The COVID-19 shutdowns have devastated most businesses around the world, but paradoxically, it’s created a tsunami in cannabis sales. Moreover, it looks like the trend is likely to continue.
Odd companions, cannabis, and COVID-19. As the pandemic triggered lockdowns and wreaked havoc on the economy, cannabis sales soared across many markets in North America. However, people stuck at home due to stay-at-home orders likely purchased more cannabis, both for medical and recreational use.
California, Colorado, and Washinton See Soaring Cannabis Sales
These three states are just a snapshot of the rush to buy cannabis during the COVID-19 lockdowns. Cannabis sales in California climbed 160% compared to March 2019. Cannabis sales in Washington rose 100% compared to last year and Colorado saw a 46% increase over last year. Furthermore, this surge doesn’t appear to be slowing down anytime soon.
Emerging Leaders in the Cannabis Market
Cannabis Strategic Ventures is an emerging leader in the U.S. cannabis market. The company is now on track to generate more than $2.7 million in quarterly sales and around $11 million in annual sales. These numbers are based on the company’s strong performance in April and May. Likewise, Cannabis Strategic Ventures has more than doubled its harvest and is selling its product at an 11% premium above industry standard.
Just like any industry, the leaders in the cannabis market are determined by sales and earnings growth. For example, Canopy Growth Corporation has continually released innovative products for many different markets and has attracted large investments from the beverage industry.
Another emerging leader, Cronos Group Inc, has continued to expand its international reach. Aurora Cannabis Inc has a similar focus on growth. Aurora has acquired Organigram Holdings Inc to expand its reach from Canada into the United States market. Organigram Holdings Inc, whose workforce was initially disrupted by COVID-19, have begun to return to work. The company quickly announced new products, capitalizing on the continued consumer demand.
Winners and Losers in the COVID Crisis
The COVID-19 shutdowns have had a devastating effect on small businesses; restaurants and shops were forced to close, and some manufacturers were unable to operate their factories. Furthermore, businesses across the service and manufacturing sectors saw demand plummet. The layoffs, furloughs, and losses are palpable, and the long-term economic impact remains to be seen.
However, a few businesses actually benefited from the disruption to the economy the global shutdowns have wrought. Some are obvious, such as those producing protective medical equipment and pharmaceutical companies. Tech businesses that create software for telehealth and working from home also benefitted. There has also been a huge demand for home entertainment, which includes a more obscure sector; cannabis producers like Cannabis Strategic Ventures.
Cannabis Businesses Boom
Cannabis was already a burgeoning industry in North America. The cannabis boom has been driven by many recent changes, including legalizing recreational use in Canada, federal legalization of industrial hemp in the US, and the legalization of both medical and recreational marijuana in a growing number of states. These trends have spurred the growth of companies like Cannabis Strategic Ventures, which serve a growing legal market.
Demand for cannabis climbed during the early stages of the COVID-19 lockdowns across North America. As people stockpiled food and supplies, preparing for a lockdown, Bank of America Securities reported record sales of cannabis. While some people stockpiled toilet paper and food, others stockpiled medical and recreational cannabis. Cannabis users wanted to make sure they not only had enough food to see them through a crisis, but also enough weed.
The result of lockdown cannabis hoarding was a spike in sales during April and May. This definitely benefited companies with quality cannabis products such as Cannabis Strategic Ventures. While sales could have been hampered as states locked down and shut down small businesses, but most states classified cannabis as an essential product, due to those with prescriptions for medical use. This allowed cannabis sales to continue while other parts of the economy suffered.
All of these factors resulted in record sales for a few cannabis companies, such as Cannabis Strategic Ventures; the company saw increased sales of cannabis from its main cultivation facility and hired more staff to keep up with the demand.
A Strong Player in the Cannabis Market
Despite restrictions on business due to COVID-19 lockdowns, Cannabis Strategic Ventures had record-breaking sales in the last week of April. In fact, monthly sales for the company were an incredible 800% higher than the monthly average for the first quarter. The increase in sales made for an extraordinary month for Cannabis Strategic Ventures (OTCQB: NUGS).
Any concerns that this might be an aberration due to panic buying at the start of the lockdowns disappeared the following month, as the company posted sales revenue from its most recent harvest. Cannabis sales in the US average around $1,525 per pound, but Cannabis Strategic Ventures sold its harvest at around $1,700 per pound, 11% above average.
However, not every cannabis company benefited from the crisis. In large part, the ability to profit from a crisis depends on the strength of an existing business model. Cannabis Strategic Ventures had been building a strong business before the crisis, such as by adding a six-acre cannabis greenhouse in 2019, capable of producing four or five harvests every year.
Capitalizing on the market opportunity brought by the COVID-19 shutdowns, the company has announced even more improvements, such as working on both the quantity and the quality of output. The company has more than doubled its harvest, which, in turn, supports the price increase for its products.
The Expanding Cannabis Industry
The expansion of legal cannabis markets over the past decade has resulted in dramatic growth for cannabis companies. The COVID-19-related flood of additional revenue provided well-run cannabis businesses the money they need for future expansion.
During every week in late April and early May, Cannabis Strategic Ventures sold out its entire stock of product.
“We’ve never seen anything like this,” exclaimed Cannabis Strategic Ventures CEO Simon Yu. “We reserved $100,000 in orders in just one day, which cleared out all of our remaining inventory. We anticipated this, but we still underestimated the trend. Too much demand is always a problem you want to have.”
Cannabis Strategic Ventures sold $929,000 of cannabis in May alone, and expects to see even bigger sales in June. More inventory and a diversified product range have supported this growth even during a time of crisis. Reinvestment from that growth will allow the company to expand its capacity even more.
Part of the cannabis sector’s success comes from producing a wide range of brands and products. Rather than just selling flowers, the most successful companies have developed a wide variety of cannabis derivatives for various markets. While the COVID-19 boom in sales has come from a demand for cannabis flower, successful companies have diverse interests to support the long-term growth of the market. Normalizing cannabis through things like THC-free CBD products will protect companies from a disruption in any single sector of the market.
Cannabis Companies Riding High on a Crisis
The sales boom due to the COVID-19 shutdowns has created an opportunity for several growing cannabis companies. While the reaction to COVID-19 caused serious disruption for businesses, it also triggered a revenue spike in the cannabis industry. Everything indicates a significant opportunity in an already growing and robust sector.
Canopy Growth Corporation is a leader in diversified cannabis and hemp products, with a variety of brands and several cannabis strains produced in dried, oil, and gel capsule forms. The company has made gains mainly through its diverse range of brands and products. Canopy has continued to grow during COVID-19, with the release of new cannabis-infused drinks, chocolates, and vaping devices. The company made headlines in 2017 when it received significant investment from a leading beverage company, Constellation Brands. Constellation has added to that investment by purchasing more shares in Canopy, a strong sign of corporate faith in the cannabis market.
Cronos Group Inc has its operation spread across five continents, tapping into the global potential of the cannabis market. The company is centered on disruptive intellectual property by advancing cannabis technology, research, and product development. Cronos has seen a year-on-year increase in revenues in the first quarter of 2020. Despite a few losses, Cronos has been working diligently to increase its international reach. The company quickly adapted to the COVID-19 crisis by holding its annual shareholder meeting online.
Aurora Cannabis Inc, based in Canada, provides products for both the medical and recreational markets, helping people improve their lives. The company’s brands include Daily Special, Aurora Drift, ROAR Sports, and MedReleaf. Aurora plans to expand its brands with the acquisition of the US-based company Reliva, which will provide a top-selling CBD brand currently sold in more than 20,000 retail locations in the US.
Organigram Holdings Inc produces top-quality, greenhouse-grown cannabis for medical and recreational use in Canada. The company is also developing global business partnerships to expand its international footprint. While its production was disrupted by the COIVD-19 business restrictions, in mid-May Organigram returned to work. The company rebounded quickly, announcing new medical cannabis products.
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