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How the Coronavirus Outbreak Could Impact the Cannabis Industry

March 12, 2020 09:59 am ET
How the Coronavirus Outbreak Could Impact the Cannabis Industry

COVID-19 is the coronavirus disease that has been taking its’ toll on many individuals, countries, and businesses across the globe. It is an infectious disease that causes severe acute respiratory syndrome and it is closely related to the SARS virus. The cannabis industry is likely to be part of the many other global industries that are feeling the adverse effects of the coronavirus outbreak. The COVID-19 outbreak began in China towards the end of the 2019 year. It has since seen to the lock-down of export and hardware giant. 

Most of the inexpensive cannabis hardware is made in China and its’ lockdown has meant restricted access, which will inevitably cause some degree of a fallout in the cannabis industry. The virus is already spreading quickly and many wonder to what extent this will influence the cannabis industry. 

Industry experts have predicted that the first major impact of the virus on the industry will be the temporary shutdown of Chinese manufacturing plants. Although this is undesired, it also leaves room for companies to step up and into the industry within their own countries

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Predictions on How COVID-19 Will Cause Issues:

  • There will be shortages in available hardware, especially those manufactured in China. This hardware includes but is not limited to cartridges and batteries. 
  • We can also expect shortages in available product packaging as labels and containers. 
  • Specialty equipment such as testing labs and extraction facilities are also likely to in shortage. 
  • Raw hemp material being exported from China to America and other parts of the world are also likely to have shortcomings. 
  • The industry will suffer a loss in investors due to the financial ripple effects upending stock markets. 
  • It forces companies to look at their supply chain and seek out alternative options. These may end up being more expensive. Companies have always been looking for the cheapest option, which has always been China. 
  • In America, the voting taking place on whether cannabis should be reclassified as medication has already been put on hold. 

Pat Lehox, Chief Executive officer at Feather Co., states that it will all come down to the relationship that the respective companies have with their manufacturers.  If you don’t have a direct relationship with that manufacturer, the company is more likely to experience even longer delays due to the coronavirus. 

The Coronavirus Could Impact the Supply Chain

Although some businesses may not feel the effects at all or are yet to feel it, the interconnectedness of the supply chain (almost always going back to China) will impact the industry in all of its areas.  Some companies such as Curaleaf Holdings Inc. and Organigram Holdings Inc. where fortunate enough to have stocked up before the Chinese New Year. Their supply should be able to keep them going for months with minimum impact from the coronavirus. Although, they could also run low on stock soon as the demand begins to increase. Unfortunately for the cannabis industry, many companies were not able to build up stock, similar to Curaleaf Holdings Inc., due to less liquid funding for supply. 

The smaller companies are likely to feel the biggest impact than those big brands, but in the end, all companies will have been hurt by the virus in one way or another. Luckily for us, cannabis has to be made in the country its’ sold in, meaning that there is no predicted shortfall in plant supply. 

It’s not all bad. As stated above, the cap left by China leaves an opportunity for local companies to step-up and imprint their footprints on the cannabis industry, filling the gap. The only thing with this silver lining is that domestic manufacturers will have to step up and offer the equipment and hardware at the most competitive prices possible.

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