Anxiety, doubt – and some optimism – over coronavirus impact on CBD in US

The wider impact on the CBD sector in the US of COVID-19 and measures intended to combat it remains confused in the short term and largely a mystery in the longer term as companies scramble to gather information.

At its most basic, it is unclear what the full impact of the pandemic will be on CBD sales. It could drive sales online due to the number of CBD stores forced to shut as non-essential retail.

Hemp associations in the US are lobbying for retail locations to be considered essential but have met with limited success.

In Texas, for example, it appears decisions are being taken on a county-by-county basis while Wisconsin has declared CBD stores non-essential, though it has continued to allow delivery services. Minnesota initially had CBD shop employees listed as exempt from stay-at-home policies but changed this in its latest update.

But with layoffs and wage furloughs hitting disposable income, it is difficult to predict just how essential consumers will consider CBD to be when they are faced with tough budgeting decisions, even if shops are open.

Looking at more easily tracked sales of cannabis products from dispensaries, there was a sharp increase in sales in anticipation of quarantine measures followed by a prolonged downturn – despite some US states labelling cannabis as essential retail or taking other measures that might have been expected to boost sales, such as allowing kerbside pick-ups.

Industry commentators theorised that medical users would be more likely to maintain levels – as they had prescribed dosages with most reductions coming in recreational sales. CBD sales may follow this pattern as many users consider CBD essential to maintaining health. This is particularly true for mental health issues, which are thought to be on the rise due to social distancing.

However, it would not be the first time hard decisions had been taken about health during times of limited spending.

 

‘A herbal renaissance’

 

A number of commentators remain optimistic about the resilience of the sector through the ongoing disruptions.

Asa Waldstein, chair of the cannabis committee at the American Herbal Products Association (AHPA), said numerous companies involved with the AHPA were seeing a general rise in interest.

“During this crisis we’re witnessing a herbal renaissance as companies making herbals such as Gaia Herbs, WishGarden Herbs, Herb Pharm and Quicksilver Scientific have seen well-deserved bumper sales,” he said. “It seems there may be cases of pantry-stocking but this crisis has also reinvigorated existing and new natural product customers. This creates new opportunities for innovative herbal products.”

This has been mirrored by those in isolation or who cannot afford supplements, with a reinvigoration of interest in the benefits of traditional kitchen herbalism, he added.

Christina DiArcangelo, CEO of a series of companies under the Affinity brand, agreed. “Although patients may not have the available income due to lay offs because of COVID-19, I believe that more CBD and medical marijuana products will be sold during this incredibly stressful time,” she said.

But even if consumer sentiment remains with CBD in constrained times, there is no guarantee products will be available to sell. Farming and production of CBD itself could be hit by measures to combat the spread of the coronavirus.

 

Compliance burdens

 

Trans-Atlantic hemp transportation has been constrained since flight bans were introduced. Capacity fell 23% in March and has continued to fall since. Staffing shortages in customs and other related areas may also affect supply lines.

Meanwhile, compliance burdens appear to be increasing.

The US requires imported hemp seeds to arrive with phytosanitary certificates to verify the seeds’ origins and that they are pest-free. Then they are inspected by US Customs and Border Protection.

Green Nexus founder Tor Hamer has said some air carriers have asked for an additional inspection from a medical laboratory to verify that no “contaminants” are present in his orders. That requirement creates another delay to shipments.

“I still have yet to find a laboratory that inspects agricultural products for viruses,” he said.

And there is evidence that supporting areas, such as packaging, have already been affected. Earlier reports – specifically for cannabis but applicable to consumer CBD as well – demonstrated shortages due to shutdowns in China. This forced companies to look elsewhere at countries that may now be experiencing their own production difficulties.

For example, companies looking to procure packaging from the US may be affected by issues related to COVID-19. KushCo, a packaging company based in California, said it was laying off 49 employees due to uncertainty in the industry because of the pandemic.

 

What This Means: It’s still difficult to tell where exactly consumer sentiment will lie on CBD when it comes to purchasing decisions a task hampered by forced closures of stores and a product spread over a wide number of retail categories.

There have been no reports so far of actual constraints on supply, but limited transport coupled with increased compliance delays does mean that is a growing possibility.

And over it all remains the issue of continued action against certain CBD sellers making coronavirus-related claims. It is exceedingly unlikely authorities would take any sort of drastic industry-wide action, but the ongoing warnings are not a good look for the industry in the eyes of legislators as well as many consumers.

Sam Newhouse CBD-Intel contributing writer and Freddie Dawson CBD-Intel staff

Image: Edvard Munch

CBD-Intel does not provide legal, strategic or investment advice. Tamarind Media Limited, the publisher of CBD-Intel, does not accept any liability or responsibility for information or views published.

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