4/20/20: Will COVID-19 Bring Pain Or Prosperity?

On the cusp of the cannabis industry’s annual celebration of consumption and culture, another “C” is taking center stage this year.

With COVID-19 now affecting citizens globally in unprecedented ways, I wanted to get a sense of what its implications could be on 4/20.

Last year’s events generated $135 million in legal cannabis sales including April 19 ($90 and $5 million respectively).

What will be in store this year for the traditional “social” celebration as opposed to the “social distancing” non-celebration we face this year?

I turned to my go to “Ecannabist”, Roy Bingham of BDS Analytics to help me find some answers.

MM: Roy, lets take a look at where we are. Imagining COVID-19 never arrived, what were the most material trends you were seeing, having just finished the first quarter of the year?

RB: Michael, you are correct, it’s hard to imagine life right now without COVID-19. Lets start with overall sale trends this year to date. We are seeing, on average, a 17% growth in the most established states (11% in California and 37% in Arizona). Massachusetts and Illinois have launched Adult Use programs, which will increase sales in those states. Medical programs in all states are growing strongly; Florida is up a remarkable 170% to $660 million in 2019 and Oklahoma, a newbie became a $350m market almost overnight. Based on these sales, BDS Analytics projects growth of 31% from $12.4 billion to $16.3 billion in 2020.

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MM: The day of the week makes a big difference doesn’t it? Last year, 4/20 was on a Saturday, one of the biggest sale days. This year 4/20 takes place on a Monday, the lowest sale day. What effect if any do you think “day of the week” will have on celebration sales? How do think year over year sales will be?

RB: You are right Michael. The day of the week does matter. Friday, as the end of the workweek and the beginning of the weekend, is normally the biggest day for cannabis sales. Saturday’s sales are typically second best only 15% less. Sunday, the last day of the weekend is usually low, followed by Monday, the lowest sale day. Last year Friday 4/19, had big sales up over 50% a typical Friday; Saturday 4/20 sales exploded at nearly three times normal Saturday sales.

Due to Monday being 4/20 day, its likely 4/20 this year will be more like a long weekend where we anticipate three to four better than average days. Unfortunately, we do not expect one huge day.

MM: The California Bureau of Cannabis Control published a release this week requesting Californians to space their purchases over four days (the 17^th to the 20^th) in order to better follow social distancing guidelines. You hit the nail on the head regarding the long weekend analogy. Other than day of the week, what are other important key factors in this new COVID-19 world for 4/20?

RB: The pandemic and recession to come are likely to weigh down growth. 4/20 is normally a public celebration. This year, parties, concerts, and other in-person events are out. By staying at home in addition to the financial pinch, many are already experiencing a negative effect.  57% of cannabis consumers have a household income of less than $60,000 and 32% of those make less than $35,000. In addition, while some dispensaries have been declared “essential services”, many have closed, and in some states like Massachusetts, Adult Use stores may not be reopened in time for 4/20.

MM: Lets talk about marketing and promotions. Normally patients and customers are inundated with special offers and discounts for 4/20. Will this year be the same?

RB: For a host of reasons, including staffing challenges, dispensaries may run fewer promotions this year. A dispensary visit now will be a special destination trip instead of a casual drop in. Occasional consumers may also buy much smaller quantities on 4/20.

MM: Are there any positives that we could see this year? What are the material factors that could increase post COVID-19 sales?

RB: There does appear to be a silver lining with regards to sales. Sixty-two percent of customers consume medically. Underlying health issues will likely increase such as anxiety, stress, sleeplessness and even PTSD. 50% of cannabis is consumed at home. More time at home should increase sales. There is an acute lack of competing relaxing alternatives at present such as yoga, the gym, bars, restaurants, and movies. This should increase cannabis consumption. Many states have introduced new rules that enable online ordering, delivery or curbside pickup. This could also increase sales.

MM: There was a lot of initial excitement about an increase in sales immediately before shelter in place rules kicked in. Headlines in most trade press gave the impression these increases would continue or at least stabilize. What really happened?

Más sobre cannabis en Español en El Planteo.

RB: You are absolutely correct. No one thought the increase was short term. Cannabis consumers stocked up to ensure they had enough of a personal inventory. March 23rd was the largest day for cannabis sales ever (even bigger than 4/20/19). Afterwards, there were nine consecutive days of above average sales. However, by March 22^nd, sales declined with two consecutive weeks of below average sales. Average order size increased 25%, but purchase frequency then plummeted.

MM: Lets talk about an interesting irony based on federal legality. Cannabis businesses will not be eligible for emergency small business loans. A majority of customers will be entitled to federal benefits. What affect could this have on sales?

RB: It’s a fascinating irony. Sometime in the next few weeks, millions of Americans will be receiving CARES Act payments from the Federal government. In addition, millions of newly unemployed will begin to receive enhanced unemployment benefits. You are correct. The majority of cannabis consumers will qualify. We witnessed this recently when government stimulus payments were distributed in Canada last week and sales increased significantly. In effect, one of the biggest catalysts for increased sales could be federal crisis payments.

MM: Roy thank you and BDS for sharing your market insights. If we do see an increase in sales as a result of Federal payments, there would be no doubt that Richard Nixon would be rolling over in his grave.

Lead image by Ilona Szentivanyi. Copyright: Benzinga.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.