Even before California voters overwhelmingly supported Proposition 64 (officially known as the Adult Use of Marijuana Act) back in November, cannabis delivery companies were proliferating across the state. Even in cities that had temporarily placed a ban on cannabis delivery orders – such as San Jose and Los Angeles – there were plenty of entrants in the marketplace. So it’s no surprise, then, that the legalization of recreational marijuana has spurred another round of growth in this burgeoning industry.
However, it’s still unclear which regulatory rules – if any – will apply to these delivery companies in 2017 and beyond. In the 62-page Proposition 64, there were few guidelines about how these delivery companies were to operate. California is now setting up a Bureau of Marijuana Control within the Department of Consumer Affairs, and that could lead to new guidelines on how these delivery companies operate later in 2017, as well as a formal licensing process.
Based on anecdotal evidence, it’s largely a free-for-all right now as tiny startups – some of them run out of home offices – compete for market share. The entrants that have the early advantage are companies like Santa Cruz-based California Greens Express, which built its core business around medical marijuana. Prior to Proposition 64, California Greens Express operated a business that solely functioned under tightly-controlled regulations about who could buy and use medical marijuana.
It’s these types of cannabis delivery companies that built their expertise around medical marijuana that are the market leaders right now. They have a distribution and delivery network in place, and they have built relationships with medical dispensaries as well as local growers. And, of course, they are more informed about the potential regulatory hurdles that could be coming soon once California lawmakers attempt to impose greater control over the industry.
In addition to the regulatory concerns facing the cannabis delivery business, there are other issues to keep in mind for these cannabis delivery companies. One of them, of course, is the intense fragmentation within the marketplace an the need to scale up. Small-scale operations might have worked when the only customers were medical patients, but the legalization of marijuana to all adults 21+ is going to create a new urgency to scale up quickly. In any industry, being able to build economies of scale matters, and the marijuana industry is no different.
So how do you go from servicing a handful of regular customers to servicing hundreds – if not thousands – of customers? The traditional approach is to scale up your advertising and marketing accordingly. Until now, most cannabis delivery companies have largely built their customer lists via social media and informal online networks such as WeedMaps, Weedly and Webjoint.
The next step could be a rollout of more conventional marketing campaigns to attract new customers. But here’s where the regulatory overhang matters. In order to avoid appealing to potential youth buyers (under the age of 21), companies won’t be able to use cartoon characters or other images meant to appeal to kids. They won’t be able to advertise on any TV network or radio station that is federally regulated. And they won’t be able to advertise within any venue unless they can show that the audience is comprised of at least a majority of adults over the age of 21.
Thus, any plans to advertise at a major sports arena (the way a company like Red Bull would) are largely out of the question for now. Presumably, however, a cannabis delivery company could advertise at a business convention for tech startup leaders in downtown San Francisco, where all the attendees are adults.
The consumer demand is already there for on-demand cannabis delivery. If given a choice between waiting at a dispensary or having an order delivered overnight, it’s a no-brainer to choose the mobile dispensary. Just as same-day deliveries of alcohol are now commonplace, it’s easy to see the same phenomenon happening with recreational marijuana. It’s legal, safe and discreet.
Take the example of California Greens Express. Using the company’s website, it’s as easy to order marijuana online as it is to order a pizza. Once you’ve identified the strain of cannabis that best suits you – like California Greens Lemon Diesel or Green Goblin – it’s easy to become a repeat customer. With online ordering, it’s easy to see how a customer could place an order in the morning and have a cannabis delivery made in the early afternoon. Sometimes, cannabis orders can arrive literally within five minutes.
The next big growth opportunity for these companies will likely involve an extension of their product lines. California Greens Express, for example, sells edibles (e.g. cookies, brownies and candies), flowers and infusions. More products mean more sales opportunities, and that could be another route to getting big fast and fending off potential competitors.
This same model of cannabis delivery, now so popular in California, could expand nationally as more states such as Nevada legalize marijuana for recreational use. There will always be consumer demand for high-quality products that are delivered quickly. That means that, across the nation, you may soon be able to order your pizza, supermarket groceries and cannabis all in the same day, and potentially even from the same online site.