What ‘deemed essential’ means to the CBD construction market

There are now curbside pickup and delivery options for cannabis, which has been an essential business is some states. Yes, you read that correctly. Cannabis was deemed an essential business. What a long, strange trip it has been, right? Turns out, in some ways, the coronavirus crisis could inspire a revolution of sorts in the legal cannabis industry.

During the lockdown, 33 states across the country were allowed to offer some form of sale and consumption of marijuana. And of those states, more than 20 have designated the cannabis industry as essential during the coronavirus outbreak.

The news came none to soon. According to cannabis industry analytics firm Headset, cannabis sales in the United States hit overdrive in mid-March, with sales growth powering up 64% in the week ended March 16. The increase was the highest spike since early 2019. The numbers went down after consumers replenished their reserves for fear dispensaries might be closed amid the myriad shutdowns. Headset data showed that sales steadied to the “mid- to high-single-digit” range recently.

With the entire global business world placed in an unprecedented situation due to Covid-19, the legal cannabis business landscape continues to have its share of twists and turns. The good news was that the decision to deem cannabis stores as essential likely kept many outlets, and their suppliers and farmers from total disaster. Unlike similar industries—take the deeply hurt restaurant industry, for example—legal cannabis businesses are not recognized by the Federal government and, therefore are “on their own’ to survive the times, i.e., no Paycheck Protection Program (PPP) money. Being deemed essential from a supply chain standpoint likely saved the fledgling industry in most legal states.

During the lockdown, 33 states across the country were allowed to offer some form of sale and consumption of marijuana.

Compounding the confusion, retail stores (dispensaries) have complex and stringent customer access restrictions and security measures to navigate. In the past, medical licenses and legal IDs were required before entering any store. In turn, the use of credit cards is extremely limited or non-existent due to national banking restrictions. So even with the advent and creativity to institute curbside pickup, the logistics and transactions caused significant challenges.

Many states, including Colorado, had not previously legalized home delivery of cannabis. Many are seeking to fast-track legislation to begin that type of licensing for the future. Online ordering was also a thing of dreams for cannabis retailers. Today, that has been approved in conjunction with curbside pickup through emergency orders.

A spokesman for the Denver-based National Cannabis Industry Association said he is eager to see how the industry proves that cannabis businesses can run these types of operations—and do so effectively—under extremely dire circumstances.

And while all of these measures have helped the legal cannabis market make its way in these trying time, there still are plenty of concerns to be addressed. For starters, the industry’s supply chain starts with farming. The heavily labor-intensive and timely planting season is underway, which means social distancing and other pandemic best practices will be put to the test.

In addition, pre-pandemic, investors were getting more realistic about the potential of cannabis stocks. Now, with the industry and economy in flux, many investment opportunities and corporate expansion plans are being put on hold.

Cannabis beyond the pandemic
While it will be interesting to track how the cannabis industry fares in the current and post pandemic landscape, there are some trends starting to take shape. For example, there will be more mainstream CBD companies. Industry consolidation will include more vertically integrated multi-state operators that can withstand the type of market volatility we are experiencing now.

The good news is that smaller cannabis companies are proving resilient. Companies that run tighter ships, i.e., smaller staffs and leaner inventories, have been able to maximize their production efficiencies and maintain inventories.

As the industry continues to mature, cannabis companies will have to pay close attention to economies of scale and automation in manufacturing. Look for more companies to become multi-state operators in order to eliminate redundancy.

With the activity surrounding delivery, drive-thru and curbside pick-up transactions, there will be closer attention paid to in-store experiences, with social distancing procedures taking hold.

As the future of the cannabis industry remains bright, predicting what and how everything plays out will be interesting to watch play out.

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Dan ONeill is the owner of Dan O’Neill LLC, a sales, marketing and business development company focused on customer facing solutions in targeted markets, including cannabis and hemp. He is currently working with New Tropic Ventures in Santa Rosa, California.

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