Three months after the Coronavirus first appeared in Wuhan, China, it has infected over 2 million individuals and claimed at least 130,000 lives worldwide. Experts say more than 70% of the world’s population may end up infected with the virus, and that we may have to practice social distancing in sporadic periods until 2022 to make sure it is completely eradicated. It’s safe to say the pandemic isn’t going away any time soon.
To help curb the spread, most governments have ordered lockdowns, requiring people to self-isolate and all but the most essential businesses to shut down. This has been extremely hard on the economy, with some economists saying the U.S. is already in a recession. The cannabis industry felt the effects of the Coronavirus way before it spread to Europe and the U.S., and it’s very possible that the industry will come out of this pandemic looking and operating very differently. For starters,
Supply chain issues were exposed as soon as China shut down production at the start of the year. The country is a known manufacturer of cheap parts, and most cannabis companies depended on it for materials like vape hardware and packaging. Additionally, the pandemic revealed that there were few, if any, domestic alternatives. Although parts of China have started opening up again, these companies will have to consider the viability of international supply lines.
Real estate opportunities. With the economy at an all-time low, companies that are in the market for real estate after the pandemic dies down will most likely find better deals than they would have before the pandemic. The fact that numerous state governments have deemed marijuana essential is a tacit acknowledgment of its medical abilities, so players looking to cash in on this after the virus dies down will have a plethora of attractive real estate opportunities.
Mergers and Acquisitions. Although cannabis has registered booming sales in the weeks leading to and during the lockdown, some businesses haven’t been doing as well. California’s marijuana industry, for instance, wasn’t in a good place even before the Coronavirus broke out. Companies have been faced with plummeting cannabis stocks and investor retreats that have led to widespread debts.
With the Coronavirus halting almost all business operations and without access to traditional banking services like bank loans, these businesses will be forced to find another way to survive, such as being acquired by a larger firm or merging with one.
However the shutdown may be around for the long haul, so the pandemic’s full effect on the cannabis industry is yet to be determined.
Experts believe that cannabis companies like Sugarmade Inc. (OTCQB: SGMD) are already activating their contingency plans and gearing up for tough times ahead.
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