Western States Cannabis Roundup in the Middle of the Coronavirus Pandemic

Regional CannaBlog By Jim Marty, CEO

Bridge West CPAs and Advisors to the Cannabis Industry

April 13, 2020

Colorado

As of the date of this writing, Colorado dispensaries are still open, both for medical and adult use cannabis, as they have been designated essential businesses.  The cannabis industry was quick to adopt new rules for curbside delivery with each transaction recorded with lapel cameras. The Colorado Department of Revenue-Marijuana Enforcement Division has issued “social distancing measures” for medical and retail store transactions that take place inside and outside.

In the early days of the pandemic, many retailers in Colorado reported record sales.  In recent days, sales have dropped back to more normal levels.  It will be interesting to track cannabis sales when the stimulus checks from the Federal Government start hitting bank accounts and mailboxes.

On the cultivation side, it has been business as usual.  I have been speaking to grow clients this past week, and they have been practiced social distancing and wearing masks, gloves, and gowns as part of their standard operating procedures even before the coronavirus.  The facilities are large enough that keeping six feet apart is not a problem.  Cultivators have treated cannabis as a pharmaceutical product for a long time.

When this crisis is over watch for a move to legalize delivery services in Colorado.

Nevada

After being deemed essential, Nevada dispensaries saw long lines and strong sales in early March.  But per the emergency declaration issued by Nevada Governor Steve Sisolak on March 20, all retail cannabis shops were forced to close due to the coronavirus.  All Nevada retail license holders will be able to start delivery services for 60 days following the shutdown.

While Nevada delivery services will be busy bringing cannabis products to residents, the number of retail dispensaries, currently 65, was not developed for the state’s three million residents, but for 40 million visitors.  Thus, there will be layoffs of budtenders and overproduction of inventory until the tourism industry comes back.

New Mexico and Arizona

These states have medical marijuana only, no adult use for now.  This could change this Fall as both New Mexico and Arizona plan to have legalization initiatives on the ballot.  For now, their residents continue to come to Colorado for adult use cannabis and cannabis products.  However, with travel restrictions and lockdowns, dispensaries on Colorado’s southern border are reporting less out-of-state sales.

As of now, New Mexico is keeping its medical marijuana shops open during the coronavirus pandemic.  Medical Cannabis Program Director, Dr. Dominick Zurlo said medical cannabis licensed producers qualify as essential services under Secretary of Health Kathyleen Kunkel’s latest emergency health order. “Accordingly, dispensaries are not required to limit operations pursuant to that order,” Zurlo wrote.

Anticipating a possible staffing shortage for producers, Zurlo said the department is also “temporarily suspending” criminal background checks for new employees until producers send in their relicensing applications, which are due in June.

“As previously distributed to the producers and dispensaries, the Medical Cannabis Program recommends using pick-up, curb-side, or delivery service,” he wrote.

California

California is also benefiting from a robust delivery service network, both state licensed and unlicensed.  The struggle to get California cannabis businesses onto the regulated, taxed and tested program continues.  Supply and demand at dispensaries seem to be adequate for the time being.

The size of the California cannabis market is huge, $10 billion a year in sales by some estimates when licensed and unlicensed business are combined.  These same estimates put the illegal market at $6 billion and the legal market approaching $4 billion at this time.  Over the next three to five years, those number are expected to reverse creating many opportunities in the Golden State.

As far as the coronavirus crisis goes in California, the state has done very well with much lower deaths than New York.  Sales in California’s market have been outpacing 2019 sales during the coronavirus crisis, and the amount by which they’re exceeding 2019 sales is lower than earlier in 2020.

Each weekend in January and February 2020, the average by which California sales in 2020 were over 2019 was 68%. Last weekend’s sales beat sales for the same weekend in 2019 by only 14%, an indication that consumers are slowing down their purchases.

Washington

In mid-March, the Washington State Liquor and Cannabis Board made this announcement:

At this time, cannabis retailers are not required to close due to the coronavirus restrictions. However, to promote social distancing for qualified patients, the [Liquor and Cannabis Board] is temporarily allowing cannabis retailers to sell to qualifying patients or their designated providers outside of their business, but within the licensed property line. This is the same allowance provided to approved alcohol licensees during this time.” – LCB press release, Mar. 17, 2020

So, Washington dispensaries have stayed open during the COVID-19 pandemic.  Sales in Washington seem to be following the trend in Colorado; sales spiked in mid-March as consumers stocked up and then trailed off by the end of the month.

Oregon

Oregonians got through their first month of quarantine by smoking more cannabis. Sales data from the Oregon Liquor Control Commission show Oregonians bought $84.5 million worth of cannabis products in March, the most in a single month since the state legalized recreational use in 2015. The previous record, set in July 2019, was just shy of $80 million.

The March number is a 37 percent increase from this time last year. Sales per retailer averaged $135,000, a 30 percent jump from 2019.

Utah

A good way to wrap-up this Western States cannabis round up is with the newest participant, Utah.  A medical marijuana program was passed by the 2020 legislative session allowing doctors to recommend cannabis to patients.  The first dispensary, referred to as a pharmacy, opened in early last month in Salt Lake City. Way to go Utah!

Stay tuned for more Regional updates and CannaBlogs from Bridge West CPAs and Advisors to the Cannabis Industry. Contact Jim Marty, CEO of Bridge West, at 303-651-0304 and jmarty@bridgewestcpas.com with any questions and for assistance navigating these challenging and unprecedented times.