How Cannabis Businesses Are Weathering COVID-19
Apr 27, 2020 | Save On Cannabis
The COVID-19 coronavirus has turned the business world upside down, and the cannabis industry isn’t immune to the fallout. Although most cannabis-friendly states have deemed marijuana businesses as “essential” and allowed sales to continue, most of these enterprises have had to make significant adjustments to their day-to-day operations. We spoke with cannabis business owners to learn just how the virus has impacted their operations.
New Safety Protocols Are Becoming Mandatory
Social distancing isn’t just for the grocery store. In order to slow the spread of COVID-19, canna-businesses have had to observe CDC guidelines and restructure their daily routine. Some dispensaries have introduced social distancing guidelines for customers and patients. Some are requiring their employees to wear gloves and/or masks. Some are adjusting their hours and even introducing senior-only hours in the morning.
Growers and cultivators have also had to make adjustments. According to Serge Chistov of Honest Marijuana Company in Colorado, “Our delivery and interaction with the outside world has become more curbside, more automated. So we manufacture and pre-package our orders so that we are able to deliver without too much interaction with our customers.”
Chistov is pleased that his sales are up 17% over the same time last year, but he notes that adjustments have been necessary. “We are trying to maintain social distancing, running skeleton shifts to the best of our ability, wearing protective gear…We are organizing our schedule better and controlling what comes in and out of our building, using more alcohol to clean and disinfect areas, changing gloves often.”
Another challenge stems from the fact that cannabis is still largely a cash business. The handling and transfer of germ-infested paper money is a prime concern amid COVID-19, which is why many restaurants and other retail businesses have enacted temporary card-only policies.
In response to the virus and CDC guidelines, some businesses are creating new solutions for cash-free transactions at dispensaries. One of these businesses is Stronghold, a virtual payment platform that works with companies in and outside the cannabis industry. According to Stronghold CEO Tammy Camp, “We are integrating with one of the largest POS companies here in California. Think of it as Stripe for cannabis payments. We are removing cash handling for them…and we have seen a huge uptake in interest from other merchants wanting to do the same.”
According to Camp, the elimination of cash handling is already reaping rewards. “Obviously there has been a huge uptake in purchases over the past month as people are spending more time at home, however with cash removed and online payment being made easier, customers are actually purchasing more as well.”
A Lot of the Business Is Moving Online
As states impose stay-at-home orders and enforce social distancing guidelines, more people are doing their shopping from the comfort of their computers. And it’s not just Amazon and Grubhub that are seeing an uptick in online orders. Dispensaries and other cannabis businesses are noticing the surge as well, and many are capitalizing on the trend by offering digital cannabis coupons and updating their service options.
According to Cris Carillo, co-founder of Allied Payments (a payment processor that works with a number of cannabis businesses), “We have noticed some changes in the last month. Many cannabis and CBD merchants have reached out to us to expand their business from their storefront location to having an e-commerce presence.”
Carillo added that “almost all of our existing merchants are experiencing spikes in online sales during this time. This could be a mix of increased demand with the changes to our social purchasing habits at this time. We will have to wait until after this passes to see how our industry has been changed by these events.”
Carillo isn’t alone in his observation. Xtractor Depot, which specializes in cannabis extraction equipment, has had a similar experience with surging online sales. According to a spokesperson for the company, “Our shipping team has been amazing, coming in early a number of days to make sure our customers were taken care of in a timely manner. As a business that already stocked antiseptics and lab safety equipment, we were uniquely suited to pivot some of our focus towards those products as demand rose. This has enabled us to keep our doors open to the extraction community who rely on us to provide the goods and services they need to keep running.”
Shipping marijuana through the mail is a federal crime, so dispensaries in particular are having to find other ways to process their online sales. Many local businesses offer the option of in-store or curbside pickup, much like casual-dining restaurants. The other option—which has gained tremendous steam during the COVID-19 pandemic—is cannabis delivery. You order your weed online from your local dispensary, and an employee delivers it to your home just like a pizza—and depending on which strain you order, you might soon be craving the pizza as well.
Some states, like Nevada, have even made emergency declarations to allow cannabis delivery specifically because of COVID-19.
The following states allow cannabis delivery for recreational users:
- Colorado (certain municipalities)
In addition, the following states and jurisdictions allow cannabis delivery for medical marijuana patients: *
- New Mexico
- New Jersey
- New York
- North Dakota
- Washington D.C.
Local restrictions and limitations may apply. For example, although Massachusetts is a recreational-use state, deliveries are limited to medical marijuana patients. Recreational sales in Massachusetts have been suspended during the COVID-19 lockdown.
* Please note that this information is changing quickly as more states consider emergency declarations to accommodate customers and patients during the COVID-19 outbreak. We’ll continue to update the information as it becomes available, but please let us know if we miss anything.
Businesses in Certain Regions Are Struggling
While the cannabis industry remains in a stronger position overall than many other markets, sacrifices are being made. In some cases, a business’s ability to weather the storm is contingent on its geography.
California, for instance, is going strong thanks to the state’s industry-friendly COVID-19 guidelines. Andrew Dorsett, General Manager of SparqOne (a fast-growing cannabis distribution company in California), noted that his business has actually been able to hire extra employees due to the added demand. “We have added four drivers, two admin personnel, and two entirely new facilities since the start of the safer-at-home orders in California.” Dorsett further noted that “we saw an approximate 60% increase of a two-week average during the initial safer-at-home orders. That has stabilized to about 25% above average, week over week.
But other states aren’t faring as well. For instance, the recreational marijuana industry in Massachusetts has been shut down indefInitely—leaving a lot of businesses hanging in limbo.
Nevada is another state that’s in a somewhat precarious position. Governor Steve Sisolak ordered the closing of all dispensary storefronts, limiting sales to deliveries only. This has affected all canna-businesses, but cultivators are being hit especially hard. According to Priscilla Vilchis, CEO of Premium Produce, “Our orders have decreased, and we’ve had to make the unfortunate decision to furlough 85 percent of our staff…Not all the dispensaries offered delivery, and they’ve had to create a system which in return has delayed sales. As a cultivation business, dispensaries are our number one buyers, so orders have decreased.”
According to Vilchis, there’s another reason why Nevada businesses in particular are struggling. “Las Vegas is a tourist town. Tourists are our main source of recreational sales, and right now it’s not a safe time for people to come to our city.”
As the first Latina in Nevada and California to receive licenses to grow and distribute marijuana, Vilchis knows what it means to face challenges head-on. She is committed to ensuring that her business remains strong as the pandemic runs its course, but her biggest concern right now is the well-being of her active and furloughed employees. “I have to be the rock for my team and remain optimistic. I’m in constant contact with them, and making sure they are okay.”
Demand Is Fluctuating, But the Outlook Is Strong
Despite the challenges, most business owners we spoke with were optimistic. Andrew Dorsett at SparqOne summed it up this way:
“It has been a roller coaster, but we’ve done very well. We’ve seen spikes in demand, so it’s not so much of a steady roll but more so periodic spikes. Every two weeks or so, we see tremendous increases, then plateaus. Although things are uncertain, business is overall going very well. That can be seen across the board and within the industry. The businesses that are doing well are well-prepared.”
Dorsett also offered an inspiring outlook for the future. “A large proportion of the cannabis consumer base doesn’t see cannabis as a luxury, but rather a medicine. Because of this, we haven’t seen tremendous negative changes or impact on our business. This can actually be a positive moment for cannabis, as this is an example of the shift from cannabis being illegal and stigmatized to it being essential and having medicinal value.”
With any luck, this period may just prove to be a positive turning point for the industry.
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