Over the last several weeks, CBE Press LLC (CBE) has been conducting research to learn from industry leadership how the COVID-19 Crisis is effecting their businesses and to learn how they are making adjustments to weather the short term storm while positioning their companies for the long-term until a vaccine is available to protect lives worldwide. In addition to the survey CBE is currently fielding with our research partner, High Yield Insights, we have also posed a variety of questions to 10 industry leaders that have shared their thoughts which we will share in their entirety in a white paper after the current research is completed in a week or two.
Industry leaders who participated include:
- Gary Cohen, CEO, Cova Software
- Christopher Shade, PhD, Founder & CEO and Jason Dyer, President, Quicksilver Scientific
- Lisa Gee, Director of Marketing & CSR at Lightshade:
- Julie Herzog, Managing Partner, Fortis Law Partners and Full Velocity Consulting
- Everett Knight, Executive Vice President, Corporate Development & Capital Markets, The Valens Company
- Kris Krane, President, 4Front Ventures and President of Mission (the company’s retail arm)
- Sage Peterson, CEO, Canuvo of Maine
- Tom Siciliano, CEO Americas, Elixinol
- Nancy Whiteman, CEO, Wana Brands
Below is a preview of the questions CBE posed and industry responses.
CBE: How do you see the crisis impacting your specific sector of the industry? Is your company feeling any unique impact?
The cannabis industry, overall, has seen rising demand early during this crisis. But efforts to meet this demand have been complicated by staffing challenges caused by coronavirus. As a cannabis dispensary company, Lightshade has had to address both high demand and problematic staffing to meet the health needs and expectations of our customers.
Like so many other retail/medical dispensary chains, we’ve seen an increase in digital sales, and we’ve moved to refine our digital platform to better meet this demand. We’ve also utilized curbside pick-up for both medical and adult-use customers. This has significantly reduced the number of people in our stores and the face-to-face interaction time.
On the production side, though, we are trying to meet the demand while operating with limited staff. Our greenhouse operations are running on three shifts, including overnight. All of our teams are having to work creatively to meet demand and still follow social-distancing practices.
These kinds of challenges won’t go away overnight, no matter how fast the economic recovery takes place.
The COVID-19 pandemic is impacting certain areas of our law practice more than others. For example, our employment and real estate practices in particular are busier. In terms of real estate, we are helping our clients negotiate with landlords on lease negotiations and rent abatement options. We’re also advising our clients on how we can help them pivot their business model. For example, our client CERIA produces non-alcoholic beer. Now, instead of dumping the alcohol, they are able to repurpose it for the production of hand sanitizer.
Litigation, cannabis licensing, M&A and financial transactions have slowed considerably. In addition, most clients that were looking to sell in the first half of the year have put those deals on hold. If they sell now, they likely won’t get the valuation they’re looking for. They would rather just focus on getting through the crisis, securing Payment Protection Program (PPP) loans and then look to market their company again once we’re through this.
I do expect that we’ll be assisting in financial restructuring, bankruptcy-related issues, and working with lenders to change the terms on loans. With Full Velocity Consulting–our sister company that offers fractional C-Suite services such as CFO services–we are helping clients apply for government and PPP loans, as well as organizing the necessary financial statements they need to submit. When PPP funds are issued to various clients, we are ensuring they keep proper records so that they qualify to have their loans forgiven. So overall, deals are still getting done but it really depends on the industry.
Jason Dyer, President, Quicksilver Scientific: In terms of Quicksilver Scientific’s CBD business, the crisis has strengthened the health supplements sector by showing just how much consumers have come to rely on the kinds of products we provide. The unique impact Quicksilver Scientific has faced is that we’ve had to keep producing to meet this demand, even as we’ve grappled with staffing challenges because of the current situation’s social-distancing requirements. We’ve also reshuffled our product pipeline, introducing immune support products such as Microb Manager, a potent blend of botanicals and broad-spectrum hemp extract to optimize the body’s systemic microbial environment. For Quicksilver’s partnerships with licensed cannabis companies–such as Wana Brands and Truss–we’re also seeing those partnerships continue since a vast majority of the markets where cannabis is legally regulated have deemed the industry essential.
Sage Peterson, CEO, Canuvo of Maine: Maine identified us as an essential business. We had to quickly adjust to safety measures for both our staff and customers. We adopted curbside service by the third week of March. Customers can call in to speak to a budtender or order online. The process has worked very well and we have a high customer satisfaction rating. The impact is a very streamlined approach to our retailing which has been helpful because our staff is greatly reduced.
CBE: The crisis is having wide repercussions on travel and industry events. How is your organization adjusting/reacting? As companies are forced to handle meetings and demos “virtually”, what is working well? What is not working so well?
Nancy Whiteman, CEO, Wana Brands: Wana continues to monitor COVID-19’s effect on industry activity and how social-distancing will impact any possible events planned through the end of 2020 and beyond. Right now, it’s still too soon to tell just how or if conventions and trade shows will return in force by the second half of the year. Of course, the longer the economy struggles with the pandemic, the farther into the future it will be before these kinds of events return as before. Wana won’t take part in any public industry events unless it can adequately protect its staff, partners and customers.
As the shopping process is upended due to COVID-19 concerns, so have our outreach and education efforts. Since customers are now shopping online and picking up curbside, as opposed to shopping in-store, we are pivoting much of our marketing efforts to be direct-to-consumer. We’re putting more of an emphasis on consumer-facing digital marketing so that we can continue to educate and support our customers at a time when we might not be interacting with them face to face.
For example, we recently sponsored several 4/20 events, including Lightshade’s Virtual 4/20 party. It was a live stream of performances from DJs, rappers and chefs. And while it wasn’t the same as the actual yearly 4/20 gatherings we’ve celebrated in the past, it was a great opportunity for Wana to participate virtually with the community and for us to continue to be accessible to consumers, some of whom may be trying cannabis products for the first time. Looking ahead, I’m sure Wana will continue to explore similar virtual opportunities like this. Our partnership with the I Heart Jane online ordering app is another way we’ve used digital assets as a way of connecting with customers, where consumers can order Wana products directly from our website and pick them up at a dispensary of their choice.
Tom Siciliano, CEO Americas, Elixinol: Right now, Elixinol sees its digital space as vital to how the company meets the needs of its customers, so we’re putting most of our direct-to-consumer effort and support into those channels. Simultaneously, we are using this time to deepen relationships with large national retailers as well as regional health + wellness locations. While we are eager to interact directly with customers at tradeshows and events, it’s still unclear when that will happen. Until then, we are leveraging technology to keep us connected to key accounts and using our digital platforms to educate existing and new customers about CBD and the Elixinol difference.
Kris Krane, President, 4Front Ventures and President of Mission (the company’s retail
arm): We are figuring this out as we go along. But given the overall impact on business from the pandemic and economic downturn, we’re being conservative with spending to ensure we have enough cash on hand to operate our core businesses. Other expenses are largely on hold in the meantime.
We’ve largely transitioned to our stores operating on appointments and we have given customers the option of online and phone ordering which has proven to be effective thus far. However, the limited amount of people we can serve per day has an impact on the bottom line.
Everett Knight, Executive Vice President, Corporate Development & Capital Markets, The Valens Company: We have reduced non-revenue related expenditures in the short run, however, we are maintaining certain spend allotments to ensure we can continue engaging with our customers, partners and investors. Though the events space has been significantly impacted, some events, conferences and investor outreach opportunities have moved to a virtual format which allows for some (though limited) contact and engagement.
The virtual format has been useful, though it is at times a difficult adjustment. We have seen dozens of 15-30- minute meetings pop-up and employees’ calendars are full – even with topics that otherwise could be a short casual discussion. This has led to working before and after usual hours to try to keep up with work requirements. We have also had feedback that the online / video format is quite draining as it is not a natural format to communicate in.
CBE: What ripple effects are you seeing among business partners? (In the supply chain, for example.) How are you adapting?
Gary Cohen, CEO, Cova Software: The cannabis industry in the US has been uniquely handicapped, in a positive way to deal with this exact crisis. Because of federal constraints, the mechanics of the supply chain have been built with a separate infrastructure from seed to sale. Transportation and distribution networks operate, independent of the limitations on corporate/public trucking. As we’ve seen, there were few limitations in product availability, and even with hiccups in the raw materials for cartridges/concentrates, there were plenty of alternative forms of cannabis.
On the retail side, we were fortunate to have built our platform with the capabilities to be flexible to the pandemic circumstances. Within 3 weeks of new local ordinances, we converted over 100 of our client dispensaries to meet their local restrictions for how they could retail by adding online, curbside and/or delivery.
Everett Knight: We did initially see decreases and pauses from manufacturers in China. It turned out to be a great exercise to evaluate where we source vapes from. Manufacturing is starting to open up again. However, it has been and continues to be disruptive to the supply chain, as certain capacities retool for PPE development and manufacturing, reducing flow of traditional consumer goods components.
Christopher Shade, PhD, Founder & CEO, Quicksilver Scientific: Quicksilver Scientific sources many ingredients, as well as packaging, from Europe and other international markets. Of course, the shutdown of factories overseas has made it difficult to get what we need. There has been a run on some of the key ingredients that Quicksilver utilizes in our wellness products, so that’s made it challenging to keep production running, especially given the increased demand from customers for our products.
Nancy Whiteman: We’ve seen much more emphasis on digital marketing. Print magazines have suspended print editions and are going fully digital. We’re seeing many new offerings in terms of marketing in the digital space.
In terms of our supply chain, it has been pretty manageable so far. We immediately went into action and secured all essential ingredients and packaging as soon as we saw the writing on the wall.
CBE: Are there any unexpected upsides or silver linings for your sector or your business specifically as a result of the crisis?
Kris Krane: The crisis has forced us to develop protocols for things like online ordering, delivery, and curbside pickup that we probably wouldn’t have spent time on before this, some of which may come in handy or stay in place after the crisis.
At the high level, when this crisis subsides it may result in real changes to cannabis policy at the state and federal level. State governments hurting for revenue are likely to look at the positive experiences of states that deemed cannabis businesses as essential and see legalization as a source of new revenue to boost constricted budgets. At the federal level, with nearly every state with legal cannabis having deemed these businesses as essential, it will be increasingly difficult for federal lawmakers to continue justifying keeping cannabis as a schedule 1 substance with no recognized medicinal value and a high potential for abuse.
Tom Siciliano: If it wasn’t clear before COVID-19, it should be now: CBD is a wellness product that an increasing number of consumers find valuable and even essential to their well-being. We continue to be a leader through education and are encouraged that more customers are finding products that help them. This was a strong trend we were seeing before this crisis and one that will only build in the days and weeks ahead as more of the population grapples with immune-health and stress concerns stemming from the coronavirus pandemic.
Lisa Gee: For Lightshade, one of the biggest upsides has been the way we’ve still been able to interact with the cannabis community through different creative avenues. For example, Lightshade recently hosted a Virtual 420 Party with Colorado-based artists. We saw it as a way to reach out to our base and offer support to them during this most unusual of 4/20 observances. As a result, we generated a lot of media interest and had more than 12,000 event participants from around the globe. Given the popularity of this event and the way it elevated our profile, Lightshade is eager to identify other similar efforts to promote in the future.
Julie Herzog; Overall, I’d say a silver lining for a lot of people is additional time at home with family. My kids are older, so personally I definitely enjoy the family time that comes from being in the house with them and working with them around. Although I understand that for some families with little kids, it’s tougher.
In addition, some clients who were very much against having employees work from home are now seeing that their business is still working really well and that certain employees are actually even more productive working from home. So I believe that moving forward, we’ll see businesses allowing for more remote work that will better support their employees.
Lastly, a big silver lining has been that clients are really viewing us as a valued business partner— both on the Fortis and Full Velocity Consulting sides. They see us as someone who will help them get through this, obtain their PPP loans, and who they can reach out to for support and advice on difficult decisions. I became a lawyer because I like helping people, so the opportunity to serve clients during this challenging time has been very personally satisfying and rewarding for me.