Economic downturns play a big role in how we treat our bodies and minds, along with our shopping habits as consumers. People have more time and more need for relief and distraction, but less money to do it with. So what does this mean for the post-coronavirus cannabis industry?

The cannabis industry is quite used to uncertainty. But savvy cultivators, processors and retailers can make the best of the unique circumstances during and after the coronavirus crisis and the resulting economic upheaval. People will continue to buy and consume cannabis, they’ll just be doing it in different ways.

Recession Lessons

We can learn a lot from the 2008 recession, which provides the best point of comparison to the cannabis industry’s current situation. The Great Depression’s context was quite different. For one, it started in the midst of alcohol prohibition.

Studies from the recent recession found an overall decrease in alcohol consumption, but an increase in binge drinking. This makes sense—in a downturn, many people have less disposable income, and those in vulnerable populations are more stressed and seeking a means of escape. These points are reiterated by a study in 2009 of the wastewater system in two cities in Northern Italy, which found evidence that use of expensive street drugs (e.g. heroin and cocaine) decreased, while there was a corresponding increase in cheaper options (e.g. cannabis and amphetamines).

During the current crisis, The New York Times examined wine and liquor stores and found that they are still as popular as ever, but people were trending toward cheaper, reliable options —  and as one would expect, delivery sales had increased dramatically.

Overall, we can say that consumption of mind-altering substances is not fully recession-proof, but consumers still show a strong desire for their creature comforts in these times. Price point matters in times of economic uncertainty, and so does product consistency and the ability to physically deliver it to your customers.

There is an important fact to remember when you hear about cannabis being a “recession-proof” industry: “Recession-proof” does not mean “immune to fundamental business flaws.” It just means overall demand is less likely to take the same hit as other industries. Cannabis brands who were unable to thrive before the pandemic are even less likely to be around afterward. You need to not only be competent, but also nimble enough to capitalize on the new normal.

Based on these findings, and the transitions we are seeing in real time, certain factors will determine which cannabis businesses thrive and which ones collapse.

The Post-Coronavirus Cannabis Industry

Cannabis businesses and the rest of the world are adjusting to a new, uncertain economy, while federal legalization lingers on the horizon. Operators can expect large new markets of casual users and dabblers as they figure out how to stay connected with their established customer base.

The digital transition of the cannabis industry is accelerating as consumers shift away from in-person retail experiences. What’s equally important are the types of products available. Standardization of products and non-combustion forms of delivery, from vape pens to various edibles and beverages, will allow for easy entry points for less-experienced consumers.

Cannabis brands are just beginning to take advantage of their own digital assets. However, we have to be ready for a world where large social gatherings will be prohibited or severely limited for a long time, which affects other marketing avenues such as sponsorships and pop-up retail opportunities.

Even as society opens back up, online clubs, virtual networking events and streaming concerts may become commonplace, as people grow accustomed to the convenience of connecting from their living rooms. Large music festivals and other events that are perfect for cannabis sales and marketing, where it’s permitted, may not come back for a while.

That’s a challenge, but not an insurmountable one. Your digital presence is important now—and will only become more vital for the post-coronavirus cannabis industry as more media and sales move online. Think about television: How people watch has changed in recent decades, but the industry as a whole is thriving, led by the leaders of the streaming revolution such as Netflix, Amazon and Disney.

Cannabis brands that work to become the first ones people think of when they look online to buy flower, edibles or oils will be in a similarly prime position.

Cultivating Change

This is also a time when retailers need to strengthen their partnerships with brands and other wholesalers. In these uncertain times, we should expect spikes and drops due to a host of external factors. Supply-chain has proven to be the biggest vulnerability coming out of the crisis. You can’t control the weather, but you can prepare for it. Retailers and brands need to be working closely to determine trends and demand changes. Brands and manufacturers need to be working closely with their suppliers in order to ensure their supply-chain is intact. The biggest failure of brands during this time will not be ensuring a consistent supply.

Surviving is top of mind for companies throughout the value-chain. Cutting costs and increasing margins are the top priority for suppliers.

Cultivators are doing that by rapidly adopting artificial intelligence, from automation for growing plants at scale to using efficient facility design and radio frequency identification (RFID) technology to quickly and remotely identify tagged products. The long-term savings in time and money made these practices popular across the cash-crunched industry before the pandemic. Now, as social-distancing practices become entrenched in the workplace there’s an urgent need to boost efficiencies, further propelling the use of these technologies and best practices.

Making History as Essential Business

Of course, the most notable development of the coronavirus retail era is that the cannabis industry became “essential” business in California and several other states. This was a historic mark in drug policy and cultural mainstreaming (even more so than the buttoned-down Washington Post publishing a pot brownie recipe on 4/20).

Regulations will continue to loosen across America, and cannabis businesses will gradually have more license to expand and promote themselves. Cannabis providers have seen near-constant change over the past decade, and we all hope the biggest positive changes are yet to come.

But while it’s nice to be deemed an essential business, it will be a while before cannabis banking, policy and stringent regulations ease up on a federal level (we hope we’re wrong, but don’t hold your breath.) Don’t let the “essential business” moniker stop you from pushing innovations and brand building forward. Anyone who does will be left behind.

New waves in economics, policy and culture are converging. Some businesses will be bowled over by these waves, but those that can anticipate them will crest with the rising tide.

Make your next move: The experts at Headquarters are experienced in all facets of the world's largest legal cannabis market. We can get your product compliant, marketed and distributed within six months. Drop us a line to learn more.

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