Retail Sales Growth Vertically Integrated Operators

Cannabis and Coronavirus: How American Cannabis Companies Are Weathering The Pandemic

Cannabis profit margins

Top Publicly Traded Cannabis Companies Profit Margins By EBITDA

 

“We had our busiest day of the year and broke our record for highest sales ever in a single day when the mayor declared a lock down”
– Cannabis Franchisor (buy a cannabis franchise here)

It was only recently that the entire American cannabis industry was facing a profound crossroads. One direction followed the same path that the majority of industries have walked along – the path of uncertainty, layoffs, and overall decline. However, the cannabis industry found itself looking down the unbeaten path – one that held the promise of a brighter future.

 

Against all the odds, the cannabis industry in America has been dubbed “essential,” and with that announcement, cannabis companies are booming rather than busting. Read along to understand how American cannabis companies are weathering the pandemic brought on by the novel Coronavirus. 

 

Why is The Cannabis Industry Reacting Differently Than Other Industries?

Ancillary Products Sales in US Dollars

Source: BDS Analytics | Ancillary Products & Services Sales 2020E

 

The question on the lips of any investor, business owner, or entrepreneur is: why is the cannabis industry increasing in value while so many businesses in other sectors are sinking like a rock? To answer this question, we’ll need to take a look at the global situation to get your bearings in order.

 

Once Coronavirus, also known as COVID-19, began its merciless march across the globe, it became apparent that nearly every industry would suffer. The travel and hospitality industries were the first to feel the effects of Coronavirus as demand cratered and travel restrictions increased.

 

The domino effect continued across the board as mandatory lockdowns began, which brought the global economy to a near stand-still. Currently, states within the US have imposed their own stay-at-home orders, virtually locking down 75-million individuals across a handful of states.

 

Restaurants that aren’t equipped for take-out have shuttered their doors, along with all other “non-essential” businesses. The only establishments that are currently open for business are those that are deemed “essential,” which means grocery stores,  pharmacies, delivery services, hospitals, law enforcement agencies, utilities, and, you guessed it – cannabis dispensaries.

States that allow recreational or medical cannabis have unanimously agreed that cannabis is beneficial for those who need it and rely on its therapeutic properties. This fact has suddenly skyrocketed the demand for legal cannabis in the United States.

Currently, cannabis dispensaries are primarily pick-up or delivery only; however, they are witnessing a demand that’s on another level entirely. Cannabis supplies are dwindling rapidly, and cannabis cultivators are working around the clock to produce more maijuana products. In other words, amid economic chaos, American cannabis companies are marching on.

 

Cannabis sales are touching new highs as customers across the US and Canada stockpile weed to prepare for long spells of isolation because of the coronavirus pandemic.
– New York Post

But What About The Numbers?

As they say, the numbers never lie. The number before the stock markets took a nosedive showed American Cannabis companies as well into the green. American cannabis companies, such as Trulieve, Green Thumb Industries, Cresco, Planet 13, Curaleaf, Medicine Man Technologies, and more, posted significant profit margin increases.

Cannabis-EBITDA-Margin-2020E-(Profit-Margins)-United-States

As you can see, the only American cannabis company that was in the negative regarding profit margins was MedMen Enterprises. However, this slump was locked in well before the outbreak of the Coronavirus reached the United States.

Furthermore, it’s not just companies that work directly with cannabis production, but also ancillary services that are part of the overall cannabis industry are experiencing a boost as well. Scotts Miracle-Gro, a trusted soil provider, has shown enormous growth in the first quarter of 2020, with a 23% increase in sales. 

So far, first-quarter reports are showing rapid growth for American cannabis companies. Now that millions of individuals are experiencing mandatory stay-at-home orders, the number of cannabis purchases is set to increase – as is seen in the upcoming graph.

Cannabis Industry Growth Rate 2020E US Focused Vertically Integrated Operators

As you can see, American cannabis companies are facing increased sales, some of which are over 400%. 

In a surreal turn-of-events, cannabis shelves are being wiped clean as shut-ins are stocking up their reserves. In an age where basic necessities include food, face masks, hand sanitizer, cannabis, Netflix accounts, and an abundance of toilet paper  – cannabis companies are witnessing unprecedented demand. 

To put these figures in perspective, American cannabis sales accelerated at an unprecedented rate, beginning March 12. Uncoincidentally, March 12th was the same day that COVID-19 was declared a global pandemic, a term that implied a profound change in the American way of life. 

A few days later, multiple states began declaring “shelter-in-place” lockdowns, which meant that only essential business was allowed. Within a week of the global pandemic announcement from the WHO, cannabis sales across the US rose 33% from the previous week according to BDS Analytics

 

Why Are American Cannabis Companies Doing Better Than The Canadian Cannabis Industry?

in another turn-of-events, American cannabis companies are outperforming Canadian cannabis companies by a wide margin. Although Canada has been the leader in the global cannabis industry – they are lagging behind significantly in profit margins.

Cannabis-EBITDA-Margins-2020E-(Profit-Margins)-Canada.jpg

As it shows on the graph, Canadian cannabis companies are not poised for a bountiful 2020. Although there are standout Canadian cannabis companies, such as WeedMD, Village Farms International, Organigram Holdings, and Aphria – the overall picture looks bleak. 

Although these figures were posted before the outbreak of Coronavirus in the United States and Canada, many Canadian companies have a long way to dig themselves out of low-profit margins.

Alternatively, American cannabis companies were already booming, and the novel Coronavirus was the straw that broke the camel’s back. Now that state governors are declaring cannabis products on the same level as groceries and pharmaceuticals, consumers are rushing to stock up on cannabis.

Is Now The Time To Start A Cannabis Company?

The novel Coronavirus has taken out entire industries and increased the jobless rate to levels unseen in decades. For most, the idea of starting a business or buying a business would be off the table entirely until a clear direction is plotted. 

However, the cannabis industry is working against the trend. Instead of laying off workers, American cannabis companies need more help to make sure products flow to customers in need.

Although it would be unthinkable to begin a business venture in these tumultuous times, starting a cannabis company can be incredibly lucrative. There are two primary reasons why starting a cannabis brand in the current climate is a bright idea. 

To this day, cannabis has been viewed as an alternative substance, a fringe commodity that’s only used to get high. However, the unprecedented revelation that cannabis is a necessity, especially in the face of a global pandemic, clearly shows a significant use-case. 

This use-case is incredibly valuable, and Americans will not forget that cannabis helped them through these stressful days. Furthermore, this brings cannabis further into the mainstream spotlight, thus adding to an overall awareness of its benefits. This new cannabis trend will only drive acceptance higher, which is already at ~70% approval in legal cannabis states.

Second, positioning your cannabis company now will pay dividends in the near future as more states continue to legalize recreational or medical cannabis. Ultimately, the goal is cannabis legalization on the national level; however, this may or may not occur within the next two years. 

Nearly every aspect of the cannabis industry is booming. Cannabis delivery sales are experiencing significant growth, retail cannabis stores are witnessing bumper-crop sales, and manufacturers are scrambling to keep up. There’s no better time than now to invest in a cannabis company due to marijuana’s multifaceted and multi-purposed use-case.

It’s clear that the American cannabis industry is poised for substantial growth as it’s passed a monumental test during the Coronavirus outbreak. 

Introduce Yourself: Name, Company, Goals

Add Listing
Menu