COVID-19 and Your Cannabis Business

Despite the inherent uncertainty that exists in the cannabis industry, we understand that even more uncertainty is brought about through COVID-19. The impacts on the cannabis industry to date have been as varied as the nuances of the industry. Citrin Cooperman is watching the impacts closely and we’ve noted the following situations:

1. Dispensary sales are jumping to exponential levels prior to the shuttering of dispensary operations due to curfews and social distancing measures. Delivery services, where allowed, are continuing to thrive.
   
   
2. Containment measures are being taken at cultivation and processing facilities and certain state regulators have issued guidance to these companies regarding safety measures to be taken at these companies.
   
   
3. Supply chain disruptions in vaping cartridges and lighting fixtures are occurring in scenarios where main suppliers are located overseas in China.
   
   
4. Trade shows, conventions, and investor forums are being canceled or postponed. As this industry is very much a face-to-face industry, expect a slowdown overall in the industry.
   
   
5. The volatility of the stock market is further drying up outside investment into the cannabis industry. Where previous investors may have been more bullish about investing in cannabis, many are holding back on investments and waiting on the sidelines to witness the impact on the capital markets.
   
   
6. The decline in travel and tourism will hit the retail component of the cannabis industry harder in some states such as Colorado and Nevada, which have been known for cannabis tourism.
   
   
7. Delays and changes in operations of state regulators in the cannabis industry may result in longer delays in the issuance of licenses, requiring more capital for a longer road.
   
   
8. With the impact on China of COVID-19, the U.S. hemp industry is poised to have a stronger year, provided that regulators are able to issue licenses on a timely basis and that weather disruptions are few.

It’s important to be prepared for the impacts on your business, from cash flow to supply chain interruptions to alternative delivery methods. While it’s too soon to tell what the impact will be on the overall producer prices or retail prices, now is the time to run as lean of a ship as possible.

With each of these situations arises an opportunity to prepare your business for these disruptions. Those in the cannabis industry understand tough times, and although these are unprecedented tough times, we’re here to help you through them, as always.