While the world is currently being gripped by the novel coronavirus pandemic, the economy is struggling. However, the cannabis sector is virtually recession-proof. Many U.S. States and Canada have deemed that dispensaries/licensed producers may stay open as “essential businesses.” Cannabis delivery companies such as Driven (OTC: DRVD) and Sava are seeing a surge in orders. Other aspects of the sector including hemp production, the supply chain, and ancillary businesses are hanging in there as well.
Dr. Stuart Titus, CEO of Medical Marijuana, Inc., (OTC:MJNA), the first publicly-traded hemp CBD company in the U.S., clarifies the shift in the industry due to the COVID-19 crisis.
“Given the uncertainties of the future,” Dr. Titus said, “cannabis is emerging as an ‘essential industry’ with many medical cannabis patients relying on a piecemeal supply chain for access to remedies that have been doctor prescribed.” The CEO went on to say “as this supply chain may show disruptions in patients receiving medication – the essential nature of the cannabis market emerges. We believe that this may actually have an effect upon lawmakers to actually consolidate cannabis legislation to keep people employed and further legitimize this industry.”
Can History Teach Us Anything About Cannabis, Coronavirus, and the Economy?
The Great Depression ended with President Roosevelt (FDR) running on a platform to legalize and end the Prohibition of Alcohol. Once elected, President Roosevelt was able to get US states to vote for a Constitutional Referendum to end Prohibition of Alcohol. This was done in part to bring more business to restaurants and legitimize a formerly illegal industry – which also brought new jobs to American workers in Depression-era times. Although no one was talking about ‘medical alcohol,’ it was legalized with 75% of the US States voting in favor of the Constitutional Referendum.
“This same scenario could occur in the cannabis industry given the current outlook for the US and world economies,” concludes Dr. Titus. “Cannabis legalization will create private-sector jobs and legitimize an emerging but quasi-legal industry while providing medicine and essential services to those in need. Add to that the ‘medical’ need for people to access doctor prescribed remedies as well as the benefits for ‘social isolation’ – we are looking at a new scenario for the legalization of cannabis.”
Bruce Perlowin, CEO of multistate operator (MSO) Hemp, Inc.(OTC: HEMP), supports Dr. Titus’ conclusions.
“Stocks for most industries and commodities have taken a hit amidst this pandemic. It’s something we all have to be understanding of and wise about,” Perlowin says. “However, I’m optimistic. The fact that cannabis retailers have been deemed as ‘essential businesses’ to remain operational as we all quarantine, the long lines these ‘essential businesses’ incur and the huge spike in the purchases of THC and hemp-derived CBD products are all a testament to how critically important the industry is to health and wellness. In terms of life after this pandemic, it is likely that the post-virus recovery will be a green one, rooted here at home. This makes for a great opportunity for US hemp farmers and the hemp industry to come together and support rehabilitating our economy and country.”
Additional pot pundits predict that cannabis retailers are probably going to benefit the most because of where they are situated in the supply chain. However, if dispensaries are not careful and don’t project their inventory needs accurately, they’re going to end up with oversupply if the demand spike retracts once stay at home orders are rescinded.
Cannabis and CBD: Recession-Proof Markets During the Coronavirus Pandemic?
Whether cannabis is purchased in-person, in a dispensary, or home-delivered, the cannabis industry so far appears to be relatively recession-proof.
“In the industry, we know cannabis is recession-proof and this past Monday being the highest sales day in the history of legal markets – including any 4/20 – was no surprise to any of us,” says Jamie Pearson, CEO of North American edibles producer Bhang.
Pearson claims that edibles represented “the largest segment of growth based on March 19th data.” However, according to data analytics company Headset, “the future may be in non-combustible products, such as vape pens and edibles. Although it is too soon to tell.”
Edibles indeed saw the biggest shift in sales, up from 11% to 14% of the market – a 27% increase in market share in only 4 weeks. Pearson suspects (as would behoove the CEO of an edibles company) that people want to consume cannabis in ways that don’t involve their lungs.
Pearson also believes that, “just like we watched the market recover from the crash in 2008 and from the great depression, eventually, the cycle will play itself out. The people who are invested in cannabis will reap the rewards sooner.”