The swift spread of the Coronavirus outbreak and fear around the severity of COVID-19 symptoms have shaken nearly every American industry to its core. Perhaps one of the most uniquely impacted industries is our own state legal cannabis markets.
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Thankfully, US cannabis businesses are being considered essential service providers in every legal cannabis state, and have remained open to serve the public (with the notable exception of recreational marijuana retailers in Massachusetts, where only medical dispensaries are currently allowed to remain operational).
The public is certainly supporting cannabis businesses in return, as many dispensaries are seeing up to 20-25% increases in their average sales since the pandemic declaration - we’ll discuss some of the many possible reasons for this customer behavior later in this article.
While it’s good news to those of us in cannabis that we’re permitted to remain open for the time being, there are still many uncertainties that could prove challenging in the near future. If general businesses are shut down for long enough that recession-like consumer spending patterns emerge, will cannabis prove to be truly “recession-proof” as some have speculated it might?
Will the many small and medium-sized cannabis businesses survive without the federal financial aid we are already being told won’t be available to us? How can cannabis businesses support their workers during the COVID-19 outbreak? And how will customer stocking behavior change, both short and long-term, in these uncertain times?
We’ll discuss these questions and more here, and we want to hear your thoughts if your business has been impacted by the coronavirus - we’d love to quote you in this article, which we’ll be updating as the situation around COVID-19 unfolds.
The Coronavirus Pandemic has Dramatically Affected Cannabis Sales
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If you work in (or have visited) a dispensary in the last week or so, you’re likely not surprised to hear that cannabis sales data analysts are reporting huge spikes in cannabis product sales since the pandemic declaration & national emergency orders in mid March. Many retailers, especially in heavily populated urban centers, are reporting sales about as high as 4/20 - usually the busiest sales week of the year for dispensaries.
These cannabis sales are exhibiting what’s called a “pantry stocking” effect - the average basket size for cannabis shoppers, both total dollar amount spent and average item price, have increased significantly as consumers stock up on the items they know they like to ensure they don’t run out during times of self-quarantine.
Shoppers may also fear that dispensaries might be ordered to close in the near future if strict lockdowns go into effect, so they are buying more at once to avoid frequent trips to the dispensary, and helping with social distancing as a collateral effect.
Sales data shows that most cannabis users typically consume at home and alone to begin with, so it is likely that those who occasionally consume cannabis will consume even more when they are confined at home for long periods. Sales trends also suggests that cannabis consumers are more likely to increase their consumption rate during the pandemic due to a sense of “pantry loading”, a phenomenon that also occurs in food consumption - because the consumable is available on hand in large supply, consumers do not feel a sense of scarcity around it and are likely to increase their standard consumption rate up to 20-30%!
We are also seeing many dispensaries move to online ordering and delivery services in response to the coronavirus outbreak - in fact, Nevada dispensaries are now ordered to operate under delivery-only conditions to reduce the spread of the virus in social gathering spaces.
Data analysts have suggested that delivery & online ordering reduce the strain on dispensaries teams that may be understaffed by giving them additional time to prepare orders for customers under increased sanitary procedures, as well as encouraging both social distancing and self-isolation recommendations from regulatory bodies. The rising popularity of these services suggests that consumers are eager to use the tools at their disposal to comply with health safety guidelines.
Consumer buying behavior toward different cannabis product types has also seen some dramatic shifts since the pandemic declaration:
Cannabis flower sales (especially of high CBD flower) have risen the most dramatically. More sales have been including flower in their basket, and more customers than ever are buying in ounce quantities over eighths and quarters - we’ve seen a 103% increase over average ounce sales since the pandemic, according to Headset data. This makes sense, as cannabis flower is one of the most cost-effective and easily stocked forms of consumable marijuana. Interestingly, pre-roll sales seem to have declined slightly, as more consumers seem to be looking for larger quantities of cannabis altogether to get the most bang for their buck as their financial situations become uncertain.
Cannabis edible sale increases are trending second highest - this could be due to edibles’ long duration of effects, which make them better suited for long stretches of time at home or by yourself without may sequential consumptions required to maintain desired effects. Edibles are also a popular consumption method for relaxation, anxiety relief, and sleep support - all of which are vital to many Americans’ mental health during times of crisis & uncertainty.
So far, there seems to be no significant impact on vape cartridges or extract product sales related to the pandemic - are consumers still weary about the impact of vaping on their lungs, which they’re looking to protect in light of the respiratory symptoms of COVID-19? Are vape cartridges the primary choice for consumption on-the-go, which will be reduced as more consumers shelter in place? Or are these simply not seen as essential cannabis products to have available to the majority of cannabis buyers? The cause is likely some combination of these and other factors.
How Dispensaries Can Support Workers & Customers During the COVID-19 Pandemic
If you’re a dispensary manager or cannabis business owner, you’re likely prioritizing procedures that will help ensure the safety of your team members who are still able to report to work, while also supporting your employees who may need to use time off to care for family or protect their own compromised health during the pandemic.
You’re also probably looking for ways to keep the dispensary or business up and running during these rapidly changing business conditions - such as the new need to offer online ordering, pick-up, and delivery of orders to consumers who are protecting their own health, or how you can maintain business operations without a full staff at your disposal. There’s also the concern about the future of small and medium-sized cannabis businesses that cannot afford too many hits to overhead costs without risking the health of the business.
While there is no guaranteed roadmap for success during such unprecedented situations, there are some good suggestions to follow to ensure that both your internal team and your customers feel as safe, considered, and supported as possible through these high-anxiety periods.
Be honest and vulnerable with dispensary/business staff - it’s incredibly important that you lay out the business needs with your employees, and how you can support them if needed - whether this means offering paid vacation/sick time if your business is financially able to do so, or requiring temporary layoffs of some employees to ensure that they can access unemployment benefits to supplement their income if your business is not able to subsidize paid time off. There will likely be hard conversations in many cases, but being upfront, honest, and transparent with your team will make things easier for all involved in both the short and long term.
Re-tool business structure to support online ordering & delivery - not only does this encourage social distancing for consumers and staff, it gives an understaffed team more time to prepare orders and inspires more trust among consumers who are looking for ways to limit their exposure to the virus. Consider dividing your workforce into delivery drivers, order fulfillment teams, back of house operations, etc. for a short time to better establish work flows around these temporary new business norms.
Communicate clearly and frequently - keep your team updated on the situation as it develops with frequent check-in meetings and one-on-one discussions to ensure that team morale is protected and all individual needs are being addressed as thoroughly as possible. Be sure to communicate any changes to business hours, service policies, online or delivery ordering procedures, or any other important information customers should know on your website and social media channels, so that consumers know what to expect no matter how they find you.
We expand on these tips and other strategies cannabis companies can use to weather the storm of the coronavirus outbreak in our recent podcast episode with Brock Binder, an Oregon cannabis entrepreneur managing several businesses in multiple cannabis industry verticals.
Listen to the episode below!
What will COVID-19’s Long Term Impact on the Cannabis Industry be?
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The massive upheaval that the COVID-19 pandemic has caused in the American economy has left us with some tough questions about where our country stands on worker’s rights, access to health care, and the distribution of governmental benefits among individuals and corporate entities. These topics have always been hot button issues in the realm of cannabis, and the spotlight of coronavirus has only intensified discussion around many persistent flaws in the legal cannabis industry that must be resolved if we are to have economic stability in the long run.
In keeping with our discussion of the impact on cannabis sales, one of the most concerning issues for cannabis business owners is how life will continue as the pandemic progresses. Will continued business closures and the potential of reduced consumer activity move our economy close to recession, or even depression? If so, will cannabis’s many recreational and medical uses prove it to be a truly recession-proof product as many in the industry believe, or will we get to a point where sales begin to decline rapidly in our industry as well?
Would that lead to the forced closure of small and medium-sized cannabis business running on very tight margins as it is, upsetting the market dynamics between craft and corporate interests in the already turbulent legal states? These crystal ball questions are very difficult to predict, but we’ll continue to update our podcast & this blog with sales trends and regulatory updates as the situation evolves, so be sure to subscribe to Periodic effects & follow us on social media to stay in the loop as we learn more.
One incredibly important side effect of the COVID-19 pandemic’s impact on cannabis is increased calls for social and economic justice among the general public. Now more than ever, we see vocal support for the necessity of cannabis legalization & access for all Americans. There’s been additional support for prisoners incarcerated on previous cannabis charges now that access to cannabis is widely deemed “Essential” rather than criminal. In fact, could this “essential” designation from trusted governing bodies even encourage those who haven't used cannabis before to try it for the first time?
After the pandemic subsides, it would not be surprising to see a renewed push for legalization in those states that currently lack legal cannabis programs, as well as even greater support for cannabis as a medicine & safe recreational aid, and calls for social equity for those with cannabis-related criminal charges.
Finally, the economic impacts of the pandemic are highlighting the operational injustices that cannabis businesses must deal with from federal agencies - we are expected to comply with federal orders to provide sick leave to our employees, which is an undisputable necessity but also an undeniably large business cost for businesses already operating under tight margins in times of crisis. Yet we are not eligible for stimulus package financial aid, small business loans, or other federal resources meant to offset these emergency costs to businesses, even though legal cannabis businesses generate many millions of dollars in state tax revenue annually.
This cannabis tax money will be all the more valuable in the months after the coronavirus pandemic, as the states attempt to repair the damage done to other areas of their economy with tax dollars accrued from businesses that were able to operate through the crisis. Will those states without cannabis tax revenue look at the legal states flush with cannabis tax dollars after the crisis with envy and a pang of regret?
The New York Cannabis Growers and Processors Association certainly thinks so, as they believe that cannabis tax dollars will be just as essential to “dampening the impact” of the economic downturns caused by coronavirus as the plant itself will prove in easing the anxieties of the public through the crisis.
Only time will tell the myriad ways that the COVID-19 outbreak will impact our already volatile and ever-changing industry. If there was ever a scrappy group of business owners ready to adapt to the batch of challenges this will throw our way, it’s definitely us making our way in the cannabis industry!
Our Host and Founder/Owner of Periodic edibles, Wayne Schwind, discusses some of these “crystal ball” questions and what we’re doing internally to prepare for the uncertainty of the future of COVID-19 in our recent Periodic Business podcast episode - listen here:
Final Thoughts
If you’re a cannabis business owner in a legal market state, consider checking out Headset’s blog post for daily updates on the COVID-19 pandemic and how it’s affecting cannabis sales trends state by state.
There you’ll find in-depth analyses on average basket size, trending cannabis products that people are stocking up on, and how state level cannabis businesses & regulators are responding to the evolving situation for cannabis consumers.
We’ll be updating this blog periodically as new information emerges about Coronavirus and its impact on cannabis sales, as well as asking our weekly podcast interview guests how the coronavirus is impacting their cannabis businesses.
*All sales data summarized from recent reports published by BDS Analytics and Headset