As we now reach the milestone that marks half a year since the COVID-19 pandemic was declared (yes, it’s really been 6 months), it feels appropriate to re-evaluate the landscape of the hemp and CBD industry.
These two industries, just like all the others, have been greatly impacted by the economical damage the coronavirus has caused. As unemployment rates continue to reach new heights and small businesses fail to receive the emergency funding needed to remain in operation, more and more emphasis is put on commodities.
However, with hemp being such a new commodity, it’s difficult for workers in the industry to be heard, resulting in issues that are ongoing still today.
But before we dive into the impact that COVID-19 is STILL having on these industries, let’s review some important impacts that the pandemic initially had on them.
Initial Impact on Hemp Companies and CBD Retailers
Nobody knew what to expect when the world seemed to hit the beginning of its end. As widespread panic began to grow, businesses everywhere were forced to adapt.
And with the panic came circumstances that were out of anybody’s control, resulting in what would be just the start of an ever-changing landscape for hemp and CBD companies.
Hemp companies were one of the lucky few who did not experience a massive blowback when the coronavirus started creating financial hardships. In fact, hemp farmers received federal loans through the U.S. Department of Agriculture (USDA) back in May.
However, despite this boost in finances, the hemp industry was met by one major roadblock.
The National Hemp Research & Education conference was one of the biggest industry events to get canceled. Many more followed after it, with several other events being postponed to either later be canceled or postponed again.
These canceled industry events had a big impact on the industry’s ability to market while educating the general public and business owners. They are also vital for leaders in the industry because it gives them an opportunity to discuss issues within the industry face-to-face.
But above all else, these canceled events put a big delay on different research projects that were being conducted to help us gain a better understanding of the crop. New studies and discoveries for hemp are vital in order to gain both the public and government trust of the commodity and acknowledge its full potential both medically and recreationally.
CBD retailers, particularly brick-and-mortar stores, have taken the majority of their damage from the beginning of the pandemic.
When COVID-19 was officially declared a pandemic back in March, it was followed by a slew of closings and shutdowns across the country. This included thousands upon thousands of retailers, convenience stores, schools, and workplaces.
At first glance, it’s obvious as to why that would make a big impact on the economy. In fact, the government even sent out stimulus checks to help balance that out (you know things are serious if the government is handing out free money).
The inability to generate revenue from the shelves of stores resulted in many CBD companies reporting losses for both the 1st and 2nd quarter. While this may not harm larger companies in the long-run, it was detrimental to small CBD businesses.
As a result, CBD retailers were forced to adapt.
Increased Focus for Online Sales
With so many physical stores being closed down, the only way to sell to consumers was online. Luckily, we live in a digital age.
Again, larger companies were not affected nearly as much by this, as the majority of them already had established websites that sold their products. For small companies however, it was difficult to generate traffic to their website because most consumers would search for a specific brand.
Evolved Marketing Strategies
Only having an online presence, CBD retailers had to become more clever with their marketing strategies. They had to study their consumers on a closer level in order to select target audiences for specific products.
Many CBD retailers bulked up their budget for product marketing and put an emphasis on quick and simple shipping. Many companies also re-designed their website in order to make it more user friendly.
The biggest issue that arose from a spike in online CBD purchases was the ability of predatory companies to scam consumers. A common theme that was noticed among these companies was definitive claims that suggested their product could cure a specific ailment.
Fortunately, the U.S. Food and Drug Administration (FDA) was able to successfully notice several of these companies and issue them warning letters that threatened shutdown if their marketing tactics were not changed.
Current Impact on Hemp Companies and CBD Retailers
Six months later and the situations between hemp companies and CBD retailers have nearly reversed. With pretty much all brick-and-mortar stores open again, CBD retailers are back to marketing and selling CBD the same way they were before COVID.
However, things are not EXACTLY back to normal for CBD retailers yet. And as for hemp companies, their biggest challenges are now breathing down their necks.
Labor-intensive jobs were already lacking workers prior to the coronavirus pandemic, making this increasingly problematic.
It’s difficult for farmers to decide who to hire as their help. The waiting list of people hoping to score a job at a hemp farm is already low, so once you include the added factor of not possessing the capability to conduct widespread testing on potential employees, the decision becomes even more difficult.
Come harvest time, farmers may not have the amount of help they need.
Lack of Financial Help
There exists a $16 billion fund that is described as coronavirus assistance for farmers who underwent crop price drops greater than or equal to 5%. The USDA decided this did not include hemp farmers.
The USDA calculated that the hemp crop had only seen a decrease of 1%. However, the U.S. Hemp Roundtable argued that hemp, as a result of being a new commodity, did not have widely published pricing data, and therefore the calculations were inaccurate.
One member of the Hemp Roundtable also claimed that hemp saw a decrease of greater than 5% when also accounting for the price of hemp flower and biomass during that time.
Final Hemp Ruling
Next month, the rules for the 2014 Farm Bill pilot program will expire, enacting the final hemp ruling that hemp producers must follow.
This final ruling includes an individual sample fee of $700, spelling financial doom for farmers across the country. This has prompted several government officials, such as U.S. Senator and New York Democrat Chuck Schumer, to urge the USDA to delay the hemp ruling.
“I’m urging USDA to delay their issuance of a final rule until 2022 so the hemp industry across the country and in Upstate New York has a chance to grow and create good-paying jobs at a time when jobs are needed the most,” Schumer stated to the press last month.
With a lack of funding from the USDA, hemp farmers are in for interesting times if the USDA doesn’t delay this ruling.
As we mentioned above, CBD retailers are finally getting to settle back into their regular routine. However, this doesn’t mean that COVID hasn’t altered the landscape in which these retailers exist.
Consumers and their product preferences are always changing, especially with the increase in online sales that allows them to be more choosy.
This fluctuation in sales trends has made it difficult for CBD companies to focus on marketing specific products. It has also created difficulty for them when deciding on how much of one product to produce.
In a way, this constantly-changing consumer behavior will be good for CBD retailers in the long run. For now, however, it’s a learning curve that puts a dent in the budget.
Consumers Spending Less
With only one round of stimulus checks going out to U.S. citizens so far, consumers have to watch their spending. Many non-essential items are now having a difficult time finding their way into consumers’ hands.
And CBD products are currently one of those products that many people are still on the fence about. If consumers don’t feel financially comfortable, they are more likely to fall off the wrong side of the fence.
Lack of Regulation
I know, I know. This gets brought up a lot.
But to be fair, this lack of regulation and rules for the CBD industry creates a lot of grey areas for CBD retailers and manufacturers. In other words, what’s legal in one state may not be legal in another.
This wishy-washy stance can also produce a lack of trust from consumers, as CBD’s association to cannabis already creates nervousness in less-informed buyers as it is.
What Lies Ahead
It’s hard to say exactly what will happen to the hemp industry if and when the final hemp ruling is enacted, but there is a guarantee for rocky roads ahead when it does. Unless the USDA agrees to push the final hemp ruling back until 2022, we are going to see just how well the hemp industry is equipped to overcome obstacles.
As for the CBD industry, it can be assumed that the pandemic will actually strengthen their ability to reach consumers. There will definitely be an adjustment period once the economy is once again “stimulated,” but as of now, they’re definitely sitting in a more comfortable position than hemp producers.
However, like yin and yang, one cannot exist without the other. If the hemp industry is struggling to produce, then CBD products will become more difficult to make and will likely experience rises in their product pricing.
Whatever’s going to happen is going to happen no matter how we feel about it. For now, the only thing we can do is educate ourselves, sit back, and watch it play out.
Thanks for reading and always remember to stay safe out there. Government health officials are still urging that you wear your mask and maintain proper social distancing of at least six feet while in public. We’re all in this together.