Blockchain
Covid-19 has impacted the cannabis industry in significant ways. It was great that the state governments designated the cannabis industry as an essential service. It was a disgrace that the cannabis industry has been left out of federal small business relief. It is yet to be seen how Covid-19 guidance will impact the industry’s structure and ultimate market strategy, especially for retail stores.
Covid-19 social distancing guidance limits the number of consumers in a store, which ultimately impacts sales. Due to this shift, retailers may turn to delivery services to expand consumer reach and increase revenues. California’s Assembly is moving bill AB-2482 forward to help level the competitive playing field between the legal and illicit markets for delivery services.
Delivery operations account for 75% of the illicit market retailers. In the licensed market, there are over 300 licensed non-storefront retailers. Three cities in Northern California account for over 65% of them including Oakland (121), Sacramento (51), and San Franciso (24). Delivery operators may only carry products for one retailer at a time, and they must start from, and go back to, the original destination on the same day.
The deregulatory legislation arms the legal market with additional ways to interact with the 54% of California consumers that receive cannabis from a delivery source. The bill expands the modes of transportation that a delivery service can use, raises the value of inventory that can be carried, and aligns the security burdens with these choices.
The existing law requires businesses to deliver products in an enclosed vehicle. Under the legislation, businesses can use bicycles, motorcycles / scooters, and cargo vans. This allows businesses to choose the most efficient and cost-effective method of delivering cannabis products to consumers. Inventory transport caps will also vary based on the delivery method that is used.
The current $5,000 carrying cap for cannabis products will be replaced by a tiered structure. An employee who uses a bicycle may carry only $500 goods whereas employees who use a cargo van can carry up to $50,000 in products. The amount of cannabis that can be carried in a car will increase to $20,000, which is closer to the typical $25,000 inventory carried by the illicit delivery services.
Finally, the legislation requires California’s regulators to work with the Department of the California Highway Patrol to develop safety standards for each value tier. The safety standards referenced in the bill are those that in use today to ensure the safety and security of the delivery including lockboxes, employee verification, and customer verification processes.
California’s legislation is a move in the right direction. Licensed operators need to be flexible and change their business strategy as the cannabis market transforms as a result of the Covid-19 pandemic. Now is the time for regulators to think outside of the box and provide relief from challenges that arise. This is a time when state and local governments need to retain market share, not only for the badly needed tax revenues but to show the illicit market that the competitive threat from the licensed market is real and growing in strength.