Panic and speculation abound with the recent classification of the Corona Virus as a “pandemic”. A now frequent question we get is “Will the Virus hurt sales?” It seems that the pandemic panic has not adversely affected the demand for marijuana products in its various forms. In fact, the “hoarding mentality” has actually increased sales!
USA Today (March 17, 2020) states “Add marijuana to the list of essential supplies Americans are stocking up on as they prepare to confront the coronavirus outbreak. https://www.usatoday.com/story/news/nation/2020/03/17/coronavirus-fears-prompt-americans-buy-more-legal-marijuana/5067578002/
And, here in California, the Orange County Register reports in its March 17 edition:
“Marijuana sales ‘on fire’ as demand spikes amid coronavirus outbreak”.
But there is cause for concern. This recent spike in sales is taking a toll on the supply chain dynamic. Motley Fool ranks this as the #1 challenge the industry will face. Consider the following from the Motley Fool March 15 edition:
- Supply chain disruption.
The biggest issue will likely come in the form of supply chain disruption. Although we often think of cannabis in terms of growing and processing the plant within the confines of, say, the United States or Canada, there are a lot of moving parts of the supply chain that originate from China. That’s because China is a low-cost producer, which is perfect for the still-nascent pot industry.
For example, cannabis companies rely on China for vaporizer production. Anything tied to vaping is expected to lead all forms of derivatives in terms of sales, but this may not prove the case if China is unable to meet its production commitments. In particular, this could prove to be an issue for KushCo Holdings (OTC:KSHB), which has generated most of its sales to date from vaporizers. KushCo is also a key supplier of packaging materials, some of which are derived from China. Although KushCo has previously stuck by its healthy sales growth guidance, this may not be the case going forward.
Other supply chain disruptions could involve heating, ventilation, and air conditioning products, as well as LED bulbs. Even though cultivators have typically leaned on high-pressure sodium bulbs for their growing, LED bulbs, such as those provided by Cree (NASDAQ:CREE), are considerably cheaper over the long run, and they create less heat, which can reduce climate control expenses. The thing is, Cree has a significant LED production operation in China, meaning it could easily be disrupted.
So, how does this impact HighBridge? While many of the concerns cited by Motley Fool are legitimate, most do not affect HighBridge and our production protocols. Most of our formula components are in ample supply and easily sourced. Nonetheless, our main ingredient – premium quality THC from a consistent strain – may present issues sown the road. HighBridge is working on alternative sources, both in California and in Nevada, to safeguard against any shortage. So as of today, the biggest challenge for HIghBridge is the difficulty in travel, a necessary element for securing our ingredients and processing partners. As HighBridge assesses this situation, we see no disruption in our development and production schedules. Of course, certain things like California’s Licensing Delay implementation, is inevitable, but affects all companies equally. Our objective at HighBridge is to continue our journey, and stay safe and healthy. We encourage all of our investors, partners, supporters, and followers to do the same!
HighBridge is a proud member of the Cannabis Trade Federation, a national coalition of cannabis-related businesses that represents all aspects of the industry and is focused on creating a professional, credible, and unified organization for the industry.