Lantern closure shakes marijuana delivery market

Referral website cites difficulty in expanding outside Mass.

THERE’S ANOTHER major shakeup coming in the already-struggling marijuana delivery industry, with the impending closure of one of the largest marketing websites in Massachusetts.

Lantern, a website where consumers can go to order legal cannabis delivered from a local dispensary, announced Wednesday that it will shut down by the end of January, citing regulatory hurdles in other states.

“While our Boston-area business continued to grow and serve the expanding cannabis community with the best selection, lowest prices, and convenient delivery, it proved difficult for Lantern to expand outside of Massachusetts, due to both the speed of legalization and the challenging regulatory framework that affects all cannabis businesses,” Lantern CEO and co-founder Meredith Mahoney wrote on LinkedIn.

Lantern, a spinoff from alcohol delivery company Drizly, does not touch the marijuana itself but is a technology company that connects consumers with dispensaries that offer home delivery. The site operates in Massachusetts, Colorado, and Michigan.

Some states have restricted the use of companies like Lantern. New York’s regulations prohibit the sale of cannabis through a third party, requiring retailers to create their own delivery applications.

Mahoney, who declined a request for an interview, says Lantern facilitates more than half of cannabis deliveries in Massachusetts. It also offers an incubator program that provided assistance to many of the state’s marijuana delivery companies.

Devin Alexander participated in the incubator program and now has a marijuana delivery company that will be considered by state regulators for a final license next week. “If it wasn’t for Lantern, I wouldn’t be doing what I’m doing now,” Alexander said. “They were the first ones to provide education around cannabis delivery.”

Aaron Goines, who is considering getting into the delivery business, said the closure is another blow for already struggling operators because it eliminates opportunities to reach customers. He said delivery companies already have a harder time marketing to customers than dispensaries do. “Lantern was an aggregator,” Goines said. “Someone could go onto the site, see everything available, and choose a delivery operator.”

Goines said he thinks the problem for a company like Lantern is that many states, including Massachusetts, prevent third party technology companies from owning shares of a delivery company. And the market for delivery has grown more slowly than expected.

In Massachusetts, there are around a dozen licensed marijuana delivery companies. But operators say it is challenging to make a profit, given the expenses inherent in running a business. Delivery operators have been lobbying the Cannabis Control Commission to change a rule that requires two drivers per car. “We’re struggling, we’re just trying to stay afloat,” said Chris Fevry, who owns Your Green Package.

Goines said he is not sure if he will open a business, particularly since inflation has increased costs while decreasing demand. As more retailers open, he said, there is less demand for home delivery. “It’s already a complicated enough industry, which is highly regulated with razor thin margins. You do not want to be starting a business in a time like this when you have such great economic headwinds and unconventional inflation levels,” Goines said.

Budzee in Easthampton opened with a flourish in April. Its owners told the Daily Hampshire Gazette they hoped to become the Amazon of cannabis. In May, the company put itself up for sale, seeking $4 million for its office, warehouse, and five vehicles.

Ezra Parzybok, a cannabis consultant and partner at Budzee, said the company was the first of its kind to open so the founders wanted to see how much money they could get for it. “We thought, well just in case someone wants to come and give us gobs of money, we should list it,” Parzybok said.

No one did.

Parzybok said the delivery market has been “disappointing.” Western Massachusetts is saturated with dispensaries and less populous. Eastern Massachusetts is a more appealing market, but Parzybok believes that after consumers spent five years adjusting to buying legal cannabis in brick-and-mortar shops, many people are not yet comfortable with delivery. Those who buy on the black market already have illegal delivery options. Because delivery services lack storefronts, there is no marketing opportunity for customers to recognize them just by driving by.

Parzybok said the markets where consumers have embraced cannabis delivery are in places like San Francisco, Los Angeles, and Seattle, where pot shops have been open for a decade and there are huge population centers in locations where driving is difficult.

One other potential danger for local marijuana delivery operators, though one that is likely a long way off, is federal legalization. “The day Amazon can sell you weed, it’s all over,” Parzybok said. “For everyone.”