COVID-19 delivers bumpy ride for cannabis sales
While some companies are struggling and selling off assets, will larger cannabis companies continue to thrive?
Some in Colorado’s cannabis industry took a hit as the coronavirus pandemic prompted Gov. Jared Polis to shut down the state, but being considered an essential business has helped others.
Sales of adult-use cannabis products in Colorado reached $108 million in March, down 6% from the same month last year, according to Seattle-based Headset, a data analytics and market intelligence platform for the cannabis industry. April sales totaled $91 million, down 16% compared with last year.
But not all cannabis companies have seen their sales decline. Sales at Denver-based Schwazze on the unofficial cannabis holiday 4/20 were down from the previous year, but they were up for the month compared with April of last year, CEO Justin Dye said.
“It’s really been a shot in the arm to be deemed an essential business,” Dye said. “We’re somewhat recession-proof.”
Brands under the Schwazze umbrella include extraction company Purplebee’s, Mesa Organics dispensaries, Success Nutrients and consultant Medicine Man Technologies. Schwazze was formerly known as Medicine Man Technologies.
While some companies are struggling and selling off assets, Dye predicts that larger cannabis companies with good balance sheets will continue to thrive.
“The industry has been very fragmented,” Dye said. “You’re going to see size and scale starting to matter in terms of being more efficient.”
While cannabis retailers in other states have shifted to the delivery model, only medical marijuana dispensaries are allowed to deliver products to customers. Recreational retailers will be allowed to deliver cannabis products in 2021.
Still, retailers are encouraging customers to order online so their products are ready when they arrive, minimizing time spent in the store.
Manufacturers of cannabis products have had a tough time predicting how much they’ll be able to sell to retailers. Clear Cannabis Inc., master licensor of The Clear Concentrate, saw sales rise nearly 150% from Feb. 15 to March 15, then plunge by the same amount between March and April.
“Retailers were either stocking up, standing pat or selling out,” Clear President Rich Batenberg Jr. said. “When the virus hit and the Denver mayor shut down dispensaries for two hours, there was a lot of panic, misinformation and hoarding going on. It became very difficult to forecast as a manufacturer.”
Clear spread out its shifts and shut down a production line to make sure employees were able to keep the proper 6-foot distance. It has also reduced its workforce because of the decline in sales.
Still, the company is optimistic about its future.
“We have growth year over year,” said Evan Owen, Clear’s vice president of sales and business development. “To stay even with what you did last year is a huge win. That just shows where we would be if this didn’t happen.”