With factories in China shut down to prevent the spread of the coronavirus, some marijuana companies have turned to manufacturers in the United States, India and Mexico to source packaging for their products.
For example, Cleveland-based Grove Bags has seen such a big spike in its business since the coronavirus outbreak that it’s had to turn business away.
KushCo Holdings, which provides ancillary products and services to the state-legal cannabis and CBD industry, is exploring packaging options in the United States, Taiwan and India.
KushCo had started looking beyond China for packaging when President Donald Trump imposed tariffs on Chinese goods, said Arun Kurichety, the executive vice president and general counsel of the Cypress, California-based company.
“As a prudent company, we look every day at other opportunities to source goods,” Kurichety said.
“Already, some of our focus has shifted from Chinese manufacturers to other countries. Our concentration in terms of products from China have decreased.”
Another example is Wick & Mortar, a Seattle-based branding agency that offers services such as packaging design and production. It ordered a six-month supply of packaging from China for its client Narvona, a grower that sells packaged flower and pre-rolls, company CEO Jared Mirsky said.
But with the spread of coronavirus, it’s started looking elsewhere for packaging.
“This entire debacle has forced us to start leveraging relationships in Mexico and India,” Mirsky said. “Once they get back to work (in China), they’re probably going to be backed up quite a bit.”
It’s not so much that the virus can live on the surface of plastics, glass or metals, but rather that the factories where packaging is made have shut down to prevent its spread.
Turning business away
Grove Bags is running three shifts a day seven days a week to try to keep up with demand resulting from the lack of packaging available from China, said Jack Grove, CEO of the Ohio company.
“We are over capacity and are turning business away, which is obviously something you never want to do,” Grove said.
“It’s been extremely difficult. We keep a good inventory of materials on hand in the U.S. but have had to tell customers we may face supply constraints.”
Grove, who spoke to Marijuana Business Daily on March 4 while attending Pack Expo East in Philadelphia, said there are many packaging businesses in east Asia and Italy, where the coronavirus hit the hardest, and that representatives from those companies did not attend the conference.
Current situation in China
Manufacturing facilities in eastern China have shut down, but several in western China have been allowed to reopen with proper certification.
Still, those operations are working with about half the employees they typically have.
Some cannabis companies are feeling the impact of the coronavirus, while others stocked up on packaging in anticipation of the Chinese New Year Jan. 25-Feb. 8, during which many factories shut down to celebrate.
Those companies might have ample supply for now, but uncertainty over how long the coronavirus will continue to spread has many packaging companies tapping solutions in other markets such as the United States, India and Mexico.
“We anticipate disruption every year and preorder anticipating there will be a slowdown for a month,” KushCo’s Kurichety said.
“Naturally, there have been disruptions in the supply chain because of the coronavirus outbreak, but we’re fortunate to have prepared in advance, have sufficient inventory in stock beforehand and have strong relationships with our suppliers to minimize the overall disruption.
“Unfortunately, some smaller and less resourced companies haven’t been able to say the same.”
And while it’s unclear whether a person can contract coronavirus by touching a surface that has the virus on it, a recent study published in the Journal of Hospital Infection suggests the disease can survive on objects for more than a week.
That’s why it’s important for marijuana businesses sourcing goods from China and Italy to understand the practices of the manufacturers they’re buying from, said Andrew Kline, director of public policy for the Washington DC-based National Cannabis Industry Association.
“If I were a distributor buying a product from China, I would want to know a lot about the manufacturing practices of that manufacturing facility,” Kline said.
“Are they wearing masks? Are people sneezing on the things they’re putting together? Are they testing employees for the virus? What actions are they taking? It’s a real issue that’s not just going to affect cannabis.”
Margaret Jackson can be reached at [email protected]