520 Cannabis

Coronavirus Contraction


As Arizona officially goes into lockdown, cannabis dispensaries continue to operate, having found a rhythm amidst the outbreak. Arizona Dispensaries Association Executive Director Sam Richard said the industry is "SNAFU," for those familiar with the military acronym.

However, the long-term outlook on the industry might not be so peachy according to BDS Analytics, a cannabis market analysis firm that has been holding weekly updates on the industry's national projection.

In Arizona, lockdown has revealed a rigorous supply chain backing the industry, as any dispensary closures seem to have been temporary due to an initial demand shock following news of the outbreak.

Legal states saw increases in demand in early March: once following the declaration of the pandemic, and again following any statewide shelter-in-place orders.

When available, delivery and pickup orders have become more common as a result of both dispensary policy and consumer preference to ward off spread of the virus.

Since then, dispensaries have had relatively fewer customers on average.

While those customers are spending more per visit to the dispensary for now, changes in consumer behavior during the outbreak may have a lasting effect on the industry.

Under the lockdown restrictions, the cannabis industry has experienced the same recoiling effect as other industries, similar to behavior during recessions.

Cannabis as a product enjoys some benefits such as medical uses and indulgence, like alcohol—sales of which also increase during a recession.

However, consumers tend to have fulltime jobs, make less than $60k per year and live in populated areas, which adds up to potentially less spending on cannabis overall.

As people start to rein in spending, cannabis users may start buying cheaper products and limit their exploration of other products. Due to heavy social use, fewer people may become users as states remain in lockdown, slowing down growth of the industry as a whole.

This intuitive concern, along with a general retraction in the economy, is reflected in decreases to cannabis stock prices.

Publicly traded dispensary brands like Harvest, Curaleaf and MedMen all saw decreases more than 45 percent, with Harvest taking the biggest hit at 71 percent over the first half of March.

Public grow companies like Canopy Growth Corp., Aurora Industries and Tilray Inc. also saw decreases of more than a third.

Most stocks have recovered at least some of that value, with MedMen and Canopy having fared the best.

The long-term outlook appears to be a general slow down in the industry.

Consumers will maintain access to their favorite products but might not have the spare cash to buy as much or as high-quality of products as they might otherwise.

Dispensaries and cultivators, on the other hand, will likely weather the pandemic without too regressing too much even if they've experienced a setback in future plans.

For now, Arizonans can be grateful that the fledging industry has developed to a point where shelves stay stocked amid global virus outbreaks and patients can rely on cannabis to help them through current challenges and those to come.

About The Author

Comments (0)

Add a comment

Add a Comment