Cannabis sales soar during pandemic as purveyors scramble to adjust retail, delivery operations
When Sonoma County’s initial stay-at-home order landed March 17, some local cannabis dispensaries were confused. The regulated industry has evolved a particular expertise operating within legal and legislative gray areas in its recent past, and here was one more knot to untangle.
Gov. Gavin Newsom, in ordering Californians to adhere to a set of safety guidelines in an effort to blunt the spread of the novel coronavirus, had deemed the cannabis trade an essential business, meaning purveyors could continue to operate. But Sonoma County Health Officer Dr. Sundari Mase initial orders specified only clearance for medical cannabis, potentially excluding consumers who don’t have state medical cards.
That category had grown to include many people who used a card for years, but allowed it to lapse when state voters approved recreational cannabis and then the county allowed dispensaries to expand into that trade.
“I remember standing in the store with a woman, she has stage 4 cancer,” said Alicia Wingard, co-founder of Flora Terra, a Santa Rosa-based cannabis microbusiness, with her husband, David. “She was sobbing because she was absolutely frightened. She thought we wouldn’t be open. She was at her limit. She said, ‘I’ll be out of medicine within a week.’”
Wingard had her own personal concerns at that time.
“We had just opened in September,” she said. “I thought if we were not essential, it would kill our business.”
Since then, despite the waves of hardships delivered by COVID-19, there has been a lot of good news for Wingard and others in the local cannabis trade. Mase took only a few days to clarify that recreational marijuana also was essential under local orders.
Shops and delivery services have operated throughout the pandemic, which has devastated many businesses but has ushered in a boom cycle for many cannabis purveyors.
Wingard, for example, says her sales have gone up “easily 15-20%, if not more.” (Flora Terra is a rarity in the trade, a company licensed for cultivation, distribution and retail, all in one setting.) She is not surprised at the uptick.
“People are stressed out, either because they’re not working, or they’re working at home with their partner, and maybe their children,” Wingard said. “It’s the anxiety. The lack of sleep. People are definitely turning to alternative medicines.”
Claire Firestone, co-founder and CEO of Farmhouse Artisan Market, a Petaluma-based cannabis delivery service, said her business experienced an immediate surge just as shelter-in-place became a reality, and has remained consistently above pre-pandemic levels.
That experience has been typical in the industry. A graph of retail sales in California produced by BDSA, which tracks cannabis sales and analyzes industry trends nationwide, shows a noticeable climb when the coronavirus was officially declared a pandemic on March 11, a massive spike when Newsom announced the state’s stay-at-home order a week later and another bump when the federal government began sending stimulus checks in mid-April.
Sales appear to be strong throughout much of the United States. Morgan Fox, a spokesperson for the National Cannabis Industry Association, notes that 26 states, plus Washington D.C., have declared the product essential. And that doesn’t includes states like Oregon and Arizona that have allowed dispensaries to stay open while not explicitly classifying them as essential.
At least locally, though, not every cannabis company has been affected in the same way.
Mase’s order to shut down in-store shopping in March fit neatly into Farmhouse’s business model: the company’s trade is 100% delivery based. That was not the case for Solful, a Sebastopol-based shop that wasn’t doing deliveries when stay-at-home order began. Its revenues fell in the immediate aftermath of the shutdown.
“Our model is really all about the in-store experience,” said Eli Melrod, the company’s co-founder and CEO. “You read the reviews, and they’re all about coming in. This transition was really tricky for us.”
So Solful adapted and added a delivery service. It had always been part of their “roadmap,” Melrod said. The pandemic hastened it, as it has for other dispensaries. During the first two weeks in March, according to BDSA, 85% of the dollar share at California cannabis shops came via in-store purchases, just 6% from deliveries. (The rest were “takeout” orders.) During the first two weeks in May, those numbers shifted to 77% in-store and 16% delivery.
Dispensaries have had to reconfigure their spaces to account for social distancing and repetitive sanitizing, like any business. But this is an industry with unique challenges. Because most financial services are wary to work with cannabis companies in light of the federal against legalization, it remains a largely cash-based system. That doesn’t fit well with anti-COVID protocols, where electronic transactions have become even more the norm.
“I remember one of my first deliveries early in coronavirus (pandemic), an elderly lady came out of her house with big barbecue tongs, with the money connected to the tongs in a Ziploc bag,” said R.J. Virata, who makes deliveries for Farmhouse.
Other customers, Virata said, will set up a small chair on the porch to serve as the drop spot, or point to a mailbox that contains the money. “There’s never anyone going into a customer’s house or apartment,” he said. “So I feel very safe when I’m out there.”
Cannabis purveyors have noticed another recent industry trend. More consumers are buying edibles and tinctures.
“I’ve definitely heard that people are a little concerned about inhaling with an upper respiratory disease going around,” Firestone said. “I also think a lot of people like the ease of use of gummy and tincture, so people with a higher-density living arrangement are choosing that.”
Wingard believes there’s an additional explanation: new users, who often gravitate toward edibles because they are intimidated by smoking a pipe or rolling a joint.
The question on the minds of a lot of cannabis executives is whether these new customers will remain loyal once the pandemic has eased up. Local and national sources both said they see the designation of weed shops as essential as a potential turning point in their mission to make the drug more mainstream.
Wingard ― admittedly, not an unbiased observer ― believes the revolution is underway.
“I feel cannabis in general enhances people’s lives,” she said. “It enhances sleep, it can be fun if you’re using it recreationally. If you’re trying to relax. If your outdoors and want to go for a hike. Organize your closet, which I think a lot of people are doing now. And I think once people are more open to the idea of that, it will happen naturally.”