Tough regulations and an explosion of dispensaries are creating a tougher landscape in Massachusetts for aspiring delivery operators, as the exclusive three-year period for social equity licenses officially began earlier this month.
“I think that the competitive forces for delivery are a lot greater than they were two years ago when we were fighting for this license in this state to be exclusive for social equity,” said Aaron Goines, president of the Massachusetts Cannabis Association for Delivery. “The operational aspect of it is a lot more challenging because we have some difficult regulations, specifically for delivery, that makes it a more challenging model to be successful.”
Delivery licenses are exclusively available to social equity applicants for three years starting April 5, 2022, which was when the Massachusetts Cannabis Control Commission issued a commence operation order for Budzee.
As the first social equity delivery license holder, Budzee joined just a handful of courier license holders and micro-businesses with a delivery certification, as the only operators able to legally deliver cannabis to customers’ homes. KindRun received its own commence operation order for delivery starting April 18.
Delivery operators must obtain a storage facility and vehicles, which means a potentially lower startup cost compared to a retail storefront. The downside is the higher operating cost of delivery, which requires two drivers for each vehicle and is now also facing increases in gas prices.
“I think that delivery has a really high overhead, you know, it’s very expensive for us to even just make one delivery,” said Alissa Nowak, founder of Lucky Green Ladies.
Nowak, who will be operating out of Norton but will likely begin her delivery operation with routes in Boston, said that she, like other operators, will likely have to travel into the city, because that is where the high demand is.
“I feel like nobody else in the surrounding areas even knows cannabis delivery exists yet,” she said. “So I think the people that are going to be successful are the ones that are going to really put heavy marketing into their area.”
The recent spike in gas prices is also taking a toll. Average gas prices in Massachusetts have gone from $2.823 per gallon in April, 2021, to $4.171 in April, 2022, according to the U.S. Energy Information Administration.
“Fuel has been absolutely insane, not only rising significantly, but it’s volatile at the same time,” said Goines, who is hoping to start his own delivery business under the name Emerald Turtle.
Aside from competition with the illicit market, the fast growth of dispensaries across the state also creates a challenge for delivery operators.
As of April, 28, 212 retail storefronts had received commence operation orders from the state, meaning that are an increasing number of close options for cannabis consumers.
“I have access to three dispensaries within two miles of my house. If I expand that 25 miles, I have access to 18,” said Goines. “So for me, I probably would never get delivery because honestly I can get in my car and go in either direction and be at a dispensary within 5 minutes.”
Ruben Seyde, co-founder of Delivered Inc., originally planned to start with a cultivation license and only pivoted to delivery when his original investment plans fell through.
“We decided to buy up 55 acres of farmland and try to do a cultivation facility,” said Seyde. “We were doing really well, and we got all the way through the provisional stage, but then COVID-19 hit and the investors pulled their money out.”
Delivered Inc. currently has a provisional delivery license, which means they are able to obtain and store wholesale cannabis, but cannot do anything else with it until they receive a commence operation order, according to Seyde.
“The Commission wants to see that we’re actually capable of doing it properly,” he said. “So we need product at the warehouse before we can even get to the final inspection”
While the illicit market is often viewed as a primary competitor for delivery operations, many of the people seeking delivery licenses come from that market.
“I was a hardcore legacy market participant. I did that for years and that’s where a lot of my experience comes from,” said Nowak. “I actually ended up getting arrested for doing that in Springfield, and that qualified me for the social equity program, which then changed my life.”
Seyde, who also has a history in the legacy market, said that he viewed the customer base that continues to rely on the illicit market as one that delivery is uniquely able to compete in, especially considering how many delivery operators may have history in the legacy market.
“I see that delivery market as an opportunity to really start capturing some of the illicit markets into the legal market,” he said. “Most of us have operated or been involved in some type of delivery service in our past already. So we understand the consumer, we understand how the market works.”