Coronavirus and cannabis: China’s supply shutdown is impacting vape businesses and events

Bethan Rose Jenkins, Cannabis News Writer/Editorial

Cannabis companies are feeling the sting from the Coronavirus (COVID-19) pandemic, which could kill as many as 200,000 to 1.7 million people around the world. Since a significant volume of vaporizer hardware is produced in China, companies are struggling to stock up on essential goods; investors are backing out of deals with Chinese suppliers and the supply chain is running low. 

Disruptions are common during the Lunar New Year, which occured on Friday, February 12 this year. However, disruptions have been ongoing and, consequently, the cannabis industry is suffering. Chief Executive of KushCo Holdings Inc., Nick Kovacevich, anticipates that delays in stock supply could continue for another 3-6 weeks. 

“People will stay in business, but it’s frustrating and a little disruptive,” Kovacevich said during a phone interview. He says that many businesses prepared for disruptions related to coronavirus and cannabis by stocking up before the Chinese new year. “The reason it’s taking a long time is the workers couldn’t get back to their factories to restart production.”

As of March 14, 150,072 coronavirus cases have been confirmed and 5,617 victims have died. A total of 73,731 people are believed to have made a full recovery from the disease, which has spread across 149 global countries and territories.

Coronavirus and cannabis: Supply issues are hurting the market

Supply shortages have become apparent across various U.S. states, including California, Ohio and Illinois. The same story goes in Canada, which launched a recreational market in October 2018. Then, in December last year, cannabis-derived products and vaporizers were legalized in Canada a move known as “Cannabis 2.0”. High demand from consumers has since left retailers searching for ways to replenish their stock. Now, with the unexpected delays occurring as a result of the coronavirus, the market has undergone prolonged suffering.

“We can’t make enough of these products to fulfill demand. We shipped products to Alberta that sold out in six days and we will continue to ramp supply as demand ramps,” Brendan Kennedy, the CEO of Tilray Inc., explained to MarketWatch reporters. Tilray, which is acknowledged as one of the biggest cannabis producers in Canada, is currently drowning in unwanted stock; unbranded products are not an ideal choice for consumers, what with the vape-lung crisis that emerged in summer 2019 being attributed to various contaminants found in unbranded products. 

“If we were to feel the impact of the [coronavirus], we would feel it first with the 2.0 products,” Kennedy continued. “We’ve been taking a good look at our supply chain; aside from vape hardware, we can find sources that supply most of our core products in Canada and internationally.”

Reports have revealed that hazardous vape products were being sold by unlicensed and – in many cases – licensed vendors. However, since Coronavirus has had such a detrimental impact on the cannabis industry, Tilray – along with numerous other prominent companies in the legal cannabis space – may have nothing else to fall back on until supply constraints are resolved.

Coronavirus and cannabis: Companies that require custom-built hardware will be worst hit

The vape market endured difficulties for months before the Coronavirus outbreak erupted. Trump’s tariffs on Chinese products made it tricky for business owners to afford hardware sourced from China. Additionally, KushCo took a hit to its earnings during the December quarter of 2019; a few months after the first cases of vaping-related illnesses began to surface. From August to October, vape sales across California, Colorado and Washington sunk by approximately five percent. On the plus side, sales have started to pick up.

Cannabis companies that thrive off of vaporizer sales will be the worst affected by the coronavirus. This is according to Kovacevich of KushCo a company that yields more than half of its total sales revenue from products that fall into the vape category. Fortunately, his company has plenty of hardware to steer clear of business delays. Kovacevich says that companies with custom-built vaporizer products and rare vaping devices will be hit hardest by the coronavirus crisis, in addition to companies that did not stock up on supply prior to the outbreak.

Coronavirus and cannabis: Industry events are being canceled due to outbreak

It’s not just supply issues that are arising as a result of the COVID-19 pandemic; many cannabis-focused events are being canceled or rescheduled to a later date. With travel plans being disrupted due to the global pandemic restrictions have been imposed for travel across specific country’s borders many cannabis and hemp businesses have had no option but to cancel conferences, meetings and the like. 

Included in the list of events that have been canceled/postponed include Natural Products Expo West in Anaheim, California and CannaTech in Tel Aviv, Israel. Cannabis event organizers that haven’t scrapped or postponed their plans should wait for an update from resources like the World Health Organization (WHO) before recommencing.