Marijuana consumption has always been around. But it has always faced public image problems along with its legality. However, as US restrictions on marijuana use become looser, the opportunity for expansion in the industry becomes greater. The combination of convenience and increasing use of marijuana, globally, opens the doors for things like cannabis delivery services. Yet, only a handful of companies are really sinking their teeth into this niche of the marijuana industry.
The biggest hurdle for a cannabis delivery service stands on the federal legalization of marijuana. While individual states are legalizing the medicinal and recreational use of marijuana, it is still considered illegal federally. This is significant because it makes interstate trade extremely difficult to the point where it isn’t worth the risk.
Limited Options For Cannabis Delivery
You cannot get marijuana shipped using USPS as they are a federal agency, nor can you utilize UPS, FedEx, or other private shipping companies. This is due to the Department of Justice looking into previous drug malfeasance in 2014. Additionally, the employees for private services can technically go through packages and either take your illegally transported marijuana or report you for financial incentives.
Marijuana industry giants like Canopy Growth (CGC) and Aurora (ACB), haven’t really focused on developing a delivery service. This is because as legality spreads across the continent, so does the delivery range of marijuana mailings. It may take resources and time to develop a delivery service, but the reward could be unimaginable. Take a look at the restaurant industry. When online delivery blew up, it experienced a growth of 300% compared to dining in according to QSR Magazine.
There Are Delivery Options Available – A Good Opportunity For Investors?
Given the industry, investors should consider that this is a very early stage in this particular niche of delivery. Being that very few public companies are entering the space, it may be hard to find a diverse pool of options. But for early marijuana stock investors, they already know all too well that first-mover advantage could be key to grabbing onto an early trend.
Driven Deliveries (DRVD) is a delivery service company for legal marijuana products. While limited in the areas it can reach, the company has grown its business out across California and has been spreading into Nevada and other states. Controlling the California market is huge given the state has the largest marijuana market in the US. It helps the company prepare for less dense markets once they are able to handle California’s market size. The growth for potential is massive as more states begin to flip to pro-marijuana delivery.
To this end, Driven Deliveries just went into expansion mode. It has successfully launched operations in Nevada with Shango Marijuana Dispensary, one of the most successful stores in the State. The new endeavor provides Driven with a monumental opportunity to serve Las Vegas, the largest market in the State with massive tourism, and a central launch point for additional markets throughout Nevada.
The Nevada cannabis market has been growing at a rapid pace. Nevada retailers sold approximately $530 million worth of medical and recreational cannabis in 2018. The $44.1 million in monthly revenue represents a 35% increase when compared to monthly revenue in 2017. According to New Frontier and Arcview Market Research, annual legal cannabis sales in the state are projected to grow to an estimated $629.5 million by 2020.
Investors are Starving for this Tech
Investors’ appetite for such delivery service companies seems to be insatiable. Take DoorDash for example. The company competes with GrubHub and Uber Eats but recently tripled its valuation in only about 5 months to $4 billion despite not even being profitable.
Moreover, Uber Eats owns about 20% of the market while GrubHub, including Seamless and Eat24, has 52% market share. And even in the face of that steep competition, DoorDash has raised nearly $1 billion overall to date. This should give you an idea of just how hungry investors are for on-demand service companies.
Even Chinese investor and WeChat owner, Tencent, is looking to get involved in the food-technology sector in a big way by contributing a significant piece of a $500-$700 million raise for India’s Swiggy. The investment would value Swiggy at $2.5-$3 billion. Another app called Rappi is a Colombian on-demand delivery startup that recently brought in a new round of funding at a valuation north of $1 billion. How will you play the cannabis delivery stock evolution?