From changing product preferences to compassionate pricing policies

The Covid-19 outbreak upended daily business operations and consumer habits in nearly every industry. In the world of legal cannabis, restrictions on business and travel are creating seismic shifts that could potentially restructure the unique culture and idiosyncrasies that define the industry. Dispensaries are quickly pivoting to ecommerce to stay competitive, consumers are starting to stray away from inhalable products and an increasing number of corporate acquisitions will transpire in order to maximize resources and supply chains in this period of uncertainty.

It is becoming increasingly feasible that many of these quick responses to health and safety concerns will emerge as lasting industry practices even after the pandemic subsides. Both cannabis companies and consumers have recently transitioned to a less social way of interacting with the plant, a stark departure from the established norms of the industry that predates the legalization movement. Considering how many business leaders and consumers embrace these changes, it is likely that these new practices will pave the way for a more modernized and accessible legal cannabis industry.

Retailers get a digital boost

Before social distancing guidelines swept the nation, the majority of dispensaries were brick-and-mortar operations that relied heavily on foot traffic and cash payments to conduct business. Granted, this was not done by choice for most retailers. Local regulations created burdensome obstacles for dispensaries to obtain delivery licenses or advertise online, and federal laws prohibited large banks and credit card companies from engaging with the industry.

Cannabis’ classification as an essential business provided a critical opportunity for retailers to stay in business in a compliant way. When states started imposing retail restrictions and store capacity limits, dispensaries were suddenly forced to shift their entire businesses to an ecommerce model that provided delivery, or at the very least, curbside pickup. Many dispensaries had to make the transition nearly overnight to keep up with safety guidelines and consumer demand, which was at an all-time high during this period. Cannabis ecommerce platform Jane Technologies reported that the number of new users ordering online increased by 142% in March as several states were imposing lockdown measures, for instance.

Although cannabis businesses frequently rely on in-person interactions to educate consumers and the media about products, many have relocated their sessions to a virtual setting to keep customers informed and safe. In the past month, dispensaries began offering telemedicine consultations with budtenders and utilized social media to livestream events and product demonstrations to maintain customer engagement. Product companies like Curaleaf also took a similar approach and chose to host desksides over Zoom to publicize new product launches and safe consumption methods to a wider audience of reporters. As consumers grow more accustomed to these newfound conveniences, it is unlikely that retailers will revert to their brick-and-mortar model after social distancing restrictions are eased.

The pandemic also highlights one of the most cumbersome aspects of the retail industry: the prevalence of cash payments. In recent weeks, numerous business owners and lawmakers have underscored the need for cashless payment options to mitigate the risk of transmitting the virus between store employees and customers.

Rep. Ed Perlmutter, D-Colo., who cosponsored the Secure and Fair Enforcement (SAFE) Banking Act that allows mainstream financial institutions to provide services to legal cannabis businesses, is pushing for Congress to revisit the bill in upcoming stimulus hearings. Passing the SAFE Banking Act would not only allow cannabis businesses to move to cashless transactions but would also legitimize the industry on a financial level. Reforms in this sector are long overdue, and these recent developments show how businesses, consumers and lawmakers are ready to integrate these changes for good.

Safety and affordability take a front seat

Fears over contracting the virus and looming economic uncertainties have significantly shifted consumer habits in the past few weeks. According to Headset, one of the leading data and analytics providers in the industry, non-smokable products like edibles and beverages have experienced the largest increases in demand in April. At the same time, sales for pre-rolls and other inhalables have decreased since the outbreak of Covid-19, which is likely connected to media coverage around the link between smoking and contracting respiratory infections.

Additionally, products like edibles and beverages are easier to enjoy solo or in the comfort of one’s home, whereas inhalable products are often consumed outside or in the company of others. The likelihood of passing around a joint with a group of friends in the near future is considerably low. Even after social distancing restrictions are relaxed, consumers may be more hesitant to share inhalable products with others for hygienic reasons, which could lead to a rise in demand for smaller, single-use products.

From the supply-side, consumer brands were quick to anticipate and respond to potential changes in consumer preferences, especially from an accessibility angle. Leading brands, including Papa and Barkley and Cresco Labs, have accelerated the launch of value product lines to accommodate cash-strapped customers. Other retailers, from California to Michigan, have started offering compassionate pricing policies for patrons who need financial assistance to purchase their medical or wellness products. As the national unemployment rate continues to climb, consumers will likely exhibit more conservative spending habits until lawmakers agree on measures to reopen the economy.

These new consumption and retail preferences are a noticeable digression from the communal and smoke-forward culture of the established cannabis world. While mainstay products like flower and prerolls are unlikely to go extinct, the future of cannabis consumption could be increasingly smoke-free and accommodating to lower price points.

More small business acquisitions on the horizon

One of the defining characteristics of the legal cannabis industry is the ubiquity of small, state-specific businesses. Federal regulations made conducting business across state lines incredibly difficult for cannabis companies, which is why many businesses rely on their local communities to stay profitable. However, as the industry matured and a handful of companies amassed the resources to function as multistate operators, there has been a steady increase in mergers and acquisitions in recent years.

This pattern is likely to escalate due to a shortage of growing, manufacturing and distribution resources in the global supply chain from Covid-related restrictions. Although the cannabis industry is relatively recession-proof compared to other mainstream industries, certain companies will still feel the pain of this pandemic and may agree to an acquisition from a larger company in order to stay afloat.

Despite the recent economic downturn, prominent vertically integrated companies such as Charlotte’s Web and The Glass House have moved forward with retail and manufacturing acquisitions in the past month. While small businesses are still vital to the distinct spirit of the legal cannabis world, appropriate acquisitions have the opportunity to diminish industry inefficiencies and allow companies to stay competitive against the illicit market.

This pandemic has seemingly catapulted the role of legal cannabis in modern society to the forefront of national discourse. As more lawmakers and citizens come to accept cannabis as an essential business, the industry itself will need to make necessary changes to present itself as an accessible business for new customers. Some of the greatest reforms and innovations in history came out of necessity, and this may finally be cannabis’ moment to transform into a truly modern and mainstream industry.