Ask Our Experts: The Global Market Despite the COVID-19 Pandemic

 

Q: With warnings of at least a 1% reduction in the 2020 global economy due to the coronavirus pandemic, what are the prospects for the legal cannabis industry?

By New Frontier Data

A: “As difficult as conditions are right now, cannabis knows where it needs to focus,” summarized Tim Seymour, host of CNBC’s “Fast Money” as he participated in New Frontier Data’s Global Cannabis Town Hall on April 2.

Through seven segments of the daylong online conference (including each Global Cannabis Industry Socioeconomic Status in 2020, the Impact of Coronavirus on the Cannabis Market, Risks & Opportunities, and respective regional updates for each North America, Europe, Latin America, the Middle East, and Asia-Pacific), stakeholders and generally interested viewers could glean what New Frontier Data’s Founder and CEO Giadha Aguirre de Carcer described as “real-time visibility into what is happening across interconnected regional cannabis markets and the continued development of an industry that is expected to stand strong amidst the current socioeconomic global crisis.”

Rest assured, as moderator and former FOX News White House correspondent Carl Cameron noted, “there is a tremendous amount that could happen,” and “it’s going to take a while.”

The impact of the COVID-19 pandemic will depend on:

• The scale of supply-chain disruptions,
• Consumers’ access to products due to shelter-in-place orders,
• Impacts of the economic recession on spending,
• The status of cannabis businesses as essential or nonessential businesses,
• Investors’ willingness to fund expansion and increase capacity, and
• The length of disruptions in travel for key canna-tourism markets (e.g., Nevada, California, and Massachusetts).

Those being noted, New Frontier Data’s Chief Knowledge Officer John Kagia offered several takeaways as explored in deep detail through the Equio online platform for proprietary data and analytics. They include:

• Uncertainty throughout 2020 as the impacts and duration of the COVID-19 pandemic reveal themselves.
• A recession-resistant legal cannabis industry as strong consumer demand persists despite social sheltering in place.
• The evolution of consumer preferences in light of social distancing and vigilance against contagion, including potential shifts from combustible to noncombustible products fueled by concerns over pulmonary health.
• Unprecedented levels of government-funded stimulus funding, even as federal prohibition may disqualify plant-touching businesses from qualifying for the emergency relief.
• The motivation of governments worldwide to seek and promote high-growth industries with well-established demand, e.g., legal cannabis as way to capture the large existing spending in illicit markets.
• The motivation of global investors to seek economic safe haven in strong-growth markets.
• The motivation of companies with transparent books, streamlined operations, and impetus toward profitability to seek secure funding or acquisition.

“Amid broader global disruptions,” Kagia reminded, “the legal cannabis industry remains uniquely positioned for growth, even amidst this storm” whether among the United States, or the international markets.  Some compelling dynamics-cum-opportunities in cannabis include:

• Support for medical cannabis arising as a therapeutic and cost-cutting alternative for acutely strained healthcare systems;
• States’ legitimizing the industry by deeming cannabis businesses as essential, likely spurring calls for legalization in markets where cannabis remains prohibited;
• Cannabis’ continuing to be a fixed expenditure for most regular consumers, meaning that they will continue to purchase cannabis even as their economic fortunes may change;
• Investors’ seeking safe haven/strong outlook markets, stable demand, and government legitimization, thus identifying the industry as a rare bright spot in an otherwise contracting economy;
• China’s moving quickly to restart business operations, possibly minimizing supply-chain disruptions for key operational inputs including vape supplies and product packaging;
• Cannabis demand being hyper-local, travel disruptions should only minimally disrupt demand among the most non-cannatourism-dependent markets;
• Broadly increasing capture of illicit market consumers seeking tested/quality products should accelerate the legal market’s capture of the share of total demand; and
• Given that most consumers (52%) consume alone, stay-at-home orders will expectedly change minimally where and when cannabis is already consumed.