How Social Distancing Is Driving Cannabis Demand

Cannabis demand is on the rise amid the COVID-19 outbreak. That's according to a new report, released Thursday by the investment division of Bank of America.

The demand acceleration promoted by social distancing of the coronavirus pandemic has not yet reflected on stock prices, according to BofA Securities.

Cannabis stocks have been dropping steadily since the outbreak of coronavirus. Since Feb. 20, the cannabis index followed by BofA has dropped 57%. As a reference, S&P 500 has dropped 29% since the same date.

See Also: BofA On Organigram, Tilray, Aphria's Cash, Demand Trends

Quarantine Accounts For Rise In Sales

As consumers get ready for extended stay-at-home periods, they stock up on consumer goods, which includes cannabis products. This has been confirmed by cannabis companies contacted by BofA.

Parallel to mere demand which could be accounted for in stocking-up behaviour, companies and experts propose the idea that consumption itself could also be increasing due to extended periods of social isolation.

Readers ought to keep in mind that these analyses are drawn from anecdotal evidence since actual sales data will not be available for weeks.

Will There Be A Need For Re-Stocking In Canada?

The firm believes that if consumer behavior continues in this direction, cannabis retailers in Canada will be required to enter a new re-stock cycle. Following a wave of overstocking by retailers and distributors between March and June 2019, companies have been in the process of de-stocking products for almost one year.

The only caveat comes when considering if stores will remain open. While some stores have voluntarily suspended business in order to stop the virus from spreading due to increased foot traffic, others have moved to a “click-and-collect” scheme.

Provincial regulation could also affect the status of dispensaries.

Photo by Melanie Pongratz on Unsplash

Versión en Español en El Planteo: Distanciamiento Social: Se Dispara la Demanda de Cannabis

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Posted In: Analyst ColorCannabisHealth CareRetail SalesMarketsAnalyst RatingsGeneralBofABofA SecuritiesCoronavirus

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