Amid growing concerns over the coronavirus outbreak impacting global trade, domestic cannabis and hemp manufacturing companies are booming.
Since the beginning of the year, coronavirus has quickly taken over the media and spread around the world. We know that many people think the stories are over-hyped. We also know that, for healthy people under 50 years of age, coronavirus is no more a threat than the common cold.
We also know that it has a profoundly strong effect on the elderly, and the death toll in that age group continues to rise. But health and wellness aside, we’ve also seen this disease have a huge impact on numerous aspects of the global economy, and the cannabis industry is no exception.
Just think about how much stuff is produced in China. In the cannabis and hemp industries, everything from vape cartridges, to lighters and paraphernalia, to packaging supplies and beyond, comes from China and coronavirus has brought that to a grinding halt. While this is obviously a major hindrance for some companies, for others who manufacture domestically, business is booming.
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Coronavirus and the Decline of Chinese Production
At the moment, China is facing an economic nightmare. Throughout January and February, China’s exports fell by double digits as efforts to control coronavirus shuttered factories across the country. After rising briefly in December, Chinese exports fell dramatically by 17.2% in January and other 4% in February.
“You can imagine the nightmare Chinese factory managers are facing today,” says Harvard Business School Professor Willy Shih. “First, many of their work crew are likely having difficulties making it back to the factories, thanks to the draconian travel restrictions imposed by regional governments. Second, when they do make it back, imagine if one worker is carrying the virus but hasn’t shown symptoms yet. Putting all those people in close quarters is a terrible risk, and I’m not sure how many managers are willing to take that kind of risk, especially if the government doesn’t tell them it is okay to do it.”
In the remote western regions of China, some factories remain open and mostly operational. These facilities need a certificate from the Chinese government stating that they are legally allowed to continue running during the outbreak. They must be located in extremely rural areas and can only run a half crew of about 50-100 workers. While this is good news for the people in those locales who get to keep their jobs, it’s hardly enough to meet current demand for anything, especially packaging materials.
Even once the virus is contained, getting everything back to pace will be a monumental challenge. While it might be easy to stop everything, restarting takes time. You have to reposition equipment and crews while working out all the logistics of being non-operational for weeks on end.
Bringing Back “Made in America”
With cannabis and hemp becoming increasingly popular, there’s been an uptick in the need for high-quality and stylish packaging. Until recently, a lot of dispensaries, shop owners, and other distributors were buying bulk packaging from a handful of Chinese companies. However, as demands for quality and customization continue to grow, coupled with the fact that Chinese production has been at a standstill for the last few weeks, companies have no choice but to bring their package sourcing back to the United States.
“The coronavirus in terms of Chinese supply chains has been extremely difficult for stakeholders across multiple industries, especially cannabis and hemp,” says Jack Grover, owner of Grove Bags, in a discussion with CBD Testers. “Our organization has been fortunate in the way that all our packaging is produced in the United States, so we have actually seen an influx in our flexible packaging business from companies that were previously outsourcing their bags.”
More Business Than They Know What to Do With
Business, in fact, is so good for some domestic companies that many are having a difficult time keeping up with the surging needs of the industry. As new potential clients continue to pour in, the question of handling their orders while maintaining a steady, and readily available inventory of materials and supplies becomes of delicate issue to balance.
“Our operation is up to running 3 shifts a day, 7 days a week and we are still, unfortunately, having to turn work away because we are over capacity on our packaging side of the business, which is certainly due to the coronavirus,” mentions Jack Grover.
“Beyond that, we do keep a good inventory of products on hand in the United States, but we have had to make customers aware that we do not know how long this crisis will continue and that we may face supply constraints with certain products so we can offer them alternative options.”
“We have had to do that more than several times at this point which is obviously something you don’t want to have to do. We try to be as good as we can about building expectations with our partners, but these are unusual times we are finding ourselves in,” he added.
What Does the Future Hold?
It’s truly a hectic time for global supply chains. As shielded as some of us have been until now, soon there will be no industry or consumer that’s not impacted by this outbreak to some degree. This epidemic has illuminated that fact that we’re extremely interconnected as a global economy, from the most rural corners of the Americas to the sprawling factories of cities like Beijing and Wuhan.
People are beginning to realize that some of their favorite products coming from China are either arriving in different packaging, or not at all. For example, Apple had issues importing their air pod headphones from China. Coca-Cola also hinted that they may be facing supply chain issues with the artificial sweetener they use (although less soda with fake ingredients might not be the worst thing ever).
“There are very few areas of life that won’t be affected by this virus if it continues on the way it has been for several more months or longer. It really is a symptom of globalization and both how interconnected and interdependent we are on each other in a global economy. Despite what any nativist or the current administration might try to tell you, we are a VERY integrated world,” Jack Grover concluded.
There are substantial challenges in the hemp and cannabis industries that are arising right now and that will continue to be exacerbated by the coronavirus crisis. As such, there will be select companies across numerous industries stepping up to fill the production gaps as best they can.
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