The pandemic is likely to influence cannabis long after the outbreak is under control. Looking ahead, we investigate the possible lasting effects that COVID-19 will have on the cannabis industry.
In mid-March state governors and health officials began to order Americans to stay at home due to the threat of COVID-19. Since that time, industries on every level have been forced to make adjustments to either safely carry on business or temporarily suspend activity.
No other industry has transitioned like the cannabis industry. During political turmoil and national confusion, the American people made it known that cannabis was not only a leisure substance but an essential item in a global crisis. This, along with other industry shifts, have many wondering what life for the cannabis industry will look like after the pandemic is over.
As some state leaders have loosened restrictions, however sustainable, there is a collective sense of a light at the end of the tunnel. In this article, the cannabis industry’s future will be examined as we enter a new stage of cannabis access and policy, post-coronavirus.
CANNABIS ACCESS: Marijuana Acknowledged as “Essential”
While marijuana remains outlawed by the federal government, it has been deemed as “essential” by more than 20 states. Andrew DeAngelo, co-founder of dispensary chain Harborside, told Forbes that even with uncertain subsequent effects from COVID-19, the cannabis industry’s role in times of crisis is clear.
“The impacts will be significant. What I do know is that people need more weed in a crisis, not less. Someone will get it to them, one way or another,” DeAngelo said.
Interim regulations were handed down by government officials in legal cannabis states on how cannabis dispensaries were to safely continue business activity. Due to the coronavirus outbreak, 24 states including, Florida, Connecticut, and New Mexico have adjusted purchase practices for cannabis dispensaries allowing for curbside pick up. Nevada closed all storefront business until May 1 and moved to delivery-only statewide.
Karen O’Keefe, the director of state policies for Marijuana Policy Project (MPP), noted to NPR that the shift in legal marijuana access is representative of how perception has quickly changed in terms of historical context.
“Marijuana has been illegal and demonized for decades,” O’Keefe told NPR. “In a lot of states, it went from being illegal to essential in a short amount of time.”
This seemingly quick shift of illegal to essential has the potential to impact the cannabis industry in significant ways, perhaps permanently changing the way Americans access and consider marijuana. Let’s take a look at how cannabis access could look after COVID-19.
Medical Marijuana Access After COVID-19
According to a tally provided by MPP, each state has responded to the pandemic in a unique way with different interim rules on purchasing cannabis and obtaining medical marijuana cards.
Many states are not allowing initial appointments for medical marijuana doctor recommendations in this critical time. States including Ohio, Delaware, and Minnesota have adopted orders allowing patients to consult with a physician via telehealth to access a medical marijuana recommendation.
The trend of conducting business via the internet has taken a strong footing as a way to maintain operations while adhering to social distancing. In recent years, telehealth has become a mainstay for basic doctor appointments and other health-related scenarios.
However, using it for medical cannabis recommendations it is a new concept. Most qualifying conditions for access to a medical marijuana card require a physical evaluation and diagnosis by a specialist. However, in times of national emergency, access to initial evaluations or refills on recommendations may take on this new platform to health.
Illegal Market Cannabis Post COVID-19
The potential impact of COVID-19 on illegal market sales may cause real long-term damage, whereas legalization efforts have only been able to make a dent. Currently, safety and sanitation regulations are being highly enforced, opening space for the legal cannabis market to take away business from illegal market sales.
Even in the age of legalization, the illegal marijuana market has held its own with relative ease. According to a Los Angeles Times report, a 2019 year-end financial audit projected roughly $8.7 billion was spent on illegal marijuana products in California, compared to $3.1 billion for marijuana sold by legal businesses.
Similar to marijuana sales, illicit cannabis growing rates overshadow licensed growers. A 2019 report from New Frontier Data suggests that more than 72 percent of the cannabis cultivated in the country is done so illegally.
Cannabis consumers who may have previously shopped illegal market cannabis to avoid high tax rates are now facing a choice of purchasing from a legitimate business with strict lab testing and safety protocols, or illegitimate sources with no proof that the cannabis product is safe.
In some states, licensed marijuana growers have already made adjustments to labor protocols to meet the safety challenges caused by the pandemic, such as staggering shifts and using digital solutions when possible.
In states with no legal access or limited legal cannabis access, concerns on how the illegal market could play into the future spread of viruses may give lawmakers more reason to consider broader cannabis reform. COVID-19 has become an equalizer, regardless of political affiliation, where the health of citizens is a priority.
Cannabis Delivery is Here to Stay
Perhaps the most evident impact on the cannabis industry since reports spread of COVID-19 in the U.S. is the increase of legal marijuana deliveries. Pre-pandemic, few states offered legal delivery for both recreational and medical cannabis.
In response to the pandemic, many states temporarily lifted those regulations under emergency rules. As a result, a significant surge in delivery rates took place as consumers in mass stock-piled and stayed at home.
Eaze, a California marijuana delivery service saw a 34 percent increase in first-time customers signing up for its service, as well as a rise in the size of product orders. Another California delivery service, Driven Deliveries, reported a nearly 20 percent increase in transactions and a 10 percent rise in order value since coronavirus was discovered in the state.
With this new convenience in purchasing cannabis being experienced by such a large group of consumers, it’s likely many will not go back to in-store shopping. Sam Ludwig, president of the Oakland-based Aster Farms, told Forbes that he expects delivery to become a mainstay for dispensaries.
“We believe brick and mortar retailers will be adding delivery as an option for their customers. This is a big deal because they will have to apply for an additional cannabis license, which is not an easy feat,” Ludwig said.
According to a report from Adweek, online shopping sales are expected to continue to climb post-coronavirus. Online marketplace Jane Technologies reported 85,000 new registered users, representing a 142 percent boost in online orders in March alone.
The company’s CEO Socrates Rosenfeld told Adweek that online cannabis shopping can provide benefits for both the consumer and the business.
“As a consumer, you don’t have to wait in line anymore,” Rosenfeld said. “And as a small business, you can digitize the experience, offer that convenience and curation, and understand your consumer on a more meaningful level.”
CANNABIS POLICY: Marijuana Law After COVID-19
The confusion of individual state discrepancies during this pandemic has some advocates calling for federal oversight to provide clarity. Debbie Churgai of Americans for Safe Access told NPR the inconsistencies can be detrimental for those seeking marijuana for medical reasons.
“This epidemic and the way the cannabis businesses are being run really highlights the need for federal oversight,” Churgai said.
In the wake of the coronavirus pandemic, will the federal government rise to the occasion and legalize cannabis nationwide? It seems that the federal government has been too busy focusing on the health crisis to find much time to consider cannabis.
Even without the challenges brought on by the pandemic, many experts suggested federal legalization would not be happening in the immediate future. A recent research study forecasted a strong likelihood of federal marijuana legalization “by the end of 2022.”
As the presidential election heats back up, candidates will most likely come out in endorsement for some cannabis criminal reform. Neither of the leading 2020 candidates, President Donald Trump or former Vice President Joe Biden, has come out in support of full legalization.
The chance of full marijuana legalization by an act of Congress is slim, given the Republican-controlled U.S. Senate has yet to approve the SAFE Banking Act. However, efforts are currently in the works to address the banking issue in the next COVID-19 federal relief package.
With all that said, federal lawmakers have to be tempted by the potential tax revenue and job creation that would come with legalizing marijuana nationwide, particularly as the budget deficit grows and a staggering 3-plus million people have applied for unemployment benefits.
State Marijuana Legalization Efforts After COVID-19
To date, cannabis is legal for recreational use by adults in 11 states, plus the District of Columbia, and legal for medical use in 33 states. Prior to the coronavirus, the odds of those numbers going up by the end of 2020 were positive.
However, the coronavirus pandemic has brought unprecedented challenges, including 20 state and federal-level cannabis reform movements that have been paused allowing lawmakers to focus instead on relief efforts. In addition to stalled reform endeavors, shelter-in-place orders and social distancing requirements have made the collection of signatures for ballot initiatives difficult.
The potential for these cannabis reform movements to return in full force, with even more enthusiasm given the validation of cannabis as essential, is promising. While cannabis advocates will focus on the health and wellness aspect of cannabis, states that projected large economic payouts from marijuana tax revenues may also seek those funds quickly to replenish state dollars spent to cover COVID-19 related costs.
CANNABIS PRODUCTS: Cannabis-Infused Products and Edibles After Covid_19
When it comes to cannabis products, one genre has come into view in an unexpected way since the pandemic swept the country. New data from New Frontier Data show that marijuana edibles and CBD edibles, as well as other cannabis-infused products, hit mainstream America as an alternative to inhaling cannabis products during the coronavirus.
“As alternative ways to consume cannabis beyond combustibles gain popularity during the current coronavirus (COVID-19) crisis, not surprisingly we are seeing a spike in consumption of edibles and other infused products,” said New Frontier Data Founder & CEO Giadha Aguirre de Carcer in a press release. “We anticipate demand for innovative non-combustible ways to consume cannabis … to continue to grow.”
The new report from New Frontier Data projects that 17 percent of U.S. spending on legal cannabis in 2020 will be on cannabis-infused products like edibles, sodas, and topicals. Marijuana flower remains at the top as far as product favorites, but researchers expect the demand for non-combustible products, including lotions and beverages, to increase over the next year.\
New Frontier Data forecasts sales of cannabis-infused products will grow to $3 billion this year. Infused cannabis products now represent 14 percent of sales and stand firm as the third most popular cannabis product type in the U.S. behind flower and vapable products.
Similar findings were reported recently in Adweek. Highlighting a new study from the research firm Headset, the report proclaims that, “Edibles stole the show.” This seems evident in delivery rates from the Eaze, showing a 28 percent jump in the infused category in the state of California alone. Market analysis of Colorado in late March showed a 70 percent growth in infusion sales, according to the Adweek report.
“We thought it would take two to five years before infused beverages really caught on,” Cynthia Salarizadeh, founder and president of House of Saka, a premium infused wine brand told Adweek. “But it’s happening right now. They’re taking up at least 25% of dispensary space. And we’ll just see this accelerate.”
The rise in cannabis-infused product sales is not limited to THC-containing cannabis products alone, but is being experienced in CBD markets as well. Like cannabis-infused products, CBD products come in many forms including CBD-infused products such as chewy edibles and body lotions.
A new report from Data Bridge Market Research suggests the CBD oil market is forecasted to experience a growth rate of nearly 32 percent from 2020 to 2027. Hemp Industry Daily projects that retail hemp-derived CBD sales will continue to surge, from $1.2 billion in 2019 to $10.3 billion by 2024, representing a five-year compound annual growth rate of 54 percent.
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Author: E.I. Hillin