As the COVID-19 coronavirus continues to spread across the world, stock markets in the United States and globally have been facing what is called a market correction, a rapid change in the nominal price of a commodity, as investors are moving their money from stocks to the bond market.
This sharp decline in the stock market is being felt by marijuana and hemp companies throughout the U.S. Many cannabis vaporizer companies rely on Chinese manufacturing plants for their product parts. Many of these plants are in the middle of a temporary shutdown due to the virus outbreak. Moreover, a decrease in raw hemp material exports might add to the industry hardship.
“It’s a huge wake-up call,” said Nic Easley, CEO of Denver-based 3C Consulting. “It’s forcing companies to look at their supply chain. ‘Where do my products come from? Do I have multiple options for vendors?’”
“Everyone was looking for the cheapest option forever, and that’s China.”
Many of Easley’s clients rely on goods from China that usually sell for 13 cents per unit that are now up to as much as 80 cents per unit.
“It’s going to hurt everyone, especially low-cost crappy vape companies, hardware companies, anyone who’s undercutting big brands, anyone who does their manufacturing (in China) – it’s going to hurt all of them,” Easley said.
“And with massive buildouts (underway) in Missouri, New Jersey, Illinois, Ohio, California, everyone needs the same equipment. Like ballasts for Gavita (grow lights).”
When it comes to a potential brightside, Easley, the National Cannabis Industry Association and others have said that the coronavirus’ effects on the stock market could be an opportunity for American companies to fill in where Chinese companies have left.
“The biggest thing I see is finally a break for U.S. CBD companies and hemp companies to do something when they don’t have massive competition,” Easley said.
“It’s also a moment for smaller companies that have lost their market share to China to step up, ramp up and focus on relationships at all costs. Get new clients now and hold them and know that most of the public-market impacts, you’re not going to see that until the next quarter.”
“If we start to see shortages or restrictions on imported manufactured products like vape cartridges or growing equipment, we can only hope that domestic manufacturers will step up and offer the most competitive prices possible,” Morgan Fox, NCIA Media Relations Director, wrote in an email to Marijuana Business Daily.