Without a doubt, the impact of COVID-19 on hemp manufacturing has been the most significant event of 2020. Millions of individuals and businesses around the world continue to feel the effects of the pandemic daily, and will continue to do so for some time. Even as international trade and industries begin the slow crawl back to pre-pandemic levels, there’s a feeling that we’re not out of the woods yet.
Before the pandemic hit, the hemp manufacturing industry was one of the high-flying areas of the global economy. Coming off the back of increasing public acceptance and wider legal backing, there was a real feeling of optimism in the industry. Legislative enactments such as the 2018 Farm Bill passed by the US were fueling interest and exploding sales in hemp and its by-products.
Eight months into 2020, and the COVID-19 pandemic, the optimism in the industry has tempered somewhat. That’s only natural, considering it’s pretty much the same everywhere (unless you’re Amazon, obviously).
Now that there are concrete hopes of globally available vaccines by 2021, CBD businesses are beginning to pick up the pieces as governments strategize on new rules for life during a pandemic. With commerce restarting around the world, now’s as good a time as any to consider how the coronavirus has impacted the hemp manufacturing industry.
Can we expect to see an upturn in global hemp manufacturing and trade? Is there any hope of rising once more to those ubiquitous 5-year growth projections? Or has the pandemic irrevocably set back years of hard-won hemp industry growth?
In this article, we consider how much the coronavirus pandemic has impacted the hemp industry and what to look forward to as COVID-19 winds down.
The hemp manufacturing industry – A primer
The hemp manufacturing industry enjoys a global footprint, largely due to the sheer diversity of hemp-based products. More companies around the world are finding new and exciting ways to make use of hemp, and this is driving demand worldwide.
Hemp is recognized as a valuable product, both alone and along with its by-products. These include:
- Hemp seed
- Hemp seed oil
- CBD hemp oil
- Hemp fiber
These products have diverse application in a growing range of industries. These include textiles, fiberglass, nutraceuticals, biofuel, paper products, construction and insulation materials, macromolecule flour, pharmaceuticals and margarine.
The increasing legitimation of hemp and its diverse applications are credited with the growing profile of the industry. There has been an explosion in the number of people establishing and maintaining hemp farms, as well as those opening dispensaries.
At the start of 2020, the hemp industry was expected to really kick on during the course of the year. Steadily increasing rates of legalization, both in the US and countries around the world, meant more people were getting interested in hemp.
Statistics from the National Retail Foundation indicate that customer demand for CBD products grew by a stunning 700% in 2019. It was also estimated that the industry employed over 211,000 full-time workers in 2019. This was further propped up by almost 85,000 full-time indirect workers who supplied crucial auxiliary services to the industry.
Considering the smashing 2019 the industry had, growth projections for 2020 were going through the roof. The Brightfield Group reported that hemp-based CBD sales in the US could approach $11 billion in 2020 and would likely reach $23 billion by 2023. The figures for 2020 were projected to be roughly 275% higher than the $4.1 billion recorded in 2019.
The pandemic has however put a damper on these projections. In the next section, we will examine exactly how this has been the case, and the extent of the impact of the coronavirus.
Adverse impact of COVID-19 on hemp manufacturing
The coronavirus pandemic is making 2020 a difficult year for business all-round. The pandemic has interfered with all the crucial aspects of business success, robbing entrepreneurs of customers, cash flow and even their own workers. Let’s take a closer at how COVID-19 has negatively affected the industry.
The most fundamental threat to businesses during COVID-19 has come from the necessity of lockdown and social distancing regulations. The hemp industry has also struggled with this period, especially due to the loss of customers who would ordinarily make in-store purchases. Dispensaries and recreational stores with a predominantly non-digital presence will have been hardest hit, since more people have turned to online stores for their product needs. For businesses that were able to stay open or that have been able to resume after lockdown regulations eased, the challenge of social distancing remains. With the need to ensure people can maintain appropriate distances from one another, stores have had to throttle their customer flow, in some cases. All of this has made it harder to sell, and will continue to affect many businesses until we see the end of the virus.
Disruption of global supply chains:
Hemp is a global product, as many businesses rely on globally-sourced strains for their product needs. Due to the initial lockdown regulations put in place, global supply lines were strained in many places, and entirely cut, in some places. Even across state lines and within states in the US, movement of hemp products, including regular and nano CBD oil, faced longer supply periods. The delays were mostly caused by stricter measures relating to disinfecting cargo loads, changing packaging and ensuring the virus is not being transported along with delivered products.
With reduced opportunities to sell and fewer customers to sell to, customer-facing dispensaries have had to grapple with reduced sales. This has in turn backed up the supply end, so manufacturers and hemp farmers have fewer goods leaving the stores. In many cases, hemp farmers have taken severe hits to their profits, as many have had to drastically reduce prices to have any hope of moving their harvest. Due to these complications, the entire hemp industry value chain has seen contractions in revenue and profit margins.
Loss of workers:
It is important to keep in mind that the coronavirus has been as much a human challenge as it has been a business challenge. The virus primarily affects people and as a consequence, also operates to deprive businesses of their crucial labor force. The US alone has recorded confirmed COVID-19 cases running into the millions and deaths up to several hundred thousand. Apart from the sheer human toll these deaths have taken on businesses, the confirmed cases, false-positives and quarantine requirements have also had their effect. These factors have caused many businesses to not only lose important workers, but also to operate at reduced capacity for much longer than is good for the business.
Cash flow problems:
The pandemic has provided a stern test to businesses around the world, and also in the hemp manufacturing industry. While many businesses were already reaping the effects of the industry’s meteoric growth before the pandemic, others will have just been finding their feet or losing them when the pandemic struck. Businesses that were already on the brink pre-pandemic will have found it incredibly difficult to survive due to an accumulation of the factors already discussed. Payroll difficulties, operating expenses, debt servicing and other financial obligations rarely concern themselves with the fact of a pandemic and this will have had serious implications for struggling businesses.
Conclusion: COVID-19 on Hemp Manufacturing
With the worst of the pandemic hopefully past, businesses in the hemp industry may now begin to hope for a better end to the year. But as they count the losses that COVID-19 has caused, full recovery may increasingly seem like a long shot for businesses that have been pushed to brink by the pandemic.
It’s not all doom and gloom though. The pandemic has left its mark on businesses in the hemp manufacturing industry, but some of this has been positive.