Essential or Not, Cannabis Sales Start to Slide During Shutdown. Can They Recover?
April 17, 2020

The preliminary reports were great. Cannabis shops were deemed “essential businesses” in several states, and according to The Motley Fool “[d]uring the first few weeks of [March], cannabis sales were soaring and spiked around the middle of the month as fears heightened that people would be confined to their homes in an effort to fight the coronavirus pandemic.” As March came to a close, however, the good news started to slow down. First, in Massachusetts Governor Baker deemed recreational cannabis shops “non-essential businesses,” which led to a massive decline in sales and litigation that was just resolved yesterday via an order upholding Baker’s decision. Second, cannabis sales slowed dramatically. In California sales went from a peak of up 159% year-over-year to up over less than 25% year-over-year. In Washington sales actually turned negative at one point, and daily Colorado sales were actually down nearly 40% from last year.

California’s numbers are especially concerning given how much hope there was after cannabis shops were deemed essential, and now there are legit questions regarding whether certain companies are going to survive the pandemic. As reported by the Washington Post “the coronavirus crisis represents a make-or-break moment” for the cannabis industry. “There’s no money that’s going to be coming into the sector,” says Nicholas Kovacevich, CEO of KushCo Holdings, a major distributor to marijuana dispensaries. “All of these companies, including us, need to get profitable really quickly or risk running out of money.” The slowing sales, logistical issues required to modify shops to have them deemed safe, and business owners having to pay for extended sick leave for employees who aren’t working because of various new statutory employee safeguards is putting mounting pressure on companies’ bottom lines. Add in that cannabis companies were not eligible to participate in the CARES Act PPP loan program, which we wrote about here, and a concerning picture emerges. Getting profitable is easier said than done. The Motley Fool posits that as unemployment numbers continue to climb “[d]iscretionary expenses could be a key area that consumers cut out of their budgets in the coming weeks…[and r]ecreational marijuana purchases are going to fall in priority when consumers are struggling to pay their rent or mortgage along with other critical bills.”

Not all is doom and gloom, however. Illinois reported $36 million worth of recreational sales in the month of March despite continuing to battle supply shortages. Further, based on the long lines being experienced at dispensaries throughout Illinois in April (and the unofficial April 20 holiday) it is expected April sales figures will be strong.

We will continue to monitor sales figures across the country on our blog.

Visit our COVID-19 Resource Center often for up-to-date information to help you stay informed of the legal issues related to COVID-19.

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