This Monday — and, really, all of April 2020 — was supposed to be big in the world of cannabis.

Since 1971, when a group of Northern California teens started meeting at 4:20 p.m. each day to smoke weed and hunt for an elusive marijuana patch, the figure 420 has been tied to cannabis. And so the fourth month of 2020, and the date 4/20/20 in particular, was poised to give marijuana consumers extra cause to celebrate the industry’s unofficial holiday while offering legal cannabis companies a welcome marketing hook.

But shelter-at-home orders tied to the coronavirus pandemic have pumped the brakes on most 4/20 celebrations. Even in weed-friendly San Francisco, Mayor London Breed is threatening to arrest anyone who shows up for the state’s largest annual cannabis gathering at “Hippie Hill” in Golden Gate Park.

Beyond canceling holiday plans, the coronavirus has hit the cannabis industry hard.

After a short-lived spike in panic purchases last month, marijuana sales statewide are dropping. And the coronavirus fallout is casting even more uncertainty over an industry that’s already struggling due to high taxes, stiff regulations, local business bans and a still-thriving illicit market.

“Layer in global pandemic on top of everything, and it is just wild, and so much more unpredictable than it ever was,” said Conrad Gregory, board president of the California Cannabis Industry Association and head of government relations at the Oakland-based chain Harborside.

Marijuana businesses are nothing if not resilient, though.

With shelter-in-place rules in effect, some shops are remaking their operations to match public health guidelines, while manufacturers are pivoting to make supplies needed in the coronavirus fight.

Some 4/20 festivals are going virtual, including the Highstream 420 Festival, where Melissa Etheridge will perform to raise money for charity. And many people received $1,200 stimulus checks from the federal government, which still classifies marijuana as an illegal drug on par with heroin, just in time to spend some of that money celebrating the marijuana industry’s holiday season.

Relative to many other sectors, cannabis in the age of coronavirus is “going to be a little more sustainable,” said Avis Bulbulyan, CEO of consulting firm SIVA Enterprises in Glendale.

From chaos to essential

The coronavirus outbreak threw just about every industry into chaos, and California’s marijuana companies were no exception.

On March 16, when six Bay Area counties become the first in the nation to enforce stay-at-home rules, cannabis businesses were deemed non-essential. But a day later, following a surge of protests focused largely on access for medical marijuana, the counties gave the OK for cannabis shops to stay open.

That policy went statewide March 20, when Gov. Gavin Newsom said licensed recreational and medical cannabis shops, plus the industry’s entire supply chain, were “essential businesses.” It’s one of the most liberal policies in the nation, even among states that have legalized recreational cannabis. Nevada limits all sales to delivery, Colorado allows only curbside pickup and Massachusetts is limiting sales only to medical marijuana patients.

“As an industry, we hit a watershed moment when the state of California deemed us an essential business,” Gregory said.

While those policies were up in the air, California’s marijuana shops saw a temporary but dramatic sales boom. Industry data firm BDS Analytics reported business was up more than 140% on March 16 when compared with the same day the year before. Firm CEO Roy Bingham noted it was the highest sales day ever in California, even topping last year’s historic 4/20 sales.

Some 55% of people who stocked up on products in those days said they did so as a way to stay calm during the pandemic, according to an online survey by American Marijuana, a website that publishes guides and reviews of CBD products. Another 23% said they were worried about product shortages, while 34% said they had been using more marijuana since the outbreak started.

Challenges compound for industry

But that sales spike lasted about a week, after which California cannabis shops have struggled. Bingham reports that recent sales have been running as much as 20% below average.

At TerraTech, an Irvine company with cultivation and retail locations in California and Nevada, sales were down 65% as of Thursday, according to chief executive Derek Peterson. The company is selling real estate and has cut about one-third of its staff in the past three months, he said, with the coronavirus severely compounding previously existing problems.

The biggest issue, he said, is a lack of capital for an industry that’s still in start-up mode. Marijuana businesses can’t access traditional bank loans because of federal law. And funding from family offices, hedge funds and the Canadian market, where marijuana is legally nationally, has been drying up since last summer. And when coronavirus pluged the world into a deep recession, whatever private capital was left evaporated.

Cannabis companies also aren’t eligible for federal coronavirus relief money, since marijuana remains illegal at the federal level. That leaves cannabis businesses with no options for capital. 

Even most ancillary businesses that don’t touch the plant are cut off from federal stimulus dollars.

That includes KushCo Holdings, a publicly traded company headquartered in Cypress that makes marijuana packaging. CEO Nick Kovacevich said that many computer, construction and mainstream packaging companies in California remain eligible for bailout money, even if they’ve worked with marijuana businesses at some point, while cannabis-focused companies, such as his, are not.

Politicians including House Speaker Nancy Pelosi have voiced support for including cannabis businesses in the next round of federal stimulus money. But some in the industry aren’t optimistic, given how politically charged the bill remains and how many people need help.

“The state didn’t do anything for us, either,” Peterson said. Many state leaders, he believes, think that allowing the industry to stay open solves the problem. “But being open as an essential business just means you have more fixed operating costs,” Peterson said. “And if you don’t have the sales to support that, you’re in a bad place.”

That’s why many industry experts predict a significant number of cannabis companies will fold during the coronavirus pandemic, though Bulbulyan says the virus will simply accelerate failures that were already inevitable.

A chance to shine

Still, some cannabis companies are hoping to seize the moment, pushing for policy changes while working to follow public health guidelines and prove themselves good corporate citizens.

At From the Earth, which has dispensaries in Santa Ana and Port Hueneme, workers sanitize high-touch surfaces after every customer and all staff is equipped with masks and gloves. They’ve started temperature check-ins for both staff and consumers and, under new city rules, they’ve added a curbside pickup option to let customers place an order online and have it delivered to their car.

From the Earth also is using its manufacturing lab in Desert Hot Springs to produce 100-plus gallons of hand sanitizer per week, and donating it to local hospitals. And Las Vegas-based GreenBroz, which makes machinery to harvest cannabis, is waiting on fast-tracked FDA approval for an automated system that will sterilize personal protective equipment for healthcare workers.

Much like grocery chains and other companies with front-line essential workers, some cannabis operators are giving employees perks, such as hazard pay and Netflix subscriptions for continuing to work in challenging circumstances.

Bulbulyan is optimistic that such positive examples might help the cannabis industry emerge from the pandemic with some newfound legitimacy. That, in turn, could mean good news in the broader push for removing local bans, opening banking access or even federal legalization.


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