Cannabis companies were cheered at first with the self-quarantine efforts leading to a rush on the dispensaries, but as the seriousness of the virus has grown more, adjustments are taking place. Whether its scaling back revenue projections or switching to curbside delivery, the ever-nimble cannabis executives are jumping into action.
Cannabis companies have always had the feeling that they are in a real life video game with fireballs being thrown at them or unexpected spaces to jump over. The most successful have been able to finish each level to move higher. Covid-19 has become the latest hurdle to overcome.
At first, the virus seemed like something like a silver lining. According to the most recent Headset data, despite Washington being ground-zero for coronavirus cases, sales of adult use cannabis in the state were up 23% on Friday, 14% on Saturday, and 33% on Sunday - over prior week. Headset said this was driven by a modest increase in total baskets - about 6% increase in tickets - and a large increase in average basket.
Average baskets on Sunday were $33.70 before taxes, up 22% over the prior week and 28% compared to baskets in January and February. The increase in average basket size was driven by increases in stock-up baskets with over 21% of baskets being greater than $50 (before taxes) compared to only 16% in the prior week. The state has reported 48 deaths and over 900 patients infected. Restaurants and bars are closed for only takeout, so it is very likely consumers are opting to stock up in case further restrictions are imposed.
Canada Goes Online
As concerns over the transmission of the virus have increased, many dispensaries are now shifting retail strategies to make sure medical patients aren't left to fend for themselves. Canopy Growth Corporation (CGC) made the decision to temporarily close all corporate-owned Tokyo Smoke and Tweed retail locations across Canada, effective at 5 p.m. on Tuesday. Since Canada's legal cannabis market initially began as an online operation with deliveries made through the mail, this is an easier transition.
"We have a responsibility to our employees, their families, and our communities to do our part to 'flatten the curve' by limiting social interactions. For us, that means shifting our focus from retail to e-commerce," said David Klein, CEO, Canopy Growth. "This is a big decision but it was also an easy one to make - our retail teams are public-facing and have been serving an above-average volume of transactions in recent days." The company said that adult consumers within Manitoba and Saskatchewan are able to purchase Canopy Growth products through Tweed and Tokyo Smoke e-commerce platforms, all other provinces and territories will be supported through government-run online retail.
California, Other States Offer Curbside Delivery
San Jose-based dispensary Airfield Supply Co. said that since Thursday, March 12, the dispensary's foot traffic has shot up to some 2,000 customers a day from its normal 1,500 and sales have also increased 25%. When the dispensary announced free delivery via its fleet of Teslas (TSLA) on March 13, delivery sales went up a full 100%.
"I think we could be seeing the cannabis industry's Amazon Prime moment," says Airfield Supply Co.'s Chris Lane. "The rapid shift to online ordering and delivery is having a powerful impact - and this could set the tone for consumer shifts in how we purchase cannabis moving forward."
On Tuesday, Airfield said it will launch a curbside service to help Santa Clara County residents abide by shelter-in-place edicts that prohibit them from leaving their vehicles.
"We are launching a new curbside pick-up option to find convenient, comfortable ways to meet demand," Lane says, adding that the dispensary is voluntarily closing to the public this afternoon to allow staff time to get their own Covid-19 arrangements in order.
Salinas, Calif.-based Grupo Flor is also offering "curbside pick-up" at two of the retail locations they operate. The request was approved by the Bureau of Cannabis Control (BCC) on March 13 for a minimum of 30 days.
In Michigan, the Marijuana Regulatory Agency is allowing home deliveries and curbside pickup with licensed retailers. The MRA stated that it must approve of the delivery procedure, but encourages the use of home delivery when applicable.
"The MRA will make every effort to review, process and approve requests from licensees within 24-48 hours," the MRA said in an advisory bulletin.
The MRA will also temporarily allow home delivery for patients and customers whose residential address is not the same as their state-issued identification card.
Massachusetts dispensaries are also making adjustments. Curaleaf CURL has online ordering for three of its locations. Curaleaf Massachusetts President Patrik Jonsson said, "We are decreasing our in-store occupancy and are asking our customers to kindly wait outside and give priority to our elderly and disabled customers as we remain vigilant and keep ourselves updated with the CDC's recommended safety measures."
Other dispensaries like CommCan have instituted distancing measures like closing every other cash register and placing marks on the floors to keep customers spaced apart. NETA in Brookline, Mass., said it has limited sales to only medical patients as of Monday and they must order ahead.
Cutting Revenue Forecasts, Closing Shop
CV Sciences (CVSI) is the first company to suggest that Covid-19 will affect its next quarter's revenue. The company's revenues were already declining sequentially as a result of increased competition and the loss of two retail channels due to bankruptcy. Then the company guided down for the next quarter placing its forecast revenue in the range of $6 million to $8 million. Chief Financial Officer Joerg Grasser said during the company's conference call, "We have taken the impact of Covid into consideration when we provided our guidance."
Also, while many CBD companies are well represented in the mass merchandise channels, many retail outlets are closing during the Covid-19 crisis. This mean sales are expected to decline not only for CV Sciences, but other companies as well. While stores like CVS (CVS) may remain open, foot traffic is sure to slow as people avoid other shoppers. Natural food and vitamin stores that sell CBD products will likely close for a short period of time as well. The cannabis industry had so many setbacks in 2019 and now it seems the recovery will be pushed to the second half of 2020.
