Some cannabis businesses are scrambling to stay afloat as unemployment undercuts sales and regulatory compliance pressures margins. And some companies are capitalizing on pandemic-related weakness in the cannabis space.
“Unlike a lot of companies that maybe got a little overextended and are contracting, Grown Rogue sees this as a good buying opportunity and expansion opportunity,” Grown Rogue CEO Obie Strickler told Benzinga.
Strickler’s Oregon-based company just completed a facility expansion in Michigan and continues to seek opportunities across the “very interesting” state market, he said.
Michigan’s Green Peak Innovations maintains a similar strategy. As a government-designated “essential business,” Green Peak has kept contractors active during the state shutdown.
“Projects have not stopped,” CEO Jeff Radway said.
Green Peak opened its first Lansing store during the shutdown in March, and it’s continued to acquire new real estate — bringing the tally up to 18 empty parcels — for future dispensaries.
It plans to open in Traverse City and Lansing in May, followed by East Lansing and Hazel Park in June.
In the meantime, Green Peak is expanding its commercial kitchen and eyeing out-of-state purchases.
“There’s a substantial amount of distress in the capital markets, in the cannabis markets, so we’re trying to take advantage of good buying opportunities,” Radway said.
Michigan Coronavirus Sales
With 170 wholesale accounts and seven retail stores, Green Peak is a “good barometer of what’s happening in the state,” Radway said.
On the retail side, the CEO said he saw the cannabis industry stumble through a series of phases caused by the coronavirus.
It began with panic stocking, followed by soft sales with 30% to 40% falloff, he said.
“We couldn’t tell if sales were rising or falling,” the cannabis CEO said of the early stages. “We were on very unsure footing. Our wholesale accounts were really nervous and they were knee-jerking and pulling back hard on inventory.”
Then came a spike in sales driven by the arrival of unemployment checks. The trends have since slowly stabilized, he said.
“Every day is a Tuesday,” he said. “The normal pattern of the week shifted on us.”
Radway said demand is still there and overall sales have held up well. Yet the mix between wholesale and retail sales has been volatile, and wholesale has compensated for retail slumps.
Oregon has seen fairly consistent sales, said Grown Rogue’s Strickler. He suspects that purchases in Michigan throughout the pandemic period remained consistent.
“Industries like ours are fairly recession-proof,” he said. “It’s kind of a necessary product in today’s world.”
The Long Game In Michigan
Even if Michigan’s coronavirus situation did create near-term risk, Grown Rogue is determined to see its bet on the state through.
“Michigan fits our criteria,” Strickler said, adding that the company likes to enter markets that are transitioning from medical to recreational.
“While there’s a lot of volatility, the ups and downs we’re seeing is what happens when you try to build a new industry from the ground up.”
This article originally appeared on Benzinga.