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

Posted In: BofABofA SecuritiescoronavirusAnalyst ColorCannabisHealth CareRetail SalesMarketsAnalyst RatingsGeneral

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.