Name: New Normal: Can the cannabis industry survive the coronavirus crisis?
Uploaded: 2020-05-11
Duration: 7 min 33 s
Description: Industry professionals weigh in on how they're adapting and planning for the future.

Industry professionals weigh in on how they're adapting and planning for the future.

New Normal: Can the cannabis industry survive the coronavirus crisis?

Retail

Industry professionals weigh in on how they're adapting.

New Normal: The cannabis industry

mhm. Mhm we've seen over the last several years. Obviously, more and more states began to legalize for medical purposes. We've seen people legalized for recreational purposes and at the very bare minimum. We've seen a tremendous amount of decriminalization, a lot of the states. The hardest thing for us has been the access to capital that traditional Wall Street mechanisms aren't open to cannabis companies. That, coupled with just the political environment being pretty unstable around cannabis, the cannabis market was having difficulties not because there was a demand. Um, demand far outstrips supply in this country by 10 to 1. Um, the problem was that because of the federal illegality and because of a lot of the road blocks that were being put up on even on the state basis, uh, with cannabis, the cost of capital was very, very hot. Normally, if you're a tech company or a retail company or a medical device company, you raise private equity. Maybe you go public downstream. The big banks come in, they raise your capital, they take your public and so forth that wasn't available, especially in the U. S. Market. So there was this vacuum coming into the middle of latter part of the last year, where almost every company in the space had a challenging time. Getting funding now layered. On top of that, we wake up one morning and the whole industry. I shouldn't even say the whole industry, the whole world is shut down from a consumer standpoint. Yeah, Fortunately, in most jurisdictions were considered an essential service. We had a surge of sales when people kind of panicked accumulated products, food and medical supplies and cannabis. But after that, the foot traffic has just died down. We've watched sales declines that are relatively significant. Specifically, look at Nevada. The volumes definitely dropped off. Nevada's turned out to be the marketing capital of cannabis because it caters for 45 million tourists from around the world and around the United States. If you take away those 45 million tourists, well, a lot of the money has dried up at that point in time. So we've had lack of capital coming into this, and now we're at a point in time where we still have all of our fixed overhead expenses. But we don't have the sales volumes of the cash flow and the gross margin, too, offset that expense. And it's been, you know, I think rather troublesome. And you've seen a lot of companies begin to do significant layoffs. We just did around a few weeks ago. We did another round about a month and a half ago, and you're seeing that as a systemic issue across the entire industry when you're in a production sort of capability where you can actually just put everything in a refrigerator and hit the pause button. That's an easy one When you're in a gross situation, Um, you have, you know, months of stock that's in various stages, so you can't just hit pause when you're the dispensary stage. Um, you know, you're just trying to adjust to the new normal of delivery service as opposed to in house consumer interaction. If you think about revenue per square foot, your average retailer does a few $100 in revenue per square foot. You'll see a lot of dispensaries in multiple marketplaces. They're joining from 5 to $10,000 in revenue per square foot, and they do that because they pile people through these retail registers. If you look at the lines that are out there, that can't be accomplished from 9 to 5 with social distancing, distancing Cramer's. So just the social distancing rules in and of themselves put us in a position where we can't kind of realized the revenue we would have realized under normal situations, so that has a profound impact on us From a revenue standpoint, we are certainly doing things to bring customers in. But we really don't want people want them to take advantage of curbside. We want them to take advantage of delivery. So all of our efforts are really into those two corridors we had to go from walking into a store and purchasing the product to delivery only on the cannabis community is extremely resilient and creative. We went from something like 50 cars to over 300 cars in less than a month of delivery services. We brought temporary employees. We worked with the most needy organizations, like the restaurant associations in all the states where there are tons of employees. Plus there they know how to run a registered. They know how to use the service who were able to bring employees. And from that, obviously a lot of these people may stay on with us. Hopefully, um, you know, as we go forward, there's more people to hire for pure leaf. And for the whole industry. Before the coronavirus, the marijuana industry was one of the largest percentage employer increases in the United States. Um, so as we come out of this, I would you know, you should look at the employment numbers. This is going to be very important in the cannabis industry, will do its part to absorb some of that. There's some radical changes from a consumer behavioral standpoint that this coronavirus is forcing us to adapt to. But I think there's some changes that I think are going to be long standing for us to keep in place post coronavirus because we don't know when the next pandemic will come be. We don't know what the residual infection rate is going to be on a go forward basis. See, we don't know if they're going to have a vaccine for this anytime soon. So I think people will continue to be nervous about their travel behaviors or recreational behaviors and their outing behaviors and that type of thing. So I think what's really going to suffer the experiential retailers the destination spots in the short run, and I think those that are putting time, effort, energy into both delivery and curbside will thrive on an ongoing basis. But you know, again, right now, all corridors are challenged in this significant headwinds. But coming out of this, I think business will be done differently for a significant period of time. I have read an article and somebody called it an extinction level events. And as I said earlier, we came into this issue. We came into this crisis under significant financial strain. Already all the companies did. And now this. You know, the lack of revenue coupled with the fact that the fact that we have significant tax burden, tax overhead and no federal or state stimulus to support us through this time, I think you're gonna watch some companies go under. And I think you're gonna watch some consolidation. New operations are clearly going to hurt, whereas the more mature ones will attract the customers and actually do much better in this point in time. It really is survival right now, and it's gonna be survival of the fittest is going to be survival of those that can adapt right now, and so you know. Fortunately, Nancy Pelosi, Cory Gardner and some of other leaders are at least starting to talk about the fact that the candidates companies are excluded from this federal stimulus plan and hopefully, this next round we get included in some capacity. I don't think people really understand that this is a vertically integrated manufacturing and retailing industry, all of the cultivation, all of the extraction is manufacturing done in this country. In these local jurisdictions, these are local jobs, the retails local jobs. Most of California is not owned by big public companies. It is fragmented, mom and pops that employed thousands and thousands and thousands of people. We hope that our political leaders begin to understand that these jobs are high paying jobs, their equitable jobs, their domestic jobs that are going to end up overseas in the foreseeable future. We hope, and their jobs that need some support right now, so it isn't about supporting the cannabis industry. It's about supporting us as employers because we've gone out of our way to pay above market wages, give above market benefits. I think our our minimum wage we pay in the company's 17 or $18 an hour with full medical benefits. We hope our political leaders understand that we hope were included in the next round of federal stimulus. But if we're not again, it's going to be as that journalists had said, an extinction level event, I think coming out of this mm.