|Though Cannabis major Aphria Inc. was forced to pull their full-year guidance due to uncertainty from the COVID-19 pandemic, the firm told investors that cannabis sales jumped 65% in its most recent quarter. Though that kind of increase is unlikely to be repeated in their next quarterly report, considering dispensaries and other cannabis retailers will be temporarily closing across Canada (Aphria’s top market), the US cannabis market remains largely open for business.
The Cannabis industry has recently been deemed an “essential” business by 24 state governments amidst nationwide lockdowns and shelter in place orders that have shut and crippled major sectors of the American economy.
According to a forecast by BDS Analytics, legal cannabis sales in America were on track to grow by 31% to $16.3 billion in 2020. In February, legal cannabis sales were up 17% from the year before. While it goes without saying that Coronavirus will definitely impact these numbers, nobody can be certain which way they’re going to go. In the same way MRP noted that many are trying to remedy hours of quarantine-induced boredom with booze, it also appears consumers across the US are lighting up to pass the time.
Cowen data indicates that Coronavirus may actually be having a positive effect on demand. Weekly sales in March topped $134 million in California, Washington, Nevada, and Colorado, a 17% increase from the weekly average in 2019. In the second half of March, the average purchase also increased by 47%.
Some 55% of people who stocked up on products in March said they did so as a way to stay calm during the pandemic, according to an online survey by American Marijuana, a website that publishes guides and reviews of CBD products. Another 23% said they were worried about product shortages, while 34% said they had been using more marijuana since the outbreak started.
Average store revenue, through March, is up anywhere from 52% to 130% compared with January across more than 1,300 stores using cannabis e-commerce platform Jane Technologies. Marijuana sales tracker Flowhub reported that sales from March 16-22 were up 50% from the same period last year in key US markets.
A number of US cannabis CEOs told CNBC that the chances for federal marijuana legalization will actually increase in the wake of the coronavirus pandemic, considering the tax revenue cannabis products could generate would help the federal and state governments cover the huge spending increases they’ve incurred to counter the virus.
Curaleaf Executive Chairman Boris Jordan noted that “One of the programs by the federal government right after the Great Depression was to focus on tax revenue generation… They lifted prohibition on alcohol and therefore started to tax it — and it became a major revenue generator for both the federal and the local governments around the country.” Jordan said believes cannabis would be “a significant revenue generator” for the government in the same way.
According to Cowen estimates, the US cannabis market is worth approximately $56 billion in 2020 but about 90% of sales are still going untaxed in the illicit market.
Indeed, some legislators have already hinted at federal reform of marijuana regulations as part of the recovery from Coronavirus.
Almost three dozen members of the U.S. House of Representatives, headlined by the bipartisan Congressional Cannabis Caucus, signed a letter to congressional leaders urging that cannabis companies be included in future federal relief packages aimed at stimulating the economy during the COVID-19 outbreak.
The letter describes the marijuana industry as “a major contributor to the U.S. economy” and noted that the industry employs roughly 240,000 Americans and created nearly $2 billion in state and local tax revenue in 2019 alone.
House Rep. Ed Perlmutter (D-CO), brought up a revised version of the Secure and Fair Enforcement (SAFE) Banking Act, which MRP highlighted last year, during a Democratic caucus meeting earlier this month. That bill, which would allow banks to legally handle the proceeds from a state-legal cannabis business by prohibiting certain federal banking regulators from taking adverse actions against banks and credit unions that provide services to “cannabis-related legitimate businesses”, cleared the House along largely bipartisan lines last year, and has been the subject of ongoing negotiations since it advanced to the Senate Banking Committee.
Perlmutter said the bill now has the support of top congressional leadership, including House Speaker Nancy Pelosi (D-CA) and he’s working to include provisions that allow marijuana businesses to access banking services in an upcoming COVID-19 stimulus package. While businesses marketing cannabis products have thus far been excluded from the $350 billion in initial Small Business Administration (SBA) lending, it is becoming increasingly likely that loosened regulations could be upcoming as part of some Coronavirus-related legislation.
On top of the 11 states (plus the District of Columbia) that have already legalized cannabis for recreational use, three more states – New Jersey, Arizona, and South Dakota – are expected to have adult-use legalization on the November ballot. Three others – New York, Connecticut and Rhode island – have bills pending that could legalize adult-use cannabis through their legislatures. 2 out of every 3 Americans now support legalization, according to data from the American Civil Liberties Union.
While the US waits on some kind of government intervention to help legal cannabis enterprise weather the Coronavirus storm, the industry is actually making some strides in adapting to the digital marketplace.
Between February and March, Jane Technologies also reported that the number of new users ordering online had increased 142%. E-commerce in the cannabis space has been boosted by the need to have product delivered or be prepared for curbside pickup in many states due to social distancing protocols.
Though all sectors of the economy continue to be impacted by Coronavirus and its continuing fallout, there are certainly some silver linings to be found in industries like cannabis. Investors can gain exposure to publicly-traded cannabis firms via the ETFMG Alternative Harvest ETF (MJ).