‘Essential’ Cannabis Businesses Stay Healthy Amid COVID-19 Pandemic

As shelter-in-place orders continue to impede activity for a range of ‘nonessential’ businesses, cannabis growers, processors, and sellers in legal marijuana states are chugging right along. Owing to their ‘essential’ status in more than 20 states as suppliers of medicinal products, cannabis businesses are reporting strong sales amid the pandemic.

• Illinois, Pennsylvania, and Florida are among the states that have seen the biggest medical marijuana sales spike.
• Inhalable products continue to do well despite concern about the respiratory effects of COVID.
• The ability of the cannabis industry to endure the pandemic while others falter is likely to sustain elevated long-term investment opportunities, and may help accelerate the movement toward nationwide legalization.

US marijuana production to expand nearly 13% annually through 2023

According to a Freedonia Group analysis, marijuana represented about 11% of the approximately 160 pounds of cannabis produced in the US in 2019 (hemp, which is legal nationwide and used to make CBD, accounted for the rest).

Through 2023, the fastest advances are expected for commercial indoor operations, as legal regulations and climatic conditions necessitate that marijuana growing take place indoors in most states. In general, these facilities cost more to run due to the higher value of equipment and consumables needed to operate, but they produce a higher quality and higher value product than outdoor operations.

Increasing production to benefit sales of cannabis growing supplies

Through 2023, demand for the equipment and consumables used in commercial cannabis operations is expected to grow 11% annually. Indoor operations will remain by far the largest segment. Most commercial indoor cannabis operations are dedicated to marijuana, which is more complex and expensive to grow than hemp.

• Indoor growing facilities require expensive pieces of equipment – such as high-cost artificial lighting and fans and HVAC systems.
• Hydroponic systems – relatively expensive growing systems that also use specialty growing media and nutrient additives – are used by many indoor growers to produce high-quality yields.
• Indoor facilities typically have multiple harvests per year – and therefore require more replacement supplies – while outdoor crops are limited by the climate and may have only one growing season.

Healthy retail sales provide opportunities for packaging suppliers

Retail sales of consumer cannabis products – including hemp/CBD and marijuana products – are spiking in some states amid the COVID-19 pandemic, supported by self-isolating consumers using more of these products for their anti-anxiety and relaxation benefits. Some are even turning to these products in hopes they will help prevent or treat the virus, though evidence that they do remains scant.

Through 2024, retails sales of cannabis products are forecast to rise 18% annually. From inhalables and edibles to topicals and tinctures, cannabis is sold at retail in a wide range of formats requiring different packaging solutions. In addition, regulations stipulate rules about packaging – for instance, most states require marijuana products to be placed in opaque, tamper-evident packaging with child safety features.

A Freedonia Group analysis projects that demand for cannabis packaging will exceed $1.0 billion in 2024.

• The fastest annual gains are expected for those delivery formats – namely edibles and topicals – that stand to benefit the most from federal legalization of hemp-based CBD. Retailers and foodservice establishments are increasingly offering CBD-infused food, beverages, cosmetics, and toiletries that appeal to consumers as offering the therapeutic benefits of CBD without the psychological effects of THC.
• Other major delivery formats include tinctures, pills and capsules, and ingestible oils, which are used for both marijuana- and hemp-based products.

Want to learn more?

See the Freedonia Group’s series of cannabis industry studies: Cannabis Growing Supplies in the US, Cannabis Growing Supplies in Canada, and Cannabis Packaging Opportunities. Also be sure to follow Freedonia’s COVID-19 Economic Impact Tracker for COVID-related market developments.

About the Author:

Peter Kusnic is a Content Writer with The Freedonia Group, where he researches and writes studies focused on an array of industries.