Impact of the COVID-19 Pandemic on the Cannabis Industry
For the cannabis industry, the consequences of the pandemic are a mixed bag. Despite the skyrocketing demand and growing investment, legalization is still stagnating. Here is an overview of the key effects so far.
Main Drivers of Growth
Covid-19 has taken an emotional toll on the North American population. Anxiety and boredom explain the increased interest in marijuana and CBD. Accessibility of recreational products (e-stores now let consumers try Delta 8 flower) and growing knowledge of medical use are also contributing to the trend. As millions of people were stuck at home for so long, it is no wonder that the demand has soared.
Facts and Figures
In 2020, sales of cannabis and related products in the USA and Canada exploded. States like Oregon recorded a 30% annual growth. The northern neighbor saw half of its users purchase more cannabis during the first wave of the pandemic.
Instead of thwarting the boom of the green leaf, this pandemic is projected to cause a tripling of the industry in the next 5 years. According to Statista, cannabis consumers around the world are expected to spend over $63 billion by 2024 while California is leading the charge in terms of sales in the US.
Key Developments Since 2020
Without fail, cannabis is one of the fastest growing industries in the world. The US and Canada are the key markets due to their size and growing legalization. The opportunity to order cannabis and CBD online is another driver of growth. Here is how the situation unfolded:
- When the pandemic hit, it seemed that the industry would be decimated, as brick-and-mortar dispensaries were forced to close and cannabis stocks plunged.
- Subsequently, proactive regulators deemed the industry an essential business, sales peaked and providers started innovating, which caused investments to rebound quickly.
- E-commerce, digital payments, production and farming have evolved.
- Online sales have allowed the industry to ride the COVID-19 e-commerce wave.
- Investment has been booming thanks to the activity of retail investors and low interest rates.
High-profile partnerships are on the rise due to the positive outlook.
Negative Consequences of the Pandemic
Yet, one area of the industry has not benefited from the crisis — foreign direct investment (FDI). In 2019, the global cannabis market set new records for venture capital and mergers and acquisitions. Greenfield FDI boomed, with the US, Canada, China, Latin America, and parts of Europe attracting more investment than ever.
Bans on international travel have wound down the party, as it is now difficult to develop new operations abroad. Both Greenfield FDA and M&As have taken a hit.
Finally, the pandemic has slowed down legalization efforts in the US, which has the largest cannabis industry. On the federal level, cannabis is still illegal. The government has not shown much interest in introducing changes soon, even though the majority of the population support legalization.