Health and SafetyInternationalNewsRetailCOVID-19 could be a boon for cannabis retail

While the pandemic exasperates the strain on producers, there are signs people are stockpiling weed along with their towers of toilet paper
Nick Laba Nick LabaMarch 13, 20206 min

Equipped with a year’s supply of toilet paper, consumers with a rekindled love of the indoors could present an opportunity for cannabis retailers — especially those with online stores and delivery options.

With global market stability teetering on the lips of the former host of NBC’s The Apprentice, there are signs of people adding weed to their social distancing stockpiles as they prepare to ride out the novel coronavirus pandemic.

People out hoarding groceries and sanitary products might also be picking up the 30 gram limit on the way home, says Brock University associate business professor Michael Armstrong.

In California, where COVID-19 cases are climbing, there are reports of people stockpiling cannabis as they would other non-perishable items.

Analysts have pointed out that cannabis companies will likely face increasing strain in the near future, and those with sturdy cash positions — like Canopy Growth Corp. (TSE: WEED), Cronos Group Inc. (TSE: CRON) and Aphria Inc. (TSE: APHA) — are likely to fair better than others like The Green Organic Dutchman Holdings Ltd. (TSE: TGOD), that are counting down the days before reserves run out.

Read more: TGOD posts $128M write-down in quarterly report

However, other major concerns surrounding limited hardware supply from China for vaporization devices might only be an issue in the short-term, according to Armstrong.

“China’s actually one of the countries that’s got its epidemic under control now. So, as far as I understand they’re starting to re-open their factories,” he said.

But while big cannabis producers face big uncertainty, weed retail might not struggle as much as other sectors.

In some countries where the virus has hit, such as South Korea, people have continued to do basic shopping.

And unsurprisingly, Armstrong said he expects online sales to increase.

“If there are delivery services available, I think there’s going to be an increase in demand for that in provinces where individual entrepreneurs can do that — as I understand, Saskatchewan and Manitoba private retailers do online sales,” he said. “If they don’t already have delivery I think this is a good time to have it.”

COVID-19 could be a boon for cannabis retail
Fire & Flower has over 40 stores across Canada. Press photo

Prominent retail chains like Fire & Flower Cannabis Holdings Corp. (TSE: FAF) offer online sales for in-store pick-up and home delivery.

Ontario currently has delivery from the Ontario Cannabis Store. Armstrong said it would be a good time to add more delivery options, same day service and the like, as a way of compensating for what could be less in-store traffic.

I think we’re going to see more people switch to online in general, he says, as Armstrong recently received an email from his online grocery service notifying customers of an increase in demand.

On the other hand, Ontario’s fresh legions of retail licencees might find it difficult to break into the market with Canada’s cannabis advertising restrictions and the unlikelihood of early foot traffic.

“I don’t think you’re going to have a big crowd on opening day,” Armstrong said.

Top image via Cova Software

 

nick@mugglehead.com

@nick_laba

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