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COVID19 & The Cannabis Industry: May Update

COVID19 & The Cannabis Industry: May Update

The cannabis industry was not immune to the effects of the COVID-19 pandemic. That said, while it was left reeling initially, the marijuana industry and its community are proving, once again, how resilient it truly is. 

With much going on in the market, these are four primary areas where cannabis is proving just how adaptable (and essential) it is. 

Supply Chain Shifts Across the Country

Much of the supply chain took a hit, with the setbacks coming early in the COVID-19 pandemic. The early upset of the market came due to much of the hardware and software used in products are manufactured overseas in China. As factories shutdown across China, so too did the production of certain items necessary to the cannabis industry. This is starting to ease but many businesses are still facing shortages of important items they typically source overseas. In the short-term, that meant a decline in product availability of existing items. Going forward, the rollout of new products will be delayed for some businesses as well. So too will tech in development that brands planned to announce in the coming months. 

The same supply chain effects are felt domestically, where delivery and pickup regulations caused dispensaries and similar businesses to pivot their business model entirely. The on-a-dime shift also saw spikes in online sales, while in-person interactions plummeted as stay-at-home orders took effect.

With such change, speculation now shifts to what the supply chain will look like in a post-coronavirus world. We're optimistic that things are heading the right direction as of this writing.

Lack of Travel Impacts Cannabis Markets

The U.S. now resembles a patchwork of stay-at-home orders across much of the country. As such, all sectors are feeling the effects immensely. That said, travel may impacted most, causing a ripple effect through the market at-large. 

With most travel halted across the world, tourism has been close to nonexistent, harming top destinations. Specific cannabis markets have had to deal with the downturn as well. The cannabis markets seemingly most affected at this time are those in travel destinations, such as Las Vegas. 

A downturn in tourists visiting the city results in a dwindling number of customers at dispensaries. With the prospect of having mostly local shoppers for the first time, Las Vegas is one city that has reportedly rethought its business strategy towards tourists. Such plans could ramp up that much more if the COVID-19 pandemic continues to affect travel and tourism this summer.  

Other legal cannabis markets in the U.S. face a struggling tourist market as well. Colorado is one of many hotspots facing a quieter traveler market today, and an uncertain one tomorrow. 

That said, we believe that a stronger market will return, in time. For now, it’s clear that a COVID-19 has and will impact travel and tourism for some time. Destinations like Colorado, Las Vegas and other markets will need to re-assess strategies to determine the best steps to generate profits and keep the company moving in the right direction. 

Federal Bailout Frustrations

So far, the federal government has indicated that the cannabis industry is on its own when it comes to recovery. The past few weeks of business news have not been kind when it comes to the bailout. Despite a market largely performing well in the past few months despite the crisis, brands in the space can and will need relief like any other legal venture in the U.S. However, the federal prohibition on cannabis, once again, rears its head to deprive the high-performing market with funds companies desperately could use to pay staff and keep operations moving. 

Despite the need, businesses which "indirectly" work with marijuana were told that help was likely not on the way from the federal government. Since the initial news broke, the industry and scores of advocates spoke up to plead their case. Efforts include several industry groups diverting their requests away from Washington, D.C. and instead on the state level where help may arrive.  

THC-based cannabis products were not the only players seeking a reversal of fortune. The hemp industry continues to push federal regulators, namely in the Small Business Administration, to include its farmers in the bailout it oversees. However, the farmers were reportedly rejected, as the SBA claims not to oversee farmers. Instead, the U.S. Department of Agriculture is the usual source for relieving cultivators during times of disaster.    

Cannabis associations and credit unions took up the fight for the industry as the month came to a close. In all, 31 groups ranging from trade associations to financial institutions signed a letter addressed to leaders of Congress pleading for industry relief. 

The fight also continues with lawmakers like Cory Booker vowing to take action as the month closed. 

Cannabis Reform Efforts Pivot All Directions

State reform efforts also faced the effects of the coronavirus

Many experts in the industry forecasted 2020 to be a banner year for cannabis reform. The notion had support as the prospect of medical and adult use laws passing in state legislatures, as well as at the ballot box in November, gathered steam. However, much of those hopes washed away as COVID-19 gripped the nation.

In response, lawmakers shifted attention and assets. In the process, cannabis reform efforts lost support from lawmakers for the moment. At the same time, signature-gathering efforts in states hoping to make their ballot in November became virtually impossible due to social distancing. 

Between the series of reform setbacks, 2020 could be considered a wash for cannabis reform. That is, until looking across the nation. 

While true that states like New York, Missouri, Arkansas and numerous others are now likely going to focus on 2021, hope remains in other states. They include Mississippi, New Jersey and an undetermined number of other that may still have a chance at becoming making the 2020 ballots. 

Hope remains in many, including some lawmakers, across the nation. States like Kansas haven’t given up hope just yet. Even in New York, some lawmakers pledge to push-on despite most writing off the effort this year. 

While difficult at the moment, silver linings exist around the current cannabis space. It will take adapting, and it will take time, but marijuana can prevail over the circumstances. For now, stay safe and take care of yourself. 

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