Nevada is a tourist mecca. Between Las Vegas, Reno, and Lake Tahoe, tourism makes up a significant portion of the state’s economy. In the 2018 calendar year, the 56 million people who visited Nevada collectively spent $65.5 billion, up from $63.7 billion the year before, according to the Nevada Department of Tourism & Cultural Affairs.
So it was natural that when cannabis became recreationally legal in Nevada in 2017, many operators opened dispensaries near the high-wheeling masses that visit the state for relaxation and entertainment. Of course, no one could have foreseen that a global pandemic would grind tourism to a halt – hurting the cannabis industry that pinned its fortunes to it.
In the early months, Nevada was affected badly by the shutdowns caused by the coronavirus. The state had an unemployment rate of 28.2% in April as casinos and the businesses that thrive off of tourists were ordered to close. This greatly impacted the dispensaries who fed off the steady stream of visitors. Consider that Planet 13, touted as the world’s largest weed store, reported a drop of 35% in Q2 2020 revenues at the end of August.
The Local Bet
But not all cannabis companies bet large on tourists. C21 Investments, a vertically integrated cannabis company with operations in Nevada and Oregon, owns Silver State Relief which has remained focused on serving local medical patients and adult consumers in locations far from The Strip. With retail outlets in Sparks and Fernley, Silver State caters to a local clientele in a big way. The dispensaries are impressive, featuring over 800 SKUs in 15,000 square feet of retail space. In these times when people are practicing social distancing, the stores are also offering curbside pickup and next-day deliveries.
What’s clear is that the “think local” strategy has paid off. C21 posted their Q2 earnings last week, reporting that revenues rose $1.2 million and that cash flow improved 200% compared to Q1. The Nevada dispensaries generated a record $8.5 million in revenue in Q2, a 23% increase from Q1. This includes July as the first month reporting over $3 million in retail sales.
C21 President and CEO Sonny Newman said in a statement, “C21 has achieved a critical milestone this quarter as evidenced by the significant cash flow generated and our positive earnings per share. Our focus and hard work over the last twelve months have paid off, and we are now in a strong position to capitalize on the next phase of business growth. Our Nevada dispensaries continue to impress with the record retail revenue achieved this quarter.”
An Uncertain Return for Tourism
Adopting a local-first strategy is smart for any dispensary, but it’s particularly important at times like these. With a vaccine for COVID still a ways off, tourism is likely to flounder for the foreseeable future. According to the latest forecast from Oxford Economics, international tourism is expected to drop by more than 70% in North America, and it will take until 2024 for tourism levels to reach what they were in 2019.
Those statistics are sobering to operators who put their money on tourist towns. Sales data throughout the pandemic has shown that supply and demand don’t fluctuate wildly for cannabis as it does for other goods. In fact, as a whole, U.S. retail sales of cannabis are up 40% year-over-year. Companies like C21 that are grounded in their community will be able to let it ride through this pandemic.
A Sales Recovery
Cannabis tech firm Akerna (KERN) said that in May, cannabis sales started to recover for the companies that use its services. This could be attributed to the reopening of restaurants and shops. Adult-use sales experienced a 52% increase in average daily sales when compared to April. It is estimated that cannabis retailers experienced a 35% potential loss in total sales between March 21 and May 31, when compared to January and February averages.
As the state’s casinos began to open back up in June, daily average cannabis sales returned to pre-COVID numbers. Adult-use retailers experienced a 26% in average daily sales when compared to May. Since June, adult-use cannabis sales increased by approximately 14%, representing 54% less growth than the rest of the industry.
“Sales have rebounded past pre-COVID numbers,” said Ryan Ballman, Business Intelligence Engineer, Akerna. “Though the state’s economic rebound has been a bit slower than the rest of the country, Nevada’s cannabis industry is still well on its way to making a full recovery.”
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