Cannabis and Coronavirus

March 10, 2020 Business Insight , Cannabis

Yesterday, New Frontier Data responded to an “Ask Our Experts” submission on Monday regarding the impact of the COVID-19 virus on the cannabis market.

The response cited the March 7 assessment of 102,000 cases across 90 countries and approaching 3,500 deaths, most of which are in China.

“According to the New York Times, more than 760 million (approximately 54%) of the Chinese population are under quarantine or travel restrictions. Factories are shuttered. Businesses are closed… Factory activity fell to a record low in February, and the timeline to resume full production is uncertain.”

New Frontier Data

Vape hardware has already been in short supply, as much of that is sourced from China.

Elizabeth Braw, Director of Modern Deterrence at the Royal United Services Institute wrote “Blindsided on the Supply Side” for ForeignPolicy.com last week, wherein she cites the effects of the Fukushima earthquake in 2011.

“Before the earthquake, the Fukushima region produced, amon other things, some 22 percent of the world’s 300 millimeter silicon wafers, which are used in semiconductors; 60 percent of critical auto parts ; and a large share of lithium battery chemicals and the conductive film used in flat panel liquid crystal displays. Indeed the Japanese suppliers did sucha good job that countless global manfacturers had gone single source – that is, they were only using tthe Japanese firms. That’s fine most of the time, but not when an earthquake strikes and renders factories unusable.”

Elizabeth Braw, “Blindsided on the Supply Side” ForeignPolicy.com

Dun and Bradstreet released a special briefing called “Business Impact of the Coronavirus” in which they stated 51,000 businesses around the world have direct Tier 1 suppliers in the Wuhan region of China, including 163 of the Fortune 1000 companies. Further, they state at least 5 Million companies around the world have secondary suppliers in the region, including 938 of the Fortune 1000.

So what does that mean for Cannabis?

The New Frontier Data response lists a myriad of changes to the cannabis environment in the near future. After SXSW was canceled last week, it’s not hard to imagine many more cannabis events around the country will follow suit.

“With over 100 major cannabis conferences scheduled for 2020, the impact of a sustained outbreak on conference and consumer event businesses could be acute. The timing of the outbreak, in the lead up to the busy April season for cannabis, many of the consumer focused 4/20 cannabis festivals may be postponed or canceled to minimize risk of community transmission.”

New Frontier Data

There is certainly also the likelihood that cannatourism will slow considerably, given that people will be less likely to leave their homes.

There is no expectation that demand will decrease, but a near certainty that it will change. Customers may cut back, but it’s more likely they’ll begin to choose cheaper and longer lasting alternatives, avoiding frequent trips to replenish.

School closings will require employees to stay home, and those businesses will suffer because of lack of workers, while the workers will lose income as a result.

All in all, we have no choice but to sit and wait for it all to shake out before we truly know what the effects of this virus will be.

In the meantime, wash your hands.

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