the extra costs involved in managing all the safety protocols for retail, as well as dealing with manufacturing and importation issues, cannabis businesses in legal states have managed quite well.
In fact, the pandemic has brought more people to the market than ever before.
While the typical cannabis consumer is still invariably young and male, there are more consumers from other age groups who are looking at cannabis as a reasonable way to manage stress and anxiety in these trying times.
How has the cannabis industry adapted?
Given the already growth oriented nature of the industry, it’s not really surprising that much of it has been able to take protocols and changes in stride, pivoting to meet the demands of the consumer.
New protocols to ensure the safety of business staff and their customers have been the order of the day.
While it’s changed how people conduct business in this industry—as it has in most every industry and market—the businesses and their teams have risen to meet the challenge.
While pre-COVID-19 processes saw people going to dispensaries and shops to consult with staff and make selections, online ordering and curbside pick up are now the new normal.
With the ability to serve the customer in a retail setting, providing advice and education where needed and directing the buyer to an appropriate selection, ending from one day to the next as lockdowns were initiated, it was a blessing that cannabis businesses are, by their very nature, innovative.
Moving information to online environments and enabling chat technology to work with consumers changed the way the conversations were happening, but at least they were still occurring. With these changes came a whole new brand of customer.
Who is buying cannabis during COVID-19?
While there isn’t specific data at the ready yet, the mere fact of how a person could shop for cannabis changing to an online system made it more accessible.
Blend an increasing curiosity about the medicinal benefits of marijuana and the fact that a lot more people were experiencing stress and anxiety, with the ability to research and shop from home without being overwhelmed by the idea of walking into a dispensary?
That is a recipe for widening the range of consumers in what was previously a pretty niche market.
It also made it easier for knowledgeable, pre-existing customers to keep up with what was new or now available to them without having to leave the comfort of home.
That consumer can make their selections quickly and easily, checking out and going to pick up their purchase.
While there have been some alterations to how cannabis is bought and sold during the pandemic, the industry as a whole is not vastly changed from what it was pre-COVID.
If anything, it’s a little more open, allowing people who might not have tried cannabis to consider its benefits.
In fact, as this way of doing business becomes more entrenched, it’s possible that it will also be permanent, which can only benefit the end consumer, providing the widest possible variety of ways to shop for cannabis.
Disruptions to Supply
With most suppliers to North American cannabis retailers being overseas, the one flaw in the business plan for many was revealed by the pandemic.
Extra restrictions on the importing of goods generally, and in the cannabis industry specifically, have forced many retailers to look to local growers and operations to find a steady and uninterrupted supply.
This could all be to the benefit of the industry as a whole, in the long run.
A shift to local producers and manufacturers of cannabis based products would definitely be of benefit to the retailer, the consumer and the industry, as a whole.
It would minimize the possibility of future supply chain issues, while at the same time improving quality control and creating larger markets for businesses to grow on the manufacturing side.
Businesses at all points in the spectrum, from growth to retail store, will be able to innovate and offer new and interesting products to their customers.
Is it time to invest in cannabis?
A startup is a startup, whether it’s marijuana based or children’s clothing.
Business owners need to know their numbers, margins, growth potentials and markets, as well as competition, to be able to entice investors.
The most important hurdle around investment in the cannabis industry is the fact that the regulation of cannabis cultivation, production of products and retailing, varies tremendously even among legal states.
Even if the appeal of a business is manifest, there are also some investment groups that will shy away from a cannabis based business on “moral” grounds.
While this is probably more the case in states where legalization is relatively new and cannabis use hasn’t been normalized, it can happen anywhere.
It’s important to remember however that there were many who had similar reservations about industries like adult entertainment and those businesses aren’t going flat any time soon!
Some investors are reluctant to get involved if they don’t have any experience or knowledge of the industry themselves.
There are a few unknowns if you don’t know where to find the data to support investment decisions in this rather niche domain.
But what’s interesting is that, as with any growth industry, there are always investors at the forefront who are willing to take a chance on something that is new and untapped in the general marketplace.
As cannabis becomes more and more mainstream, there will be more investors who want to get involved.
Beyond investing, there is also the consideration of how the business will operate within the context of traditional funding and banking resources.
Banks will happily do business with a cannabis business by allowing them to open accounts, for example.
But funding a loan for a cannabis business is a different proposition entirely.
Because banks are federally regulated, accepting the profits of a cannabis business as proof of financial solidity to warrant the granting of a loan or line of credit, might not be workable.
At least not until marijuana is legalized at the federal level, and not just state by state.
For the startup that wants to open a cannabis business, or the investor who is working with a cannabis based business, it’s probably best to avoid traditional banking structures and toward investment groups that are either specialists in the cannabis industry, or are interested in growth industries where there are still regulatory hurdles.
As with any new innovation or change, it’s these growth industries that carry some risk, but also provide the greatest rewards.
Where is the cannabis industry going in the future?
Innovation and growth will come as normalization of cannabis use continues to increase and legalization, within every state and at the federal level, becomes all but certain.
Consumers are the ultimate arbiters of what’s going to be successful and what isn’t.
It’s through consumer pressure that many changes happen in industries of all kinds. Even within the relatively young cannabis industry, concerns over the ability to consume cannabis in a clean way—without inhaling smoke, to the detriment of individual health—has pushed some within the industry to innovate and begin creating more ways to consume cannabis.
Edibles, drinkables, as well as the technological manipulation of the chemical compounds in cannabis to create other products, such as topical creams are all projects that are well underway.
For businesses that are interested in manufacturing clean consumption cannabis goods, the technology exists to create new delivery methods that will appeal to the end consumer.
Luckily, the adaptability of the industry in a general sense now is what will also propel it forward in the future.
Federal legalization of cannabis would solve many problems but it isn’t the be all and end all for the industry.
As states begin to realize that marijuana consumption is being normalized, they will also begin to realize that legalizing, regulating and benefiting from taxation of it, will be beneficial to them too.
Ultimately, the elimination of barriers to the industry and the creation of new opportunities for cannabis based businesses, is closer than many might think.
