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COVID Spikes a Tsunami of Cannabis Sales


News provided by

CannabisNewsWire

22 Jun, 2020, 12:30 GMT

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CannabisNewsWire Editorial Coverage

DENVER, Colorado, June 22, 2020 /PRNewswire/ -- COVID-19 has devastated most businesses but created a surge in cannabis sales—a trend that's likely to continue.  Strange bedfellows, COVID-19 and cannabis. As the pandemic wreaked havoc on the U.S. and global economies, cannabis sales rocketed higher across multiple markets in North America. California cannabis sales soared nearly 160% compared to the same day in March 2019, while sales in Washington rocketed 100% and Colorado saw a 46% increase on the same day. This surge doesn't appear to be a flash in the pan either. An emerging leader in the U.S. cannabis marketplace, Cannabis Strategic Ventures (OTCQB: NUGS) (NUGS Profile), is now on pace for over $2.7 million in quarterly sales and approximately $11 million in annualized sales, based on its strong performance in April and May. Simultaneously, the company increased its harvest size by as much as 2.5x and is now selling product at an 11% premium to industry standard. Like any industry, the real winners in the cannabis markets are tied to sales and earnings growth. Canopy Growth Corporation (NYSE: CGC) has continued to release new products for a variety of markets while attracting significant investment from the beverage sector. Cronos Group Inc. (NASDAQ: CRON) has continued to work on expanding its international reach. With a similar focus on growth, Aurora Cannabis Inc. (NYSE: ACB) has acquired another company to expand its reach from Canada into markets in the United States. Organigram Holdings Inc. (NASDAQ: OGI), whose business was initially disrupted by COVID-19, has begun a phased return to work and almost immediately announced the release of new products, making the most of continuing consumer demand.

Click here to view the custom infographic of the Cannabis Strategic Ventures (OTCQB: NUGS) editorial.

Winners and Losers in the COVID Crisis

COVID-19 has had a devastating impact on most businesses. Shops and restaurants forced to close, manufacturers unable to operate their plants, companies across the manufacturing and service sectors seeing demand plummet. The layoffs and losses are very real, and no one knows yet what the long-term economic impact will be.

But some businesses actually benefited from the economic disruption the pandemic has wrought. There are obvious ones like pharmaceutical companies and those producing protective equipment for medical staff. There are the tech businesses that facilitate working from home, providing software for virtual workspaces and online meetings. And there has been a huge increased demand for home entertainment, which has spilled over into a less obvious sector – cannabis producers such as Cannabis Strategic Ventures (OTCQB: NUGS) (NUGS Profile).

Cannabis Business Booms

Cannabis was already a boom industry in North America. This has been driven by a range of recent changes, such as recreational legalization in Canada, federal legalization of hemp in the US, and the repeal of prohibition across a growing number of states. This trend has allowed the growth of companies such as Cannabis Strategic Ventures, which cater to a growing market as customers move from criminal supply channels to legal ones.

Demand exploded during the early stages of COVID-19's spread through North America. According to the Bank of America Securities, there were record sales of cannabis as consumers stockpiled, preparing for a lockdown. While some people bought mountains of toilet paper or tinned food, both medical and recreational cannabis users were making sure they had enough to see them through a crisis.

The result was a spike in sales in April and May to the benefit of companies with recognizable quality products gleaned from operational efficiencies such as Cannabis Strategic Ventures. Sales could have been stymied as states locked down and restricted business to control the spread of COVID-19. But most states classified cannabis as an essential product, allowing sales to continue even as other parts of the economy were shutting down.

Together, these factors led to record sales for some cannabis companies, with Cannabis Strategic Ventures celebrating increased sales of cannabis product from its core cultivation facility and adding staff to address the rising demand.

A Strong Player in the Cannabis Market

These sales marked an extraordinary month for NUGS. Despite restrictions on business due to COVID-19, the company had record-breaking sales in the final week of April, putting monthly sales 800% higher than the monthly average for Q1.

Any fears that this might be a blip caused by panic buying at the start of the pandemic vanished the following month, when the company announced sales from its most recent harvest. With cannabis sales in the US average roughly $1,525 per pound, the company sold its product at around $1,700 per pound—11% above benchmark levels. This was a particularly impressive price given that it had been selling at a discount relative to the benchmark only six months before.

Of course, not all cannabis companies will benefit from the crisis. Their ability to profit depends in large part on the strength of their existing business. NUGS had been building up its business prior to the crisis, with the addition of a six-acre cultivation site in 2019, capable of four or five harvests per year.

Seizing the market opportunity brought by COVID-19, the company has announced further improvements in the first half of 2020. Work on both the quantity and the quality of output has more than doubled the output of cultivation facilities while supporting rising prices for its products.

An Expanding Industry

The long-term expansion of legal markets has led to dramatic growth for cannabis companies over the past decade, and the COVID-19-related influx of revenues provides well-run businesses the resources they need for further expansion. Late April and early May saw Cannabis Strategic Ventures sell out its entire stock every week for a month.

"We have never seen anything like this," said Cannabis Strategic Ventures CEO Simon Yu. "We booked $100,000 in one day to clear out all of our remaining inventory. We anticipated this dynamic but still underestimated the force of the trend. Too much demand is always the problem you want to have."

NUGS sold $929,000 of cannabis products in May and expects to see even greater sales in June. Expanded inventory and product range have supported this growth even in a time of crisis, while reinvestment from that growth will let the company further expand its capacity.

Part of the sector's success comes from producing a varied range of brands and products. Rather than just selling weed, the more successful companies have been developing a variety of cannabis derivatives for different markets. While the recent boom in sales has come from demand for cannabis itself, related brands have diverse interests in supporting long-term growth of the market, normalizing cannabis and its derivatives as consumer products, and protecting companies against a disruption in any individual part of the market.

Cannabis Companies Riding Out a Crisis

The boom in sales brought about by the COVID-19 crisis has created an opportunity for a range of growing companies.

Canopy Growth Corporation (NYSE: CGC) is a leading diversified cannabis, hemp, and cannabis device company, with a range of brands and cannabis varieties sold in dried, oil and gel capsule forms. It has gained in strength largely through its diverse range of products and brands, which it has continued to grow during the COVID-19 crisis, with the recent announcement of new cannabis packages, infused drinks, chocolates, and vaping components. The company made news in 2017 when it received substantial investment from Constellation Brands, a leading beverage company, and Constellation has recently added to that investment by purchasing further shares – a sign of big business's faith in the cannabis market in general and Canopy Growth in particular.

With development and distribution spread across five continents, Cronos Group Inc. (NASDAQ: CRON) is tapping into the international potential of the cannabis market. The company is focused on building disruptive intellectual property by advancing cannabis research, technology and product development. Cronos saw a year-on-year rise in revenues in Q1 of 2020, despite some losses, and has been working to expand its international reach. It has adapted to the COVID-19 crisis by moving its annual shareholder meeting online, allowing full participation without the infection risks that currently come from large gatherings.

Canadian-based Aurora Cannabis Inc. (NYSE: ACB) serves both the medical and consumer markets, working as a pioneer in global cannabis to help people improve their lives. The company's brand portfolio includes Aurora Drift, Daily Special, MedReleaf, and ROAR Sports. It will be expanding its lines with the recently announced acquisition of American company Reliva, which will provide Aurora with a top-ranked hemp-derived CBD brand currently sold in over 20,000 mass retail locations in the US.

Organigram Holdings Inc. (NASDAQ: OGI) produces high-quality, indoor-grown cannabis for patients and adult recreational consumers in Canada, as well as developing international business partnerships to extend its global footprint. Though its work was initially disrupted by COIVD-19, in mid-May the company announced the first phase of a return to work. The company has quickly gotten back to expanding its business, with the announcement of new product releases for medical consumers.

COVID-19 caused serious disruption for most businesses but spurred a revenue spike in the cannabis industry, creating a substantial opportunity in an already expanding sector.

For more information on Cannabis Strategic Ventures, please visit Cannabis Strategic Ventures (OTCQB: NUGS)

About CannabisNewsWire

CannabisNewsWire (CNW) is an information service that provides (1) access to our news aggregation and syndication servers, (2) CannabisNewsBreaks that summarize corporate news and information, (3) enhanced press release services, (4) social media distribution and optimization services, and (5) a full array of corporate communication solutions. As a multifaceted financial news and content distribution company with an extensive team of contributing journalists and writers, CNW is uniquely positioned to best serve private and public companies that desire to reach a wide audience of investors, consumers, journalists and the general public. CNW has an ever-growing distribution network of more than 5,000 key syndication outlets across the country. By cutting through the overload of information in today's market, CNW brings its clients unparalleled visibility, recognition and brand awareness. CNW is where news, content and information converge.

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