North Americans are stockpiling cannabis for COVID crackdowns and this could finally fix the market
Health & Biotech
Health & Biotech
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Special Report: North Americans are stockpiling cannabis, which means sales are spiking and the oversupply problem could be over.
While researchers are saying don’t mix cannabis with COVID-19, strict lockdowns in North America mean people are buying for another reason: mental health and stockpiling.
Canadians and Americans are stockpiling cannabis products as they prepare for long periods of enforced isolation at home, and they’re preferring the new wave of edibles over dried flower.
“Cannabis sales are spiking now and will be astronomical over the next three to four months,” MMJ non-executive director Mike Curtis says.
Data from US sales tracking platform Flowhub show that from March 16-22 recreational cannabis sales in the key US markets of California, Colorado, Oregon and Alaska were up 40 per cent, and medical cannabis sales were up 41 per cent over the year before.
Sales in Nova Scotia, the latest Canadian province to establish strict coronavirus controls, shot up 76 per cent last week, according to the Nova Scotia Liquor Commission.
Curtis is based in Toronto and has a first-hand view of what is happening across his country.
He told Stockhead he believes the way people are anticipating getting through the extended lockdown — during a northern hemisphere summer no less — is with cannabis.
“Different parts of North America have been in lockdown for the last five to 10 days and people are expecting anywhere between three to six weeks of continual restrictions,” he said.
“With everyone trapped in their houses we’re starting to see hoarding, as the bunker mentality kicks in, and that’s why cannabis sales are spiking. People want to know they have enough to get through the next three months.”
With cannabis dispensaries considered an essential business in Canada and some US states, cannabis companies could be some of the few to emerge from the pandemic with solid sales and in good financial health.
Indeed, New Cannabis Ventures says the pandemic won’t end quickly which will lead to two positive outcomes.
“First, cannabis legalisation could be seen as more important to states looking for tax revenue and job growth,” the company said in a note on March 22.
“Second, cannabis companies may see more demand as consumers cope with increased anxiety, trouble sleeping and other conditions that are being exacerbated by this crisis.”
MMJ has investments across the cannabis sector, from growing to extraction and retail.
But it is aiming to become an extraction specialist, an area Curtis says isn’t bedevilled by the oversupply curse that has lingered over the industry for the last year but also gives it access to the rising demand for processed products such as edibles.
“Large volumes of cannabis in the next three to four months will suck up all excess supply,” he said.
“I expect North America will in fact come out of the coronavirus pandemic with a cannabis supply deficit due to the demand I’m seeing now.”
Canada has suffered an oversupply of cannabis since it legalised recreational use in 2018, as companies invested heavily in growing facilities in the expectation of massive demand.
Government data showed that in August last year cannabis inventories had hit almost 400 tonnes. Experts believed that could cover two years of demand at the levels seen in late 2019.
But sales were already rising before coronavirus was a pandemic. The Canadian government legalised edibles in October last year. Until then the only way to use cannabis recreationally was by smoking it.
Curtis says gummies, brownies and the like are already appealing to a class of well-off young professionals.
Indeed, Statistics Canada said in January that sales of adult use cannabis in November finally topped $US100m for the month.
Back in Toronto, Curtis says even going for walk is now frowned on.
He believes as the weeks turn into months, more and more Canadians will turn to alcohol — as Australians are expected to do — and cannabis to get through the cabin fever.