Recession resiliant

With speculation of a recession on the horizon, many question how cannabis would fare in a serious downturn

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male hand with a green leaf of marijuana against the background of a beautiful heavenly landscape of blue sky with fluffy clouds behind the porthole of a plane, travel concept
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The last few years have been turbulent for the economy. And according to chair of the Federal Reserve, Jerome Powell, a “soft landing” that would avoid a recession might not be possible. 

“A soft landing is really just getting back to 2% inflation while keeping the labor market strong,” Powell said in an interview with NPR’s Marketwatch. “And it’s quite challenging to accomplish that right now, for a couple of reasons.”

Among the reasons Powell points are the first global pandemic in 100 years, the stimulus response by our government that created trillions of dollars, the resulting outbreak of inflation, the unexpected outbreak of war in Ukraine, and the recent shutdowns all across China. 

All of that compounding has sent the economy into a spiral that’s starting to look more and more like a tailspin. Or, in more technical terms, a “recession.”

Since the last U.S. recession in 2008, one very green new industry has blossomed in states across the country. In 2012, just as the U.S. was climbing out of 2008, Colorado legalized cannabis recreationally, launching an industry that would generate over $12 billion between 2014 and 2022. Cannabis has yet to go through a recession—it’s one of the few industries of its size that hasn’t. Leaving many to wonder, how cannabis will fare if the Fed’s “landing” is as rough as some are anticipating.

Historically, vice industries like alcohol and tobacco have shown resilience through economic downturns. During the 2008 recession, alcohol sales remained stable, and even saw growth over time. It was the same for tobacco sales. In a study published in Tobacco Induced Diseases in 2009, researchers found that the three largest tobacco companies in the world saw massive returns despite global downturns across other industries.

“The sales records of these tobacco companies demonstrate that smokers not only continued to smoke but also actually increased their cigarette intake during this period of economic difficulty,” the study reads.

According to Jay Czarkowski, a founding partner of the cannabis business consultancy Canna Advisors, the same thing would likely happen to the cannabis industry in a serious downturn.

“I don’t think [a recession] will hurt sales a whole lot … people want to enjoy their cannabis no matter what,” Czarkowski says, and after a brief pause, adds, “They may need to enjoy it more, to keep their spirits up.”

It wouldn’t be dissimilar to the COVID-19 lockdown, Czarkowski agrees. People trapped at home, without work, suffering through stressful and uncertain times, turned to liquor stores and dispensaries to assuage their anxiety. According to data collected by the US Census Bureau, just in Colorado, tax collections from alcohol sales jumped 46.6% in March of 2020; 14% in April, and through September it continued to incrementally rise. Tobacco sales saw similar leaps and bounds in tax revenue throughout the year.

And cannabis? In Oregon, Washington, Alaska and Colorado, cannabis sales reached a three-year peak in 2020. 

“I think as an industry, cannabis will be just fine,” Czarkowski says. “I don’t see why a recession is going to keep people from enjoying cannabis.”

Counterintuitively, a recession might actually make the cannabis industry grow in unexpected ways, Czarkowski suggests. 

“The cannabis industry here in Colorado was born out of the Great Recession of 2008,” Czarkowski says using himself as an example. He was developing real estate when the 2008 recession hit and turned his career on its head. He and his partner left that industry out of necessity, and entered Colorado’s budding new cannabis industry, instead. “Here I am 13 years later and still in cannabis.”

Czarkowski isn’t just in cannabis. His business, Canna Advisors, is a consultancy group that has helped businesses launch and get established across the country. They help clients win cannabis business licenses, optimize facility designs, standardize operations and maximize business development. Canna Advisors has helped grow the industry across the US, and if it hadn’t been for the last recession, Czarkowski says it probably wouldn’t exist.

“If people start to lose their jobs in other industries, we may find them as the next batch of folks that are getting involved in cannabis,” he says. That could fuel a new era of growth for an industry that’s already exploding. 

If nothing else that should speak to lawmakers who are hesitant to legalize or decriminalize cannabis in this country. This is a very resilient industry, and whether you support it politically or not, that’s a very legitimate reason to support its legalization everywhere. 

“Those folks that still think that this is the ‘devil’s lettuce’ will hopefully realize that they can help protect their communities and protect their states by helping to foster this new industry,” Czarkowski says. 

Communities, counties, states and federal lawmakers should be embracing cannabis—not just for the weed, or the tax revenue, but to provide their constituents with secure industries and jobs that are insulated from economic instability, he says. 

The Fed’s “landing,” soft or not, won’t have much of an effect on Colorado’s cannabis industry, most economists and consultants like Zarkowski agree. So we might as well spark one up before we fasten our seat belts and secure those oxygen masks . 

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