What’s holding up marijuana home delivery?
IT WILL PROBABLY BE summer before Massachusetts residents can start getting marijuana legally delivered to their home, warned Devin Alexander, vice president of the Massachusetts Cannabis Association for Delivery.
First, marijuana entrepreneurs must overcome a host of regulatory hurdles, including the state licensing process and potentially more difficult municipal approvals. They must navigate a market that involves retailers, who have not been entirely welcoming to delivery companies – and have threatened to sue state regulators over the new delivery rules.
Alexander, the co-founder of Rolling Releaf, and Chris Fevry, president of the Massachusetts Cannabis Association for Delivery and co-founder of Your Green Package, joined the Codcast to talk about the nascent marijuana delivery industry, and some of the controversy surrounding the drafting of state regulations.
Under regulations that the Cannabis Control Commission will vote on Monday, delivery licenses will for the first three years be granted only to social equity applicants, who are people from communities disproportionately affected by prior enforcement of drug laws.
But Alexander said one major barrier remains the host community agreement – an agreement any marijuana business must sign with the municipality where it is located. Host community agreements are allowed under state law to take 3 percent of a business’s profits, but practically there is little enforcement of that limit and many agreements require additional “donations.” Some communities cap the number of agreements they will issue. Others have moratoriums on marijuana establishments in place – so marijuana delivery companies cannot deliver there.
“There’s been a lot of people who have had a head start in obtaining these host community agreements before these marijuana and delivery operators, which is really going to make it very difficult for them to get up and operational,” Alexander said. Alexander said municipalities need to be educated about the role delivery businesses play in ensuring equity in the industry, and about their differences from retailers. “We do not cause foot traffic. We do not cause abnormal vehicle traffic. We are giving people incentives to stay in their homes,” he said.
Initially, the Cannabis Control Commission wanted deliverers to be curriers, like Uber Eats – picking up marijuana that was ordered from a retailer and delivering it to a consumer. The delivery association was a strong proponent of the creation of an additional license type that would let them buy marijuana wholesale, then warehouse it and sell directly to consumers.
Fevry said the courier model is not financially viable, and relies too heavily on contracts with retailers, who have their own financial interests in getting into the delivery business once the social equity exclusivity period ends.
“I’ve had many conversations with different dispensaries,” Fevry said. “Some are very nice, and some are very much, give me 9.9 percent (ownership), I’ll help you get a (host community agreement). Or hey, we want to partner with you, but at the end of the exclusivity period, we want to buy you out.”Fevry said the warehousing model would let him buy wholesale from cultivators then mark up the flower by 40 or 50 percent to make a profit – while maintaining access to customer data, which can be used for marketing. “At any point in time, no one can say, hey, we’re severing the partnership and your business is dead,” Fevry said. “You’re very much in control of your own destiny and making sure that your customers are happy.”
Some retailers have complained that this model will turn delivery companies into retailers, without the same overhead costs. Fevry responded that a retailer can partner with a delivery company. And while delivery companies can drive to deliver merchandise, stores have the benefit of being able to attract customers from out of state, although it remains federally illegal to transport marijuana across state lines.