It was only a matter of time once the ink from the pen strokes on Proposition 64 dried that a booming cannabis industry in California would emerge. Nearly four years later, and the ardent supporters of a thriving, regulated cannabis market have been proven right. California is now the largest legal marijuana market in the world. The industry surged past $3.1 billion in licensed cannabis sales in 2019, underscored by a rapidly industrializing sector infused with some of the latest tech developments.
Dispensaries and growers are consistently tinkering with new products, companies are enveloping the manufacturing process under vertical umbrellas, and boutique tech services are becoming turnkey solutions.
The only apparent direction for the market is up, and the delivery market, in particular, is skyrocketing – even amid a global pandemic.
Following the Signs of a Booming Market
Most industries emerge highly fragmented, with many early startups tinkering with business models and ways to appeal to a niche market. From pioneering technology like the Internet to massive manufacturing sectors like steel, the trend of any emergent industry follows a path of grassroots competition to robust consolidation and more efficient capital allocation.
The cannabis space is no different.
In only a few years, the market has gone from a tenuous string of dispensaries and independent growers to large-scale manufacturing and co-packing entities like GrowPacker paired with delivery services mirroring the efficiency of Uber Eats. Low margin competitors have fallen away as the more robust companies have absorbed market share, positioning themselves for appealing acquisitions.
One of those companies was Greenlight, the first order-ahead mobile app for cannabis with built-in loyalty for dispensaries.
Founded by Vanessa Gabriel, Jade Gabriel, and Marc Lopez, Greenlight was acquired by a publicly-traded cannabis company in 2018 after executing with cutting efficiency on its way to over millions in transactions and thousands of users in only nine months.
The founders’ track since then is a microcosm of how a booming market evolves. At the time Greenlight was created, the cannabis delivery service market was especially ripe, and the Greenlight team took their experiences following their acquisition and applied them to their newest venture – Drop Delivery.
“While building our previous company, Greenlight, we were exposed to the lack of technology and software for the cannabis delivery industry,” details Vanessa Gabriel. “We saw that, although there were many software platforms available in the market, it truly was a fragmented experience for a business to run on a day-to-day business.”
At the time, the cannabis industry was molding a more robust manufacturing and growing sector first, before transitioning to a more consumer-focused evolution of boutique services.
Companies needed to preserve capital and manage cashflows for an industry that’s early days saw a slew of competitors go bankrupt quickly. That’s a natural progression for any nascent market, though, and is a sentiment recently expressed by Matt Hawkins, CEO of Entourage Effect Capital, in a piece for Forbes, citing the need for cannabis companies to “return to the basics.”
For the Greenlight team, they leveraged their experience to wield as a competitive edge – well aware of some of the early market’s pitfalls and how to still innovate in a ripe area of the market.
“At any given time, a cannabis delivery business would be using 5+ different platforms to take care of their needs,” continues Gabriel. “With this, there are several inefficiencies such as data not being connected across platforms, working with multiple support teams, and higher monthly costs.”
And so, the spark ignited for Drop Delivery, whose vision was to coalesce the tech, marketing, and delivery needs of cannabis companies into one turnkey platform.
“We had the idea of creating a true all-in-one delivery management software that offered solutions entailing: E-commerce, POS, CRM & Loyalty, SMS Marketing, and delivery logistics in one platform,” says Gabriel. “We knew that delivery was going to be the future of cannabis, and we took what we learned from Greenlight and dispensaries to give us a head start in building software for delivery companies.”
Strange Times, Solid Margins
It’s hard not to mention the exogenous circumstances of 2020 and how they’ve had an impact on every industry in what is, so far, one of the strangest years on record. With people shuttered in their homes for weeks on end, delivery services were poised to capture value from the direct needs of consumers not willing to leave their homes amid a pandemic.
Unsurprisingly, tech darlings like GrubHub and Postmates were virtually saved from endemically poor margins, with Uber’s acquisition eyes firmly fixed on GrubHub now. In the cannabis space, delivery services were already beginning to show signs of progress before COVID-19, then everyone sitting at home wanted a Postmates for cannabis, and demand ramped up.
Social distancing ignited a surging demand for cannabis delivery, and the providers were prepared for the rush.
Formerly, the fragmentation of the market shared by Vanessa Gabriel would’ve hindered delivery services in major Californian cities like LA, but the opposite happened. Online web portals, mobile apps, and real-time tracking of cannabis deliveries from Los Angeles’ copious dispensaries have proven as efficient as the food delivery sector. In many ways, it may be even better.
Drop Delivery has played a significant role in the success of cannabis delivery in California’s biggest city too. With 150 percent sales growth from February until now, the doldrums of the lockdowns, Drop Delivery has had thousands of successful deliveries and a couple million transactions processed through its platform since January. But it’s not only the financial metrics that are impressive.
“As part of our SaaS package, we provide their own E-commerce mobile app for our users to easily view products, shop, and gain loyalty points. No other competitors offer that at the moment.”
Such a service ties into marketing for Drop Delivery’s users, who can bypass conventional (and costly) marketing avenues. It even helps to increase retention of customers with points and a branded experience that is reliable and they can keep coming back to.
Drop Delivery’s all-in-one services have a mutually beneficial effect on Los Angeles’ numerous dispensaries and cannabis startups.
“We are the only all-in-one delivery management software that offers all of the above components in one simple platform to help run the day to day of a cannabis delivery business,” details Gabriel. “Other companies may offer one or even two components above as their specialty but not all. Our onboarding process can be completed within 24 hours of client sign up, whereas other platforms you are estimated at anywhere from 2-8 weeks.”
Quite simply, it’s the mesh bringing together the many fragmented components of a blossoming market into a more cohesive, efficient mechanism for managing business cash flows. The industry can organically grow with healthier margins than those early wild west days following Proposition 64, and the cannabis market in California can become the next iteration of what happens when you let a free market for an emerging suite of products thrive.
The California cannabis industry will only continue its skyrocketing growth from here – COVID-19 or not. And with the end of lockdowns just over the horizon, look for the delivery market to serve as the industry’s technological bellwether moving forward.