Cannabis in North America: COVID-19 challenges the sector
The Interview first covered the impacts of COVID-19. It “has the potential to be the straw that breaks the camel’s back” for some companies. Consumption is going to decrease, which will hinder companies’ ability to generate cash – adding difficulty to a situation where capital-to-assets has “already been drying up”.
As cannabis consumption isn’t federally legal, it could be harder for firms to access government help in the US, but this isn’t the case in Canada. However, “I think that there is a grey area in terms of some of the criteria to access funds in Canada”.
The specialist pointed to the last recession as an indicator of what could happen to consumer demand. With reduced discretionary spending, people tend to move to lower priced options within categories – and it could be no different with cannabis, which could
have a significant impact on the medical cannabis industry. “The reality is, COVID is causing consumers to shift a few levels down on Maslow’s hierarchy of needs.”
Another topic brought up was the fact that the medical cannabis industry has been falling below expectations on revenue. Two reasons were given for the prior optimism. Firstly, many projections assumed that the strong growth rates initially recorded would continue, as well as the ability to carry on attracting new consumers. And, secondly, the power of the black market was underestimated.
The general management style within Canada’s industry was also questioned. Focusing on licensed producers, the specialist added that: “You had people at the top who knew how to raise money but not how to run businesses. You had people running, in the businesses, who really understood cannabis well, so they built those brands and those propositions as if they were the consumer.” By not taking into account the “curious, non-cannabis user”, market opportunities have been missed.
The conversation moved on to discussing opportunities and challenges in CBD, the competition, including Aurora, and the financial issues seen in the industry. As one of his final remarks, the specialist affirmed that “it’s not a segment that’s going to go away. It has the potential to be a really big category”.
To access all the human insights from Third Bridge Forum’s Impact on Cannabis Industry & Bankruptcy Outlook Interview, click here to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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