Is cannabis now an officially recession-proof good like alcohol and fast food? That’s the chatter after Illinois released adult use cannabis sales numbers for March on Thursday. Sales ticked up $1.1 million over February, totaling $35.9 million for the month of March. It’s nothing like the national increase in alcohol sales, which jumped 55% in the week ending March 21, according to Nielsen, but for a burgeoning industry still burdened by conservative opposition and a very active underground market, a 3% month-over-month increase in sales during one of the most devastating recessions in history is nothing to be sneezed at, right?
Being recession-proof is key to success these days, since we seem to be heading towards if not a global economic apocalypse, then at least some sort of bonfire. Unlike many other industries, which are laying off and furloughing employees at a furious rate, the cannabis industry in Illinois seems to be struggling with not enough employees, as some stay home for health reasons, and companies are now looking to cross-badge employees so they can work at multiple facilities to cover the worker shortfall.
So cannabis is doing great! If we sustain the same sales growth rate as last month, we’ll end up with a 50% annual increase, an enviable number for any industry. But then there’s the whole problem of capital availability: If cannabis companies keep burning cash, where are they going to get money to stay in business?
As we reported last week, the planned purchase of Verano Holdings by Harvest Health & Recreation seems to have collapsed largely due to Harvest’s sudden need for cash, as the economy fell apart. Laster this month, most of the U.S.-based cannabis companies will report their 2019 financials, which will tell us who has the cash to survive the recession, and who will have enough cash to keep growing.
Then we’ll know if not just cannabis as a good, is recession-proof, but if cannabis as an industry is recession-proof.