Not Even Cannabis Can Escape the Coronavirus: Cannabis Weekly

(Bloomberg) -- Of all the industries, you'd think cannabis would be one of the most immune to supply-chain disruptions from the coronavirus. Yet even it's beginning to feel the impact.

Feather Co., a cannabis hardware provider that sources nearly all of its products from China, is experiencing shipment delays of two to four weeks due to epidemic-related factory shutdowns, according to Chief Executive Officer Pat Lehoux.

Those delays are likely even longer for other companies that don't have strong relationships with their suppliers, Lehoux said.

“When it comes to the delay a customer will actually get when dealing with a Chinese company, it really comes down to the relationship you have with that manufacturer,” he said. “If you're going through a third party and you don't have that close relationship, I think the delays will be more severe.”

Feather's largest customer is Canadian cannabis producer Organigram Holdings Inc., which uses its vape pens for its Edison brand. Marijuana vape products just became legal in Canada in December and Feather was extra cautious about building up inventory ahead of the Chinese New Year, which often results in supply disruptions even in normal years.

“We were able to convince Organigram to get that order in before Chinese New Year even hit,” said Mitch Thompson, Feather's director of product development. “Had we waited, we'd be in a pretty bad situation right now.”

Curaleaf Holdings Inc., the largest U.S. cannabis company by market value, recently stocked up on about $2 million worth of vapes from a U.S. supplier, which should last it about five months, Executive Chairman Boris Jordan said in an interview.

Jordan believes some of Curaleaf's competitors will soon run low on stock.

“I'm not particularly worried although I do think that some companies that were running thin on capital and couldn't store inventory the way Curaleaf can, I think they will be faced with shortages of cartridges,” Jordan said.

Thompson believes everything will be back to normal by April. In the meantime, some companies that are already struggling due to a lack of funding may see their margins shrink if input costs rise due to a shortage of supply.

“The vape pen industry is a pretty slim-margin industry,” Lehoux said. “I do think the industry as a whole will definitely see a disruption with raw material prices going up.”

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To contact the reporter on this story: Kristine Owram in New York at kowram@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Will Daley

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