Cannabis Industry Changing As Covid-19 Shifts Global Focus To National Health

THE local corner shop has never been so busy, with stock squeezed into every conceivable corner a former struggling business has been transformed and is now hiring staff.

Deemed essential, it serves an increasing number of housebound customers as the UK enter its fifth week of lockdown.

Over in the North America legal pot shops have also been deemed ‘essential’ in a move which has locked their legitimacy into an increasingly cannabis-friendly global psyche.

In North America, legal ‘pot shops’ have been deemed ‘essential’.
Photo by Alex Person on Unsplash

Demand has spiked as cannabis – like the other ‘sinners’; alcohol and tobacco – are snapped-up by anxious, trussed-up consumers.

On the black-market, the price of illegal cannabis has doubled as empty streets expose local dealers to the eyes of the law and supply chains become stretched.

Cannabis Supplies

Stresses on the UK medicinal cannabis supply chain have also shown. Prof Mike Barnes, Chair of the Medical Cannabis Clinics (MCC), says it had struggled to secure supplies from Israel with the export ministry short of key staff and flights suspended.

However Dutch supplier Bedrocan’s production and supply chains are not affected, saying in a press release: “As standard, we maintain several months of supply for our critical stocks.

In case of a crisis, we can
continue to function as normal with
minimal personnel


“Also, in case of a crisis, we can continue to function as normal with minimal personnel. That is the advantage of working within a highly controlled environment where little human action is required.”

Whilst concerns medical cannabis patients would be unable to access prescriptions have been allayed through telemedicine consolations adopted by the main private UK clinics; the MCC, Sapphire Medical Clinics and Cannabis Access Clinics.

Online CBD Sales Strong 

Also, online, many in the CBD and wellness industry are experiencing a sharp rise in demand as populations find ways to boost their health in the battle against the monstrous Covid-19 virus.

Alexej Pikovsky, co-founder and CEO of Alphagreen Group, which operates the alphagreen.io on line market-place, told BusinessCann it has seen page impressions rise exponentially from 25,000 a month to 150,000, as digital devices assuage the lockdown blues. 

Phil Berriman, Founder of Durham-based craft CBD retailer The Healing Cauldron saying its business as usual with the company sitting on adequate Spanish oil stocks and demand holding up.

Although he says there are some bottlenecks in the system for those brands using while-label oil suppliers.

Rob James, CEO of UK medicinal cannabis and CBD firm Cannuba, says there is no shortage of wholesale CBD oils in the European market, despite a reduction in supplies from China.

Whilst bleakly commenting ‘there is little that can be done to prevent the impending destruction of the global economy’ Steve Moore, at the Centre for Medicinal Cannabis says, it is ‘business as usual’.

As members of the CMC’s sister trade group the Association for the Cannabinoid Industry press ahead with Novel Food applications, audit inspections and meetings are being undertaken remotely.

Investment Stasis 

However, the signs of economic strain are starting to show with Prof Barnes seeing investment proposals and long-term business development plans shelved.

“Progress on securing UK growing licences for medical cannabis companies have been stopped in their tracks. Inspections from Home Office have stopped, but  I doubt it will be long term.”

Facilities in some emerging markets are experiencing similar validation difficulties although in recent days Denmark has said its inspections will resume.

Cannabis veteran Peter Reynolds, founder of CLEAR, had been undertaking consultancy work for overseas firms looking to secure high-THC growing licences in the UK, Jersey and Ireland with this grinding to a halt.

He continued: “A lot of people don’t have any money and this is reducing demand, but demand is also being boosted with people seeing CBD as a way to support their health during difficult times.”

The people who are saying
they will be going out of business
are smaller companies with less
established client bases

Peter Reynolds, Founder of CLEAR

However, he foresees further difficulties ahead for some: “The larger more established suppliers should be okay, it’s the smaller suppliers who are really suffering. The people who are saying they will be going out of business are smaller companies with less established client bases.”

The Cannabis Trades Association says some of its 1,000-plus members are struggling and have been forced to use the UK Government’s furlough scheme, which pays 80% of salaries until the end of June.

One Eastern European business leader told BusinessCann it has some concerns the lockdown measures in their country means they will not have the manpower to get this year’s harvest planted in time, leaving them facing a fallow year.

Jonathan Wiser, Managing Director of the UK-based Global Cannabis Intelligence and co-host of incisive podcast Professionally Cannabis, says the small and medium-sized, innovative businesses which drive the industry have seen fund-raising markets stalling since the back end of February.

He added: “But I am positive, that once the restrictive measures on movement are eased over the coming months a lot of these projects will come back on-line – both in cannabis and other industries.”

Charlotte Bowyer, of UK cannabis consultancy Hanway Associates says as a result of Covid-19 there is no appetite for fund-raising with UK activity ‘grinding to a halt’.

The Economic Outlook 

While cannabis is being touted as one of the emerging trends of the ‘Troubled Twenties’ – with the potential to be a $2 trillion industry – it does not exist in a vacuum, and will be at the mercy of a turbulent global economy for some time to come.

According to the IMF this downturn will not be as severe as the Great Depression of the 1920s when growth fell by 16%.

Although the initial shock will be more severe than the immediate impact of the Global Financial crash 2007 with millions of jobs being lost and GDP in advanced economies set to fall by 6%.

The key determinant will be the shape the recovery with the likelihood of a V-shape recession receding with each day the world spends in lockdown.

With second and third outbreaks outbreak possible the path to recovery will, in all likelihood, look more like a set of steps, with business life resuming slowly, and in stages.

For Investors It’s Cannabis, For Consumers It’s Health 

The commonly held view is that the focus of Governments, businesses and households will shift towards spending on health.

A recent survey from BCG found preventative healthcare, vitamins and supplements and fresh and organic foods as being the spending priorities of consumers.

Global preventive health systems will also come under scrutiny with Governments under pressure to bolster their ability to cope with this, and future health crises.

While cannabis has not surged like the food retail sector, it has also not felt the pain experienced by the travel industry, luggage retailers and cosmetics firms.

The Cannabis industry is, and
does remain, one which has the
ability to be a huge economic
driver for countries

Jonathan Wiser, MD of Global Cannabis Institute

A recent survey by Ligo Partners of over 300 family offices – investors advisers for high net worth individuals – found that moving ahead cannabis, CBD and hemp are their number one investment tastes.

Mr Wiser added: “The Cannabis industry is, and does remain, one which has the ability to be a huge economic driver for countries. Over the last couple of years, since its legalisation in Canada, it has been the single biggest job creator, and in the coming years more countries will experience the same.”

Cannabis Industry Advances

Canadian companies have been struggling for almost a year with job losses, share price plummets and executive firings commonplace.

While Covid-19 had not yet featured in its litany of woes Organigram broke rank last week by laying off roughly half of its 400 staff saying social distancing makes it impossible to run its pre-rolled joint production line.

Ms Bowyer, who is based in Canada, highlights how many established Canadian companies have provided sanitisers and PPE equipment to protect health workers, demonstrating a new level of Corporate Social Responsibility engagement in what, just a few years ago, was deemed a vice industry.

Oliver Zugel, Founder and CEO of multi-faceted cannabis firm FoliuMed Holdings, sees a number of changes taking place in its three business streams.

These include further evidence of a global shift from flowers to oils, the normalisation of cannabis home deliveries in North America and a potential role for cannabis in the personal hygiene market.

It has a joint venture with German pharmaceutical firm Fidelio Healthcare. Germany is Europe’s largest medical cannabis market and in this jurisdiction its business as usual for Foliumed.

Nevertheless Mr Zugel says Covid-19 is speeding-up the shift from flowers to oils with physicians steering patients away from smoking, due to its negative impact on respiratory systems.

He is also seeing this trend continue in the US with its Taproot business boosting sales of tinctures and other non-smoking cannabis lines.

However, this is in the context of a major drop in demand with Las Vegas – a city built on tourism – suffering during the lockdown.

Las Vegas is one of worst affected
cities in in US with 80% of the
cannabis sold to tourists

Oliver Zugel, Founder and CEO of FoliuMed Holdings

He said: “Las Vegas is one of worst affected cities in in US with 80% of the cannabis sold to tourists. However we have re-purposed some facilities to help with hand sanitisers and are making drivers available for on-line deliveries.

“Home deliveries in Las Vegas were never allowed, before, but it’s happening now, and will not be taken back. This, and the recognition of cannabis stores as essential, mean that when we come out of this we will be looking at a different world.”

He said that in Colombia, where its growing operations are based, it’s business as usual, while it also explores possible uses for cannabis in personal hygiene and disinfectant products.

A Retreat From Globalisation?

The frantic search for protection and testing equipment, a lack of national drug manufacturing capacity and other supply chain shortages is now at the forefront of the minds of policy makers, key workers and the general public.

Cannabis home deliveries in Las Vegas were never allowed before, but they are now.

Last year’s vape crisis weakened the attraction of the low-cost Asian countries as essential links in the cannabis vaping supply chain.

Trade disputes between China and President Trump have further weakened these cross-border links and now Covid-19 has led to renewed calls for a major overhaul of how we source goods and key components.

Mr Zugel is in no doubt that there will be a retreat from low-cost jurisdictions such as Africa and Asia.

He said: “It’s already happening, and it will disadvantage people producing medical-grade pharmacy grade products outside of the EU.

“When we established our German partnership we stated getting more interest from buyers and distributors. We are in the right position to get the ingredients manufactured and distribute locally through our German partner.

That’s also now the case in the US.
They want their suppliers to be
located in the country

Oliver Zugel, Founder and CEO of FoliuMed Holdings

“That’s also now the case in the US. They want their suppliers to be located in the country.”

Ms Bowyer says some European drug contract manufacturing businesses are looking to re-shore from places such as India and China. 

However, Mr Wiser highlights how a feature of the nascent cannabis industry is the thriving, global network of academics and entrepreneurs and says this collaboration will continue.

A New Normal?

The financial stresses at the heart of the European Union have once more emerged with calls from the Southern nations – Spain, Greece and France – for more robust monetary measures meeting with a muted response from their Northern neighbours.

A retreat from decades of globalisation is now up for discussion amongst world leaders with arch-federalist President Macron of France suggesting, recently, that its supply chains will have to become ‘more French’.

Over the weekend it was reported the UK has banned the export of over 30 drugs to maintain national stocks, and Boris Johnson was reportedly talking to colleagues about the ‘importance of national self sufficiency’ in medical matters.

As the socially-distanced queue snakes around the street corner in our small County Durham town thoughts, once more, turn to life after lockdown.

Whilst it’s highly unlikely the corner shop will be as busy, Covid-19 is producing some fundamental changes to our lives and it looks like national health will be at the heart of these changes for some time to come.

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