We expect to witness 7 major changes in the cannabis industry post COVID, and in this there will be no going back to pre- COVID.
So brace up!
The global pandemic that started in Wuhan, China is 2019 has been a game changer, both in a positive and negative note depending on how you choose to look at it. It’s a case of the glass half full or half empty here.
These changes are likely to be permanent and there will be no going back to a time when our generation was oblivious of such magnitude of global disruption. If there is one thing that human beings and businesses have learnt this last year is that there are no guarantees in life. We are a generation that is accustomed to unpredictability, and the COVID- 19 pandemic has served to rubber stamp this notion. How does this all effect the cannabis industry?
Background on Cannabis Industry
Here is some background on the cannabis industry that will serve as a starting point to demystify what is likely to happen post the pandemic.
For a long time cannabis was illegal in most parts of the world. Things have changed in the last decade and many countries have warmed up to the idea of legalizing cannabis for medical and recreational purposes. Uruguay was the first country to legalize cannabis and was followed by Portugal and Uruguay. Several US states have legalized marijuana or are in the process of doing the same. The UK seems to be warming up to this idea; there is incentive to act but when they will act remains unclear.
With more nations joining in, the global industry has been growing in leaps and bounds. That’s not to imply that it’s been all smooth sailing. If anything, the industry has been plagued by a myriad of seeming insurmountable setbacks. But even with this, the growth potential is limitless. The value of the global cannabis industry has been placed at a staggering $340 billion. So the industry has been working through the growing pains aka unpredictable laws, competition from the black market, stigma, and stiff taxation among other setbacks to be where it is today. Then corona happened.
So what happens to the cannabis industry after corona?
1. Changes in Consumer Purchasing Behavior
COVID- 19 came with many things, people were forced to stay home and carry out most of their operations virtually. As opposed to walking into cannabis dispensaries to interact with budtenders and make purchases, cannabis consumers now had to make online orders and wait for deliveries at home. Other dispensaries allowed their clients to pick their weed deliveries from the curbside while others opted for drive- thru purchases. This became the new normal and nine months later, it is highly unlikely that people will deviate from the new normal.
Forward thinking cannabis businesses need to anticipate the challenges and setbacks that come with this mode of operation. For example questions such as what does a cannabis dispensary lose when customers cannot interact directly with budtenders should be asked? Then, appropriate solutions need to be crafted and implemented.
2. Cashless Payment
The cannabis industry is one that has been largely unbanked. Traditional banks, not to be blamed, have shied away from dealing with canna- businesses due to the high risks involved. Consequently, the industry has been one that has mostly operated using hard cash exchanges. Then comes COVID and what happens? Cashless payment checks in.
What we are likely to see in the future is businesses and consumers making card payments where this is an option. Decentralized currencies such as bitcoin are also likely to dominate the industry due to obvious reasons such as anonymity and lower fees.
3. Stalled Legalization of Cannabis Across States
Legalization efforts have been greatly hampered across different states in the US. For starters, the pandemic has taken over every conversation and cannabis legalization has been kicked to the curb, at least to some extent. Secondly, with the pandemic imposed social distancing limitations it’s become difficult to conduct pro- cannabis campaigns and gather signatures. One good thing that has come out of this is that cannabis, once stigmatized, has been listed as an essential service in some states. That said, states that had been expected to legalize marijuana this year have not been able to do so due to the pandemic. This dragging of feet is likely to persist into the better part of 2021 until the pandemic is completely resolved. The legalization of recreational marijuana in New York is a case in point.
4. Hoarding of Cannabis
At the beginning of COVID-19 we witnessed hoarding behavior of essentials such as toilet paper, gasoline and even cannabis. This was a statement on how people view cannabis; an essential commodity. Cannabis consumers have gotten used to making bulk purchases, just in case supply runs out. With this realization, it is highly likely that this trend will continue.
5. Industry Contraction
Cannabis dispensaries are having to deal with the effects of a beaten- down economy, thanks to the pandemic. How fast the economy will bounce back is subject to confounding factors. Some sources claim the economic repercussions of the pandemic will be felt for up to 5 years past the pandemic. To what extent this is true is debatable. However, it is clear that the cannabis industry will have to grapple with the effects of diminished purchasing power and lack of investor opportunities long after the pandemic is gone.
6. Real Estate Opportunities
This is a good turn of events as cannabis businesses are likely to have better access to real estate post the pandemic. With many businesses closing down due to the economic crunch cannabis businesses that will stay afloat are likely to have a variety of real estate opportunities to choose from.
7. Disruptions In the Supply-Chain
Having large exporting countries like China shut down will have long term ripple effects on the cannabis industry. The industry relies on overseas factories in China and Asia for hardware that is used in the industry. These countries have cheap labor which helps to keep the prices of these devices low. The disruption is something that will affect the industry for a while.
The pandemic has taught businesses severe business lessons, canna businesses included. The greatest lesson perhaps is that need to plan ahead for dire times. Changing paradigms is the name of the game and businesses should always be prepared for this.
These are the 7 main changes that we expect to see in the cannabis industry in the post COVID period.