The Industry COVID Can't Kill
No one knows what America is going to look like a year from now.
Between the pandemic, the ongoing social unrest, the coming election, and the never-ending game of geopolitics, there’s no telling what the climate in this country will be in 365 days.
And while all of those aspects play important roles, it’s perhaps the pandemic that will have the longest-lasting effect on life in the United States.
Yes, there’s the obvious human toll, something states are experiencing on different levels. But, longer-term, there will also be the financial toll.
You already know about the business closures, layoffs, and runaway unemployment that comes with those things, but then it’s important to think about what that means for state budgets.
A portion of every state’s citizens isn't working right now. Another portion isn't spending like they used to. That means states aren’t bringing in the tax revenue they're used to. That ripples out to things like schools, civil services, and other areas the public relies on.
And unlike the federal government, those states aren’t able to simply conjure new money out of thin air to make up for that projected shortfall.
It’s something governors are already beginning to prepare for, but the reality is still going to sting when it finally hits. And they don’t have many options when it comes to getting the cash. Like I said, there’s no printing money. Likewise, raising taxes is going to be out of the question.
There is one thing states will be able to do to stop the bleeding, however. It’s a matter of turning to a relatively new industry that’s proven able to withstand the economic freefall we’ve been seeing for the past few months.
A Shelter from the Storm
It’s been proven that ‘vice’ industries and health care tend to be able to withstand downturns. The marijuana industry can be seen as a bit of both.
Marijuana legalization has been a big economic story for only the last few years, so this downturn brought on by the pandemic can be seen as its first big test.
Consider the states of Oregon and Washington, which both have legal recreational and medical marijuana use.
Since the pandemic began in the U.S., these states have seen surges in sales. Oregon’s sales were up 60% from May of 2019, crossing the $100 million line for the first time since legalization in 2015.
Likewise, Washington saw an increase of nearly 30% in March, April, and May over the same period last year. With these numbers come increased tax revenue. Washington charges 37% sales tax while Oregon gets 17%, leaving both states with something to help patch the hole left by the blow their economies have taken over these past three months.
Now, in all fairness, that isn’t necessarily the case everywhere marijuana is legal.
Take the states of Colorado and Nevada.
Colorado saw a dip in recreational sales in April, by about 12%. Medical sales were up, however, by about 10%. In Nevada, most marijuana is sold in Clark County, where Las Vegas is located. Statewide, sales were down about 25% in May.
Still, in 2019, Nevada saw sales of $629 million, which was 20% higher than 2018 and showed just how capable the industry is of fattening the state’s coffers.
It also helps to consider the fact that Colorado and Nevada are big tourist states, more so than Oregon and Washington. When you take that into account, it’s easy to see why the marijuana industries in those areas stumbled these past few months. And when you look at what those states have sold just last year, it’s easy to see the potential as states begin to recover from the pandemic.
The states that have legal dispensaries have largely caught on. Most states deemed marijuana dispensaries to be “essential services”, meaning they were allowed to continue operations during stay-at-home orders.
They know this industry is one that can help them bounce back from crippling deficits as they begin to rebuild once the pandemic is over.
And it’s a trend that could spread to the rest of the country.
A Coming Cultural Change
No state wants to leave money on the table, especially when they’ll be strapped for cash in the coming years. It’s for that reason that many see the legalization of marijuana on a federal level happening sooner than later.
And when it does happen, there’s one company in particular that stands to benefit. It has almost a quarter billion dollars in funding. Its founder has scooped up 11 different companies to bring under his umbrella. It’s already secured overseas clients, so its ambitions aren’t limited to sales here in the U.S.
It’s a story investors should know about while it’s still early.
Jimmy Mengel, who was the first to uncover Canopy Growth before it became a runaway success, has all the details. You can learn all about them right here.
Keep your eyes open, Ryan Stancil Ryan is an associate editor and regular contributor to Outsider Club. Since 2014, his articles have offered commentary on technology and geopolitics to help readers make sense of the constantly changing landscape and how it affects their investments.
Contributing Editor, Outsider Club
Keep your eyes open,
Ryan is an associate editor and regular contributor to Outsider Club. Since 2014, his articles have offered commentary on technology and geopolitics to help readers make sense of the constantly changing landscape and how it affects their investments.
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