Canopy Growth Scales Back Operations

As states continue to implement and extend stay-at-home mandates, cannabis dispensaries have, for the most part, been among a select number of businesses permitted to remain open. Some cannabidiol (CBD) retailers have not been given the same luxury, but even for the CBD companies who are permitted to continue operations, the decision to stay open is not always an easy one. 

“We’re kind of just going day by day, minute by minute, quite frankly, and just trying to be responsible and good stewards of the community, looking out for our employees. It’s just, it’s really hard,” says Thomas Fisher, founder of Botanic Alternatives, a Chicago-based brick-and-mortar CBD retailer. “I mean, it’s like three-dimensional chess—how do we keep paying people, stay in business, [be] in compliance and not be part of a problem? It’s just complex, so you’ve got to be able to shift and move on a dime.”

As CBD companies navigate the COVID-19 outbreak one day at a time, they’re making changes large and small to keep their business afloat. 

RELATED: CBD and COVID-19 Part 1: How Sales Are Trending

New Offerings

From new purchasing methods to new products, companies are using COVID-19 to test the waters of a rapidly evolving landscape.

Taking a note from cannabis dispensaries in legal states that are permitted to stay open, some CBD retailers, like Botanic Alternatives, have begun offering curbside and delivery services for their products. The delivery model especially has given a boost to the company, which doesn’t have online sales and is dealing with the additional challenge of nearby construction deterring foot traffic, Fisher says. 

Some companies have gotten creative to meet customers where they are. Cornbread Hemp, a Kentucky-based CBD product manufacturer, sells its products at more than 100 retailers nationwide. But with some of its retailers closed because of stay-at-home mandates, Cornbread Hemp has created new benefits for those buying directly from its website. 

“We are offering free shipping on all orders until we get an all-clear, and we are working on implementing a payment plan option to help people purchase our products in these tough times,” says company co-founder Jim Higdon.

On the wholesale side, white label CBD product supplier Exactus Inc. has begun offering forgiveness plans to its customers to help them stay afloat. 

“On the brand side we’ve been expanding payment timelines, and we’ve been allowing more extensive credit terms to customers to help people stay in business,” says Derek Du Chesne, the chief growth officer of the company. “We know not everyone’s been as fortunate, so just to kind of mitigate the risk and minimize their exposure, we’re doing everything we can on the finance side to keep everybody else’s businesses going until everything is back to normal.” 

Meanwhile, some CBD companies have temporarily pivoted to making new products entirely. Several CBD companies have begun making hand sanitizer to meet the growing demand amid the spreading pandemic. Andy Rodosevich, the CEO of Hemp Depot, told Hemp Grower the company began doing so to help in any way it could and to try to “keep our staff busy and [not be] in a situation that we were going to have to lay anybody off.”

“It’s like three-dimensional chess—how do we keep paying people, stay in business, [be] in compliance and not be part of a problem?” -Thomas Fisher, founder of Botanic Alternatives

A Different Day-to-Day

While companies have made additions in light of COVID-19, many have also cut back in various senses of the word, from reducing social interactions to halting planned projects.

Botanic Alternatives has reduced its hours, and for customers who do decide to come into the store, Fisher says his staff, equipped with masks and gloves, controls how many people enter the store at once. 

Companies are also trying to reduce employee-to-employee contact, as well as avoid layoffs while keeping business afloat, by cycling employees in shifts.  

In addition to eliminating in-person meetings and letting those who are able to work remotely to do so, Exactus is having employees on the farming, manufacturing and shipping sides work in different shifts.

Botanic Alternatives has taken on a similar, yet slightly different approach. Out of Fisher’s seven employees, three alternate working at the store, but the employees work together to decide who will take which shifts. “I let them kind of figure out amongst themselves who wants to work, who needs to work more, you know, who may need the money,” he says. “I bonus them as well. Just any little bit I’m sure helps.” 

Even some of the largest companies in the industry have been forced to make cuts in areas of their businesses over uncertainty brought about by the coronavirus. “We are closely evaluating all spending across the organization, including exiting planned capacity additions,” CV Sciences CEO Joseph Dowling said during the company’s 2019 earnings call. “Also, we have decided to temporarily slow down our drug development efforts while we wait for certainty in terms of the breadth and scope of the patent protection we expect to obtain. We still continue to prosecute our patent. We are confident that we can reduce near-term costs to reflect an anticipated lower level of revenue as we navigate the near-term industry headwinds.” 

Looking Ahead

Despite the various changes companies have made, uncertainty over the future still remains. Businesses are evaluating how long they can sustain the new norm of operations before reality sets in.

“My labor costs obviously have gone way down [with our limited store hours]. I’m not ordering a lot of products right now, so I don’t have open invoices,” Fisher says. “If that were to maintain at a reasonable level, and again, it’s meager, we can probably go on almost indefinitely because we’re pretty fine-tuned. We were pretty well-stocked with inventory. … We’re going to be okay. We’ll be able to keep going for quite a while. I don’t think everybody’s that fortunate.”

Du Chesne says he’s trying to “figure out creative ways” to keep all his employees on payroll despite losing a significant chunk of revenue from hospitality customers.

“For people unable to work from home, we’ve had them on sick leave,” Du Chesne says. “We’re trying to avoid having them file for unemployment, but we’ll see how much we can offset those costs as long as possible. But with the current state of things, it’s not sustainable to keep people on payroll who are unable to work.”

No matter how rapidly things are changing, though, companies are attempting to hold onto a shred of

Photo courtesy of Harvest Connect.

normalcy. Despite worries over retaining employees, for example, Du Chesne says Exactus is still looking to hire seven to eight positions on the digital side of its business.

And amid all the confusion, some CBD companies, like Harvest Connect, are plowing forward with plans. In early April, the company opened a new store, CBD Store and More, in Roswell, Ga., with some minor adjustments.

To ensure social distancing, the company devised a type of drive-through that uses the store’s back porch and a system of pullies to deliver products without person-to-person contact. The store can take orders online, over the phone and through individual consultations. For now, it is limiting the number of customers inside to ensure 6 feet of distance between employees and customers.

“This is, most certainly, a unique time to open a physical store,” Kevin Quirk, CEO of Harvest Connect, said in a news release. “But we felt it was important to try, even if this opening looks far different than what we originally planned. There are people we can help with our products, so opening is more important now than ever. We just had to make adjustments.”

Hemp Grower Editorial Director Noelle Skodzinski and Editor Nicole Stempak contributed to this report.