What Does It Mean for Cannabis to Be Deemed “Essential”? Four Experts Weigh In.

Oregon's cannabis industry can't seem to catch a break.

If it's not oversupply sending prices plummeting and putting farms and retailers out of business, then it's vaping products suddenly and mysteriously incinerating users' lungs. Now, it's a global pandemic ravaging the economy and taking disposable income out of its customers' wallets.

While March broke cannabis sales records in Oregon, leaping 37 percent from the same time last year, those numbers are already sliding downward, according to dispensary owners, as their main customer base—namely, service industry workers—face mass unemployment.

"It was like our 4/20 holiday came a month early," says Tyson Hawarth, owner of Oregon's Finest, which has stores in Northeast Portland and the Pearl District. "It seemed like there was a bunch of panic buying right up until the Stay Home, Save Lives  order. And then, as soon as that officially took place, we saw sales take a nosedive. Since then it's been very, very slow."

Sure, Gov. Kate Brown has deemed cannabis an "essential business," allowing shops to stay open. But with the pot industry specifically ineligible for loan assistance from the federal government, the already thin margins many dispensaries and growers operate on are getting slimmer.

In the long term, however, there are reasons for cautious optimism. In fact, according to some observers, the pandemic could end up being a boon for cannabis, particularly on a national level.

To get a sense of where coronavirus is pushing the cannabis industry, WW spoke to several Portland experts: Adam Smith, director of the Craft Cannabis Alliance; Amy Margolis, lawyer and founder of the Oregon Cannabis Association; and economist Beau Whitney, formerly of New Frontier Data.

WW: What does it mean in the long term to have so many states deem cannabis an "essential" business?

Beau Whitney: It benefits the industry in an environment where there's already nationally 65 percent support for cannabis legalization in some form. By saying this is an essential business, and then by highlighting that fact, the general public becomes more and more comfortable with the concept of having legal access to cannabis products.

Amy Margolis: Just hearing over and over that cannabis is essential is going to have a federal impact. A lot of these state legalization initiatives are not going to make the ballot because they can't get the signatures under the circumstances, so I think a lot of attention and energy is going to be shifted to federal work. I think a silver lining is going to be that we might have a lot of energy and resources directed at 280E [the federal tax code barring cannabis businesses from taking deductions or credits], federal legalization, veterans research—those kinds of things that are broadly important.

Adam Smith: This is a moment when everything is on the table. Everything is changing in some way. I think that this is going to impact cannabis, and the first step is the governor calling it essential. It was an admission of reality. So now it is a question of accommodation. How do we accommodate the new reality, and how is the new reality going to create more frictionless ways for the economy to operate?

March was the biggest month ever for cannabis sales in Oregon. Is there any indication of who was buying all that weed?

Smith: I don't have numbers, but I've heard four different dispensaries in the last month who have said to me some version of, "I had this old lady came in who said she hadn't smoked in 30 years." I think people are looking at like, "What am I going to do for the next three weeks at home?" Especially if you lost a job or you're working from home at some level.

Margolis: I speculate that it's people stocking up the same way I went and bought 27 boxes of Cheerios.

Whitney: We're seeing this across the country. Consumers were reacting to shelter in place with their grocery shopping or their alcohol shopping, and they did the same thing with cannabis. They reacted to the uncertainty by buying. I don't think it was any different than buying rice or beans—maybe a little bit different than TP.

Will these people remain regular consumers once this is over?

Smith: Again, this is all non-scientific, but like anything else, when people get back to work, they will have less time and do mindless recreational things less. But this is a unique time. It may be a time of expanding the base a little bit, and those behaviors may change, but I think they're sort of elastic with life situations.

Margolis: Even though I want to think cannabis is recession-proof, I had someone ask the question: If people don't have jobs and they can't get any assistance, are they going to spend money they don't have on the weed? And I think that remains to be seen. Under the circumstances, in a recession, that looks very different than what we've seen before, where millions and millions and millions of people are immediately out of work, how do we spend our discretionary money, if there even is any discretionary money? We'll have to look and see what happens in April and May if people stay on lockdown as they file for unemployment. If there's no money, there's just no money to buy weed.

How significant is it that the Oregon Liquor Control Commission allowed curbside sales at dispensaries, even temporarily?

Smith: It's an indicator of a new way of regulators looking at the industry. "How do we make this function more smoothly?" is becoming more important than, "Oh my God, we have to treat this like nuclear waste." The absurdity of that starts to become apparent when it's economically life or death to keep an industry going.

Margolis: It paves the way, if it works, to having drive-thrus, and that's kind of amazing. You've seen Starbucks go from stores where you have to go inside, and now you see the lines around the blocks for takeout. I don't think people can recognize the big changes because, shit, the world's a dumpster fire. But that is a huge shift.

Hawarth: Another thing that we've requested is that they allow vending machines to be used inside of our locations. The biggest risks are customer and employee interaction—anytime they're transferring product payment or checking ID, those are the different areas where you're likely to be within 6 feet of the other person. If you can have mechanisms in place so that it's not as frequent, it should, in theory, slow the interaction and slow the spread.

What role might cannabis play in reinvigorating the economy?

Smith: Cannabis would normally be a very weird place to look for economic stimulus.  What would happen, though, if Congress passed the State Cannabis Commerce Act that [Ron] Wyden and [Earl] Blumenauer introduced, which tells the feds, "Hands off, let the states move product"? If we could move product between states, you would immediately have thousands of businesses on the West Coast whose valuations would increase two to five times. On the East Coast, instead of looking three to five years down the road, within the next six to 18 months, if New York legalizes, you have hundreds of companies forming and launching and getting up and running, with hundreds or thousands of suppliers.

Whitney: There are almost 31,000 legal businesses in the United States, and there's an additional 115,000 that are operating illicitly. Assuming full federal legalization, you'd have an additional 1.5 million workers in the workplace that are paying taxes at a time where people are economically displaced. There's a strong case to be said for reforming some of the laws in order to allow greater access.

Smith: If we fix the economics, cannabis is poised to be maybe the most important source of economic stimulus in the private sector. What other industry could do anything to have thousands of companies increase their valuations by multiples and hundreds of new companies starting up in the teeth of a recession? It doesn't exist.

How realistic is the idea of interstate commerce, though?

Smith: All we need is for the feds to get out of the way. The Democrats are ready to allow the states to do what they want. Even [Joe] Biden, who is probably their least cannabis-friendly candidate, has said, "Look, I don't believe in federal legalization, but of course we will let the states do what they think they need to do." So what we need to do is get the states to say, "This is what we need to do." Kate Brown has signed a bill here, and Jared Polis in Colorado has spoken approvingly of opening up markets. What we need is, this is the moment for the governors to step up. And I think this is going to be the path forward.

Margolis: Eventually, we need interstate commerce. Do I think that somehow the lockdown is going to result in rapidly expediting interstate commerce? No. I also think the focus right now more broadly should be including the cannabis industry and cannabis-adjacent businesses in the stimulus plan. To exclude a business that is legal in Oregon and many other states is totally unacceptable, especially because we have seen many of these states deem cannabis businesses essential and allow them to continue operating.

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