THE PANDEMIC HAS brought the cannabis industry a strange mix of outcomes—things that were to be expected alongside surprises both good and bad. Now, as a vaccine rolls out, few know what to expect in 2021 and beyond.
It wasn't surprising cannabis sales took off after stay-at-home orders were issued last spring as the Covid-19 pandemic took hold in the United States, just as it wasn't surprising that sales dipped a month or so later.
First, consumers stocked up out of fear that cannabis shops would not be exempted from the orders, and they wouldn't have access to weed. Then, when the pot industry was deemed "essential" and allowed to keep operating, sales fell as consumers worked their way through their surpluses.
What is perhaps surprising is that after sales spiked again, they stayed high and are still lofty to this day, according to just about every survey of pot markets around the country, including California's. Most shops "saw a significant bump in April," Bruce Barcott wrote in Leafly a couple of weeks ago, "and then the bump became a plateau."
According to Leafly's analysis of state tax and revenue data, pot sales rose 67 percent last year, counting both medical and adult-use cannabis purchases. Nationwide, pot merchants tallied $17.9 billion in revenue, $7.2 billion more than in 2019. Other surveys show similar results.
Obviously, we'd all be a lot better off without Covid, or if the pandemic had been taken seriously and competently managed by the federal government from the start. But given how bleak things were looking for the pot business in 2019, and the fears that 2020 might be even worse, it's hard to conclude anything other than that, on balance, the pandemic has been good for pot businesses.
Part of the increase in sales is due to the slew of new buyers entering the legal market after various states approved adult-use or medical cannabis. But it appears most of the increase is because existing consumers are simply buying more weed—a lot more, according to Leafly, which concluded in a recent report that the "main driver" of the increase was existing consumers boosting their average purchases by between 25 and 40 percent.
The reasons for the sales spike are obvious: people are stuck at home, with few entertainment options outside of streaming video and doom-scrolling on Twitter, and they're stressed out. A pandemic is pretty much the perfect scenario for pot consumption.
The question now on everyone's pot-covered lips is whether sales will continue at their lofty levels.
It seems likely that they will do so for the duration of the stay-at-home orders, which means the boon will last at least several more months. It's hard to predict what will happen after that.
Two major factors will determine how the next year or two will shape up for the still-nascent pot business.
One is legislation: if the federal government legalizes weed or at least passes laws like the proposed SAFE Banking Act, that will be good for business. Additionally, if state governments lower taxes and ease regulations, more consumers will be drawn away from their local pot dealer and toward the legal market. Most pot consumers in California still buy from the illicit market because legal weed is so expensive, and also because huge swaths of the state are effectively dry, with local governments refusing to allow retail shops.
The other factor is investment. Despite 2020's increase in sales, investment in the pot industry essentially froze due to both the pandemic and to the investment bubble that burst in the latter part of 2019. Many major cannabis stocks (most of them traded on Canadian exchanges) endured swoon-inducing losses by the end of 2019.
So, while there was a fair amount of business consolidation in 2020, not all that much fresh capital was deployed for new businesses or expansions, leaving the industry in a holding pattern.
However, there are some indications that investors are ready to start writing checks, with venture capitalists beginning to assemble new funds dedicated to weed. That's not surprising, given that 2020 has proved cannabis to be—like liquor—recession-proof.
It's possible that 2021, or maybe 2022, will turn out to be the turning point for weed that everyone has anticipated since states started legalizing nearly a decade ago. But only if a lot of things go right.