Cannabis Business Proving Itself Pandemic and Recession-Proof

Cannabis Business Proving Itself Pandemic and Recession-Proof

Near the end of January 2020, the United States officially entered the longest period of economic growth in the country’s history. Growth had slowed significantly by 2020, but the economy still showed signs of moving forward. At the time, it seemed like nothing could stand in its way. On the other side of the globe, though, cases of COVID-19 started to spread beyond the borders of Wuhan, China. No one knew it, but COVID-19 was coming for the U.S. and world economies in a big way.

Now that the U.S. has gone from growth to recession at breakneck speed, entrepreneurs and investors want to find opportunities that will help them earn strong returns despite the mounting damage of a global pandemic. The cannabis industry stands out as one of the best options as it proves itself pandemic and recession-proof.

Cannabis Sales Increase Even as the Economy Stumbles

Slowing the progress of COVID-19 means that people need to isolate themselves and stay at home. As a result, service industries came to a sudden halt. Restaurants, hotels, and movie theaters shut their doors during March because they didn’t have any customers. As more businesses layoff workers, unemployment claims have skyrocketed. The Department of Labor reports that in March 2019, about 1.7 million people applied for unemployment. In March 2020, the number of filers exceeded 3 million.

The slowing economy and job loss haven’t hurt the cannabis industry, though. In fact, recreational cannabis sales rose by 50% between March 16 and 22. Compared to March of 2019, medicinal marijuana sales grew 41% by the end of March 2020.

Analysts say that sales in Oregon, a state that allows medicinal and recreational sales, increased by 75% while the price of the average order grew by more than $10. In California, dispensaries say that the number of first-time buyers has jumped 50%.

Why the Cannabis Industry Can Grow During a Recession and Pandemic

A few key factors make cannabis industries pandemic and recession-proof.

First, economic uncertainty creates a lot of anxiety in people. Jobs that seemed secure a month ago have evaporated. Whether currently employed or not, people don’t know how long they will keep receiving paychecks. Using cannabis helps many of those people control their anxiety so they can focus on staying safe and sane during isolation. Others use marijuana to cope with symptoms of depression that often increase when they can’t socialize.

Second, people get bored quickly. Even with countless movies, songs, and games to access online, humans crave social interaction and novelty. Dispensaries in California may have seen an increase in first-time buyers because people who don’t typically use cannabis are seeking novelty.

Consuming marijuana also improves sound perception. Listening to music under the influence of cannabis can create euphoric feelings. People need the escape of euphoria most when they feel like everything else in the world has gone wrong.

Third, many states and cities have decided that cannabis distributors are essential businesses that aren’t held subject to government orders to close. California Governor Gavin Newsom announced on March 19 that cannabis distributors with medicinal licenses were considered essential. Unlike bookstores, clothing stores, and bars, dispensaries did not have to close their doors to customers.

The decision to include cannabis dispensaries as essential businesses means that companies can continue making money during the pandemic. Since consumers have fewer places to spend money, it makes sense that more of them will head to their local stores to purchase cannabis products.

Cannabis Has Replaced Alcohol for Many Consumers

During the Great Recession that lasted from December 2007 to June 2009, alcohol sales grew. As people lost their jobs, they turned to alcohol to cope with the situation.

Stores will continue to sell alcohol during the worldwide downturn caused by COVID-19. Most states list liquor stores as essential businesses. Consumption trends have evolved a lot over the last decade, though. Today, a lot of people who enjoy cannabis say that they don’t consume much alcohol.

Millennials are fueling the trend away from alcohol and toward cannabis. Many Millennial consumers say that they don’t get much enjoyment from drinking alcohol. They also complain that alcohol costs a lot of money. Spending one evening drinking at a bar can easily cost $30. Plus, plenty of cannabis users say that they prefer marijuana because it doesn’t give them hangovers like alcohol does.

Cannabis gives consumers a cheaper, more enjoyable experience than alcohol. Some companies that understand this trend have already started investing in cannabis-based drinks that offer a buzz without the booze.

The Cannabis Industry Has Ample Opportunities to Grow During a Recession

Most states have some level of cannabis legalization. The industry, though, has ample opportunities to grow during a recession. As of 2020, only 11 states have fully legalized marijuana for adults over 21. Thirty-three states have medicinal marijuana.

During a recession, states will need to find new sources of revenue. States that have been close to legalizing cannabis, such as California and New Jersey, might get the nudge they need to follow through during the 2020 and 2021 elections.

Within two years of full legalization, California collected more than $1 billion in cannabis tax revenue. As states realize the financial burden caused by unemployment, closed businesses, and slowed travel, they cannot afford to ignore the benefits of passing laws that favor the cannabis industry.

Cannabis businesses already have a lot of ways to earn profits. The pandemic and recession may prove that people need the relief, jobs, and taxes that the cannabis industry can offer.

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April 4, 2020Comments Off

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