Will Weed Sales Plummet When Enhanced Unemployment Benefits End?

Uncertainty abounds in the coming weeks, as the cannabis industry will learn if its business is as resilient as alcohol.

No neat and tidy summation explains how the coronavirus impacted the cannabis industry. Due to the plant’s federal illegal status, cannabis businesses were not eligible for small business relief other sectors enjoyed and big companies scaled back many of their operations. Just don’t tell the customers.

The cannabis industry is expected to surpass $15 billion in combined recreational and medical sales, a 40% rise from the year previous, and weed workers should outnumber computer programmers by year’s end.

But the industry will now confront whether increasing sales numbers were correlated to the additional $600 benefit in unemployment checks provided by the CARES Act. These extra benefits, which were designed to ease financial burdens for out-of-work Americans under the coronavirus pandemic, ended July 26.

Republicans and Democrats are currently drafting a new round of relief funding, as more than 30 million Americans remain out of work. That $600 bonus in benefits has emerged as a primary separation between the two parties, as Democrats want to maintain the weekly benefit and Republicans would like to reduce it to $200 a week.

Outside tourist-heavy markets like Nevada, cannabis sales have steadily risen throughout the pandemic. Baby boomers and millennials reported spending about an extra $27 per week since mid-March, according to a recent poll. However, that could soon change.

“I’m confident in saying that reducing an individual’s total earnings will affect the amount of money they’ll be able to spend on cannabis,” Andrew Livingston, director of economics and research at Vicente Sederberg, a cannabis-based law firm, told MJBizDaily. “But I would expect a larger impact on adult-use sales because medical patients treat cannabis a lot like their necessary medicine.”

For all the proclamations about cannabis as “essential business,” this moment could indicate whether marijuana is as resilient as wine, beer, and spirits. Alcohol sales have increased around 27% since March 7, according to Nielsen data, with domestic beer and spiked seltzer being the biggest beneficiaries.

What’s helping brands like Busch Light and Miller Light increase sales? Their affordability and bulk packaging at a time when many Americans have searched for ways to cut costs. Canada’s biggest marijuana retailers, including Canopy Growth and Aurora Cannabis, announced so-called “value brands” the first week of March, before the severity of the coronavirus had been realized in North America. Perhaps this will become a new model moving forward in the cannabis industry.

Marijuana business have reached an interesting crossroads, one backdropped by a global pandemic. Optimism remains in the cannabis investing space, and some may find opportunity in unusual spaces.

“The industry has found itself pandemic-resistant as cannabis has been treated as an essential business allowing dispensaries to remain open and, in many cases, showing record sales during this tough period,” David Feldman, a partner at Hiller P.C., a global law firm, told The Fresh Toast. “That said, most companies in the industry are not yet at break-even, and raising money remains a major challenge, as it has for about a year.”