STMH - Cannabis Delivery Could Stay Strong Even After The Pandemic
The Covid pandemic has been impacting our economy in so many ways for such a while now that it’s hard to parse which marketplace developments are driven by a climate of uncertainty and crisis versus a myriad of other factors. Online ordering and delivery, which was already gaining ground as a popular mode of consumerism pre-pandemic, received a massive boost in popularity from the endless restrictions that Covid-19 has placed on our daily lives.
But delivery’s spiking popularity is not solely due to attempts at avoiding Covid infection. Meadow co-founder David Hua, who notes that retail cannabis deliveries went up 50% in 2021 from 2020, anticipates that the continued growth of this trend will see ongoing benefits beyond staying Covid-free. These include heightened delivery times and expanded access to a greater range of offerings for consumers, while businesses can expect to see increases in the size of their customer base and boosted sales.
A January report on delivery service trends produced by The Harris Poll for delivery management software company Onfleet found that over half of those surveyed stated that if they were going to purchase legal cannabis products, they would be much more willing to do so via delivery versus in person. The convenience factor and remaining taboos regarding cannabis use are likely factors here, but other safety concerns cannot be discounted. Christine De La Rosa, co-founder and CEO of The People’s Ecosystem , highlights the rise in instances of mob robberies at retail locations in places like California and Oregon, and predicts a commensurate rise in cannabis delivery services by small businesses “rather than face the risk to their safety, their employees’ safety, and their business safety in the current climate.”
In several parts of the U.S., however, cannabis delivery services face a number of potential legal challenges. Recreational marijuana became legal to buy in Maine almost a year and a half ago, but weed shops and dispensaries remain relatively thin on the ground in Vacationland due to a slow acceptance of the cannabis industry in some areas. To leapfrog this slow thaw, some in the Maine cannabis industry are pushing for a legal door-to-door delivery system. Direct delivery is already allowed for medical cannabis in the state, and many legal businesses owners hope recreational cannabis delivery will give them an edge in competing with illicit operations. (Due to an eight-fold increase in calls for unintentional marijuana poisoning among children since 2012, many Mainers fear that door-to-door delivery will only place kids at greater risk.)
Not far from Maine, Lantern has thrived in Massachusetts. Lantern is among the leading cannabis e-commerce marketplace and delivery platforms in the U.S and was formerly part of the Drizly Group, a top alcohol delivery company. Lantern currently offers on-demand cannabis delivery for patients and adult-use consumers in Massachusetts , Michigan , and Colorado . In February 2021 , Uber announced an agreement to acquire Drizly for approximately $1.1 billion in stock and cash. As part of the deal close, Lantern has transitioned to a separate corporate entity and received $40 million in capital from Drizly Group. The price paid for Drizly has certainly sparked dollars signs in cannabis delivery company’s eyes. Lantern experienced 350% year-over-year growth following the expansion of its on-demand marketplace delivery platform into Colorado and Michigan , two of the fastest-growing cannabis delivery markets in the U.S. Additionally in July 2021 , Lantern became the first adult-use delivery platform to launch in Massachusetts and serve the Greater Boston area.
Eaze is one of the largest cannabis delivery companies and the best known. It is a vertically-integrated company with over 7.6 million deliveries completed to date and over two million registered customers. Eaze carries over 100 brands and 600 individual products on its menu and is a nationally-recognized leader in promoting social equity licensees, who have sold nearly $7.7 million in products via the Eaze platform. In July, Eaze launched the first-of-its-kind shoppable cannabis app for Apple. Eaze has also entered into the product side of the business as well and acquired a dispensary from the company Manifest Seven (OTC: MNSFS) in November for $6.7 million.
Despite these success stories, it isn’t all rosy in the delivery business. Stem Holdings Inc. (OTCQX: STMH) (CSE: STEM) sold its wholly-owned subsidiary Driven Deliveries, Inc. to Driven Deliveries’ founders in return for 12.5 million shares of Stem. At the time, Steve Hubbard, Interim CEO of Stem, commented, “After careful consideration with the Board, we have made the strategic decision to divest and discontinue operations of Driven Deliveries for several reasons. First, the delivery and e-commerce cannabis business in California has become increasingly more challenging due to oversupply in the market, which has reduced price per pound approximately 50%. More competition in California has also increased marketing expenses, which has resulted in low margin deliveries consistently. This divestiture will dramatically reduce our monthly expenses and improve our balance sheet, putting the company is a much healthier financial position to focus all of our resources on cultivation, processing, retail and our award-winning brands in California, Oregon and new markets.”
Despite the inevitable legal challenges and logistical complications that come with expanding cannabis delivery systems, Onfleet’s report paints a promising picture for a rising use of (and reliance upon) delivery for all kinds of consumables. With 55% of America’s Gen Z and 60% of Millennials owning up to having more delivery apps than streaming services on their phones (and older customers having grown more comfortable with delivery apps during the pandemic), delivery is a field ripe for innovation. That is, as long as that innovation doesn’t rely on robots or autonomous vehicles. According to Onfleet’s survey, It’s a brave new world, but not that brave. At least not yet.