How are you supposed to escape when you can’t go anywhere?
When the COVID-19 pandemic hit Canada in March of 2020, Canadians started stocking up. For some, it was toilet paper, for others hand sanitizer and antibacterial wipes, but for 20% of Canadians, it was cannabis. With a spike in demand in an industry so new to Canada, COVID-19 affected the way several consumers depend on cannabis products, as well as the processes of those producing them.
A Mental Health Lifeline
“I didn’t know how I was going to do it.” That’s what Kacie Fann said when the effects of the pandemic found her losing her job, caring for three young children now navigating online schooling, and desperately trying to keep her family out of debt. It’s a similar story for many Canadians, much like the rest of the world. Fann ultimately turned to CBD for her severe pandemic-related anxiety attacks, looking for any form of stress relief cannabis could provide. StatsCan reports that of those Canadians already regularly consuming cannabis products, 34% of users say they have increased their consumption due to the pandemic. These users cite reasons such as stress, boredom, and loneliness for their increase in consumption, looking for a way to cope.
Supply vs. Demand
With this increase in cannabis usage at the start of the pandemic that has since continued into 2021, there comes another side to the story from the manufacturing side. This increase in demand also exposed the flaws in the Canadian industry, says Greg Engel, former CEO of New Brunswick-based cannabis producer Organigram Inc.
At the start of the pandemic when the government had implemented lockdowns, Organigram Inc. was forced to kill large quantities of their plants due to being unable to harvest them. This led to voluntary layoffs which ultimately turned permanent come August 2020. While this turmoil was occurring inside the doors of Organigram, outside of the facility in the rest of the province, consumer demand was surging. However, Engel calls this demand worthless without supply, “In hindsight, we reduced our staff too much…the demand continued to grow.”Engel’s story mirrors many similar experiences across the province and the rest of Canada. During a time where cannabis producers theoretically should have been thriving and having a record year, manufacturers were struggling to maintain normal production schedules—let alone increase to meet the spike in consumption. Organigram Inc.’s silver lining is its newly implemented automation techniques in order to maintain production with fewer people, processes that will continue long after the pandemic is in the past.
Where Does the Industry Go From Here?
One of the most notable results from the cannabis boom during the pandemic is that it decreased illicit marijuana sales in favour of licensed dispensaries. David Soberman, a marketing professor at the University of Toronto predicts that those who steadily consumed legal cannabis during the pandemic will remain faithful to their legal options, and not return to illicit opportunities. In July of 2020, licensed cannabis retailers recorded the greatest monthly sales increase since cannabis was first legalized in Canada, with more than $231 million in legal products sold. Additionally, by the third quarter of 2020, the licensed cannabis market was projected to represent $824 million in sales, overtaking the illicit market with an estimated $754 million in sales.
This spike in licensed product demand is also significant because legalized cannabis products cost 40-50% higher than their illicit counterparts—not yet including government regulated tax. Legalized cannabis in Canada is subject to excise taxes in addition to regular sales taxes, resulting in 25% of tax dollars being allotted to the federal government and the remaining 75% being distributed at the provincial level. Thus, this increased demand for products is resulting in an influx of tax dollars through legalized cannabis channels. Consumers during the pandemic are looking for safe and reliable options in terms of both the products they consume and the manner in which they are sold.
The cannabis industry is yet another sector to be transformed by not only the pandemic but the digital age. In addition to the digitally automated production processes that businesses like Organigram Inc. were forced to adopt, strict stay-at-home orders found businesses scrambling to create websites in order to reach consumers. This resulted in the e-commerce industry seeing sales more than double by 110.8% from May of 2019, pre-pandemic. The work-from-home business model implemented at the start of the pandemic also likely allowed users more time and freedom to consume cannabis, speculates Terry Kulaga, Founder of Weed Me in Pickering, Ontario.
With COVID-19 still a part of daily life after more than a year since it was first declared a pandemic, it is unclear if Canada’s cannabis industry will return to 2019 industry benchmarks, or if like much of the rest of the world, the industry will adapt to the “new normal.”
With the high-stress circumstances of daily life combined with the increase of the industry’s digital presence, COVID-19 created the perfect storm for a cannabis boom.
Editor’s note: Katie Ross, a student of Digital Communications at York University is our first guest blogger. Share your personal cannabis stories with us in the comments below.
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