The COVID-19 pandemic has been an uncertain and scary reality for us all. On many levels, our global society is being dramatically altered during this public health crisis. As many of us wait for things to “go back to normal,” the question remains: “what will the new normal be?”
The coronavirus pandemic will undoubtedly change our society for good. The drastic shifts in the social, political, and economic realms are too significant to leave no lasting impact. And, as always, the cannabis industry faces unique challenges in addition to the same daunting prospects as everyone else. What is changing now, and what might the world look like when the global pandemic passes? Let’s Fink about it.
How COVID-19 will change the social landscape
The spread of the novel coronavirus has underscored some shifts in the social landscape. As a collective effort to engage in “social distancing” to “flatten the curve” rapidly spread throughout the world, existing trends such as an expansion of remote work arrangements and independent contracting have accelerated.
As many of us adapt to the new realities of social distancing, remote work, and limited socialization, it’s natural to feel like things will never be “normal” again. And though in time, we will likely return to face to face social interaction, then we will undoubtedly gain a new perspective toward public health and common courtesy. Even when the virus wanes, many of us will continue with the mindset that this could happen again and will live and act with newfound caution.
This could have profound on how we socialize. After living with less in-person social interaction, some will learn to live with it and find new ways to socialize-in-place, and others will crave and jump back into what they once had. Many of us have now come to value, or re-value, alone-time, and family-time. This is likely to recast how we think about our careers and our work-life balance.
Also, flexible work arrangements will likely become commonplace. Remote work was already on the rise before COVID-19 and, with many businesses leaning into that trend to remain operational, expect to see that trend accelerate. Remote work is not only desirable to employees, but research also suggests it improves productivity and reduces costs for employers. The COVID-19 pandemic proved remote work on a broad scale is possible; look for more businesses to extend remote work options to their employees once the coronavirus wanes.
Alongside the expansion of remote work is the ongoing growth of the “gig economy.” For many who worked as independent contractors to supplement their primary income in the past, their “side gig” has suddenly become their primary job as many businesses closed their doors due to COVID-19. Look for this trend to compound the growth of the gig economy when the coronavirus comes to an end, as many independent contractors will find they can meet their financial obligations by working for themselves.
The political ramifications of the coronavirus pandemic
Public policy is not immune from the sweeping changes brought about by the novel coronavirus.
Spending measures that were politically unfeasible before are now being passed by a Republican-controlled Senate and Republican president without delay. President Trump signed a $2 trillion stimulus package called the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27th in a move that would have been unthinkable from conservatives under typical circumstances.
That measure – the largest in U.S. history — included $350 billion in forgivable SBA loans for small businesses, $500 billion in loans to distressed industries, a broad expansion of unemployment insurance benefits, and direct payments of $1,200 to most taxpayers, as well as block grants to states and emergency relief funds for some businesses.
For perspective, in 2009, the federal government passed a controversial stimulus package called the American Recovery and Reinvestment Act (ARRA) intended to address the financial crisis. That package totaled about $831 billion, which pales in comparison to the $2 trillion CARES Act. The ARRA passed the House by a vote of 244 – 188 and the Senate by a vote of 61 to 36. The CARES Act was unanimously supported in the Senate 96 to 0 and passed the House by a voice vote. Given the likelihood that the economic impacts of the coronavirus long outlast the pandemic itself, it is possible we could emerge from the crisis with Trump acting more like a liberal president and conservative Republicans lined up behind him in support of additional government intervention in the economy.
Also, it will be interesting to see how the White House responds to this moment with future crises in mind. The 9/11 terrorist attacks precipitated the creation of a new Department of Homeland Security: for example, a governmental reorganization will likely be needed to prepare for future pandemics. After the coronavirus, it is not unthinkable that we see the development of a new pandemic response department tasked with preventing and responding to rapidly spreading illnesses like the coronavirus. A similar reorganization of existing agencies that we saw with the Department of Homeland Security — when more than 20 agencies were brought under the newly formed department’s hierarchy — could occur to better prepare for future pandemics.
How the coronavirus pandemic will impact business and the economy
The unusual speed with which the federal government delivered a massive stimulus package demonstrates how severe the economic impacts already are. This has been evident in other ways as well, such as businesses voluntarily shifting to a full-remote work model even before they were ordered to close by the state. Those companies capable of remaining operational with a fully remote staff have put significant effort into retooling their workforce – including implementing training for employees and software solutions to support their productivity – in a bid to stay open.
Unfortunately, other businesses are not so lucky. Those that were forced to suspend operations found their revenues evaporate overnight. Many companies, to sustain themselves for the short- to mid-term, have turned to creative solutions to generate immediate revenue. All restaurants pivoted to takeout or delivery services, for example. Others are selling discounted gift certificates redeemable for future goods or services.
Some of these changes in the business model will be here to stay. For example, expect restaurants that pivoted to deliveries and takeout to retain those services even after their dining rooms reopen. In keeping with the restaurant industry, for example, centralized kitchens focused on the delivery of fresh meals could find significant success even in a post-COVID-19 world. This is the idea behind Uber co-founder Travis Kalanick’s new business, CloudKitchens. New and creative business ideas like this, which are suited to the needs of this moment, could exhibit significant staying power even once business returns to its more usual rhythms.
Of course, there are bound to be many bigger-picture economic impacts after COVID-19 recedes. As the crisis comes to an end, there is likely to be a sudden consolidation across many adversely affected industries due to a reduction in competition or mergers and acquisitions. There will also be an opportunity for disruptors that found a niche during the crisis to upend long-standing industries. Additionally, expect to see the availability of commercial real estate increase, as a result, both of economic turmoil and an increase in remote work arrangements.
Time will tell whether relief funding and social distancing helped mitigate the worst economic impacts of the coronavirus. Still, one thing is sure: the damage done to many businesses forced to close or significantly scale back operations is likely to create lasting impacts for months and even years to come.
The cannabis industry after the novel coronavirus
The cannabis industry, unfortunately, faces all these challenges and then some. As an industry based on a product that remains federally illegal, cannabis businesses, both plant-touching and ancillary, are mostly locked out of the relief funding available to other industries in the CARES Act. Without access to federal stimulus funding, cannabis businesses are forced to rely on their states for support, as well as their own revenues.
In some places, this is a challenge. Some states have designated cannabis dispensaries non-essential and ordered them to close their physical locations. Depending on local delivery regulations, some cannabis dispensaries in these areas have been able to shift to an e-commerce model.
The designation of many adult-use cannabis dispensaries as non-essential has also revealed that many Americans relied upon the adult-use side of the industry for medical or wellness purposes. In Massachusetts, for example, more than 1,300 new patients were approved for medical cannabis access in the last week of March alone. An influx of new patient registrations into medical marijuana programs could illuminate the need for expanded access to cannabis and change states’ attitudes toward cannabis in general.
The economic uncertainty plaguing the broader economy, of course, is also impacting the big players in the cannabis space. Acreage Holdings, for example, announced April 3rd that it would cut 120 jobs, temporarily close several facilities across the country, and step away from multiple acquisitions. Meanwhile, 4Front Ventures cut about 40% of its corporate workforce, as well as eliminated about 45% of all its staff at its adult-use and medical cannabis stores. MedMen also withdrew its previous revenue and store count guidance for fiscal 2020 and 2021, explicitly naming the coronavirus pandemic as the culprit.
The reorganization that many cannabis companies are undergoing as a result of the coronavirus is here to stay. Even when the immediate impact of the illness has dissipated, these companies will retain the efficiencies they found during the crisis. If there is a silver lining for the cannabis industry, it is that it could emerge from the global pandemic leaner than before and well-positioned to resume its remarkable growth.
Beyond immediate term reorganizations, however, is the question of whether an economic need could accelerate support for the repeal of federal prohibition. The need for economic growth will be immense even after the coronavirus wanes, and an unfettered cannabis industry could provide new jobs to those that were laid off as a result of the coronavirus and a robust source of tax revenue. In other words, cannabis could help lead the way for a post-COVID-19 economic recovery. There is historical precedence that suggests this is a real possibility. During the Great Depression, anti-prohibition activists successfully argued that the need for jobs and tax revenue was so immense that alcohol must be legalized. As we emerge from the coronavirus pandemic, legalization advocates should make the case that the cannabis industry will be a central pillar of the nation’s economic recovery.