The Trajectory of Cannabis Delivery

By J. Dee February 28, 2019 6am

If you’re interested in purchasing cannabis but don’t want to be in or around dispensaries – you have options.

Prior to medical marijuana legislation in the mid 90’s, black markets spanned the state of California – forests, farmland, mansions and industrial buildings were used by resilient networks with safe houses throughout major cities. Marketing was word-of-mouth and delivery services (drug dealers) were the only form of retail distribution.

Then came Proposition 215, or the Compassionate Use Act which was later implemented through Section 11362.5 of the California Health and Safety Code, the latter being enacted by the wittily designated Senate Bill 420.

Complex, conflicting and often punishingly expensive regulation poured in and black markets turned grey. Entrepreneurs set up non-profits and attempted to comply with this array of nuanced rules, guidelines and judicial precedent. Doctor prescriptions and physical storefronts were a new phenomenon, attracting mass consumer interest. Cannabis operators started collectives and launched dispensaries, and a quasi-commercial market grew.

Delivery services became niche, no longer being the only method for retail sales. This new market nearly abandoned delivery altogether, focusing on brick and mortar business models. Severely ill and immobile patients, many times unable to leave their residence or assisted living facilities, had little choice but to continue using the delivery services of old school drug dealers. Similarly, many professionals (e.g., doctors, lawyers, public figures etc.) continued using drug dealers out of fear of being seen sneaking in and out of green crossed storefront dispensaries and thereafter stigmatized as cannabis users. A handful of companies saw opportunity and focused solely on delivery – specifically to these high demand clients.

Marijuana Delivery Service was founded in 2009 with a small grow facility and office in Redondo Beach, California. A group of growers focused on breeding top genetics operate this exclusive collective, which recently re-launched in San Francisco, Los Angeles and San Diego.

Speed Weed started doing business in 2011, and was acquired by Aquarius Cannabis in 2016. They serve a client list of over 25,000 and have remained at the top of the marijuana delivery market in California for years despite being sued in 2016 by the Los Angeles City Attorney’s office for operating in the city.

Eaze began operations in 2014, quickly becoming one of the most successful delivery services in the country. Last year they raised $27 million in Series B financing, claiming a 300 percent year-over-year increase in gross sales.

Proposition 64, or the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA) legalized the recreational use of cannabis in California on November 9, 2016. A year later temporary state licenses started being issued by the Bureau of Cannabis Control. Unfortunately, as with the Compassionate Use Act, a labyrinth of confusing and conflicting regulations deterred many operators from seeking licenses, encouraging the perpetuation of grey/black markets.

Non-profit co-ops and collectives had been allowed to operate without state permits, because they were given a legal defense from prosecution under state law. That ended on January 10, 2019 with an amendment to SB 420. As of now any co-op or collective being run without a state permit can be raided by law enforcement and shut down if they serve more than five patients.

On January 16, 2019 state rules approved by the Office of Administrative Law gave licensed cannabis delivery operations the right to deliver cannabis anywhere in California, even in cities and counties that had previously barred delivery, eliminating much of the confusing and conflicting state and local regulations. This should result in the exponential growth of legal marijuana delivery services which is especially important to those unable or unwilling to use dispensaries because they can now enjoy the health and safety protections guaranteed through fully legal and licensed distribution.

Marijuana delivery is making a full circle from the only form of retail distribution, to a niche market, and soon back to the preferred solution for most buyers and sellers. Not only do consumers enjoy the hassle-free aspect of menu apps and home delivery but opponents to legalization and municipalities attempting to please everyone find themselves supporting delivery operations as a means of satisfying the market and not saturating their districts with the eye sore of pot shops in every strip mall. Delivery services have significantly less overhead than storefronts with infrastructure that places them in good position to capture wholesale distribution contracts. These vertically integrated companies can benchmark product and bypass brokers, bringing prices down and quality up for the consumer. Over the next decade I see delivery services dominating the retail space as technology continues to advance, bringing the dispensary experience discreetly to residential communities.

National marijuana legalization seems inevitable, with significant support on both sides of the political aisle. Delivery companies bridge gaps between market participants. Security is always a concern and they secure their operations without becoming a visual afront to everyday citizens many of whom do not see legalization as the revolution it is keen to become, but instead as a drug and medical movement. Wholesale delivery operators and their strategic partners are laying the foundation for a traditional commodity market and sparking the flames of a genuine cannabis and industrial hemp led wave of economic expansion.

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