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Cannabis delivery is a big business. Though it once was a luxury reserved for the most forward-thinking cannabis states like California, the COVID-19 pandemic has resulted in many states fast-tracking their own delivery services.
Now, some form of cannabis delivery is available in more than a dozen states nationwide. If you’re considering cannabis delivery as a business, though, you have to navigate a labyrinth of complex legal and supply-chain issues.
The Logistics of Cannabis Delivery
Cannabis delivery is currently permitted in the following locations:
- New Jersey
- New Mexico
- New York
- North Dakota
- Washington DC
However, there are a few caveats worth mentioning here:
- The majority of these states exclusively allow delivery for certified medical patients. Recreational cannabis delivery is only available in California, Colorado, Michigan, Nevada, and Oregon.
- Some states and municipalities are permitting only temporary delivery services for recreational cannabis due to COVID-19. So if you’re thinking of building a recreational delivery service, Michigan, Nevada, and Washington DC are all risky locations as their recreational delivery privileges may be revoked in the near future.
- Delivery services are sometimes limited by city or county as well. In Colorado, for instance, delivery services are only permitted in Aurora, Boulder, and Denver.
There are also important transportation guidelines that must be followed. For instance, when transporting cannabis from a retail location to home, all products must be clearly labeled, stored in sealed bags, and often kept in the trunk of the transporting vehicle. Consult your local laws if you’re thinking of starting a cannabis business.
The Supply Chain of Cannabis Delivery
When it comes to cannabis delivery, the biggest consideration is the supply chain. Where does cannabis actually come from?
The supply chain typically begins with the grower. Cannabis may be grown in a greenhouse, a controlled indoor grow house or a natural outdoor environment (if the climate permits). From there, the harvested cannabis may be sold to:
- Product manufacturers. These are the big brands that package cannabis products and put their name on them. Product manufacturers may sell their branded products to dispensaries or direct to consumers.
- Cannabis processors. These are companies that turn raw cannabis into extracts and infusions (dabs, edibles, etc…). Processors then sell their extracts and infusions to product manufacturers, who in turn market them under their own banner. Some processors also function as manufacturers and/or retailers.
- Cannabis retailers. Some growers sell directly to dispensaries. The dispensaries then sell the fresh flower or pre-rolls to consumers.
So as cannabis makes its way from the soil to the dispensary, where do delivery companies get their supply? Cannabis delivery is usually built around one of three business models:
- The “Pizza Delivery” Model: In other words, a dispensary offers delivery of its own products much like a pizzeria offers delivery of its pizza. The dispensary may allow customers to order online or over the phone, and then a budtender or delivery specialist brings the order to the customer’s home. The supply chain issue is pretty straightforward here, as all products come from the dispensary’s existing inventory. The problem is that you have to own a fully functioning dispensary to take advantage of this business model.
- The “Door Dash” Model: In this type of setup, an independent delivery organization or entrepreneur will partner with multiple neighborhood dispensaries and centralize their partner dispensaries’ products on a single delivery website. The customer will visit the delivery website and choose the products they want from one or more dispensaries. Then the driver will visit the appropriate partner dispensary to acquire and deliver the goods. This type of business offers several benefits as it allows entrepreneurs to break into the cannabis industry without having to maintain their own supply (and often without the need for a dispensary license). It can be difficult to partner with dispensaries, though, and profit margins tend to be much lower than with other delivery business types.
- The “Amazon” Model: A cannabis delivery company maintains its own supply of products, all stored in a warehouse or other retail center not open to the public. A customer places an order online, and drivers then deliver the products from the warehouse to the customer’s home. This operation works like a delivery-only dispensary, but it requires less overhead and often fewer regulations than a traditional customer-facing dispensary.
The supply chain can take many paths, but there’s one essential rule: It must remain in a single state. Because cannabis is illegal at the federal level and classified as a Schedule I Controlled Substance, interstate commerce is a federal crime. So if you provide cannabis delivery in California, for example, your supply must be grown, processed, and manufactured in California.
Cannabis Delivery Is a Growing Industry
The cannabis industry is projected to reach $63.5 billion by 2024, and delivery plays an important part in that economic growth. If you’re thinking of getting into the cannabis delivery industry, just determine the ideal business model for your operation, obtain the appropriate licenses within your state, and make sure to follow the law to the letter.
Delivering cannabis can be a rewarding and lucrative endeavor, so long as you’re willing to endure all the complexities and red tape involved.