Cannabis and convenience had intersected well before the pandemic arrived, but over the past year, that connection has grown even stronger.
With several cannabis delivery service companies in Los Angeles — which were deemed essential businesses by the state — consumers had a range of options at their fingertips during stay-at-home orders.
Even when restrictions eased as the pandemic wore on, delivery services continued to thrive.
Now, as the Covid-19 crisis wanes in California and with the state removing most limitations, Los Angeles County-based cannabis delivery companies like Herbarium, Rebud and SpeedWeed are working to ensure they don’t give back their hard-won progress.
There are indications that these businesses are well-positioned going forward, although increasing competition and potential market changes loom in the distance.
According to a consumer trends survey by North Hollywood-based cannabis brand Ganja Goddess Inc., 90% of respondents said they used online ordering and delivery services to purchase cannabis. Around 60% reported that online ordering and delivery would continue to be their preferred method of purchase post-pandemic.
“The initial spike in cannabis delivery sales was noteworthy, but its continued prevalence more than one year later speaks volumes,” Ganja Goddess Chief Executive Zachary Pitts said in a statement.
Fast-growing market
Not surprisingly, the cannabis business is both active and competitive in California, the largest cannabis market in the United States. In 2020, cannabis sales in the state topped $4.4 billion, up 57% from 2019, according to Lakewood, Colo.-based cannabis industry publication Marijuana Business Daily.
And Los Angeles accounts for the lion’s share of that spending.
“L.A. is the biggest (cannabis) market in California, if not the world,” said Michelle Mabugat, a corporate and transactional attorney who is focused on the cannabis industry at Century City-based law firm Greenberg Glusker Fields Claman & Machtinger.
Cannabis businesses that provide pickup or delivery options made around 22% more in sales on average than businesses without those options between March 16 and April 24, 2020, according to Denver-based cannabis retail management platform Flowhub Holdings Inc.
The pandemic accelerated growth for many cannabis businesses. San Francisco-based Eaze Technologies Inc., one of the largest cannabis ecommerce companies in the United States, saw orders spike 60% in the 30 days following the enactment of stay-at-home orders in California.
The industry’s expansion has also attracted outside interests. In April, Dara Khosrowshahi, chief executive at San Francisco-based ride-share giant Uber Technologies Inc., told CNBC that he’s considering adding cannabis delivery to the company’s offerings once federal regulations are loosened.
Greenberg Glusker’s Mabugat said the ease of delivery has increased the appeal for many consumers.
“More and more people just want the convenience of cannabis products being delivered straight to the home as opposed to having the experience of going out and buying in person,” she said.
Licensing challenges
One issue faced by many cannabis-related businesses based in California is obtaining adult-use licenses to sell, Mabugat said.
According to a February 2020 market report from Marijuana Business Daily, 993 cannabis retailers and delivery services in California are licensed, while 2,835 retailers and delivery services in the state do not have permanent licenses.
Mabugat said cannabis companies’ interest in setting up shop in Los Angeles has decreased over time due to the difficulty obtaining licenses and the “high barriers to entry.”
This has had a “domino effect” on the delivery and ecommerce segments of the industry, she said.
“L.A. still is the capital of the world for the green rush,” she said, “but that excitement for L.A. licenses over time has started to wane.”
Around 82% of California’s cannabis businesses have provisional and temporary licenses rather than permanent ones, according to the governor’s office. But on June 14, the state passed a $100 million plan to help unlicensed cannabis businesses obtain licenses. L.A. County received $22 million as part of that plan to help local companies transition to permanent licenses.
“This infusion of cash is exactly what (the Department of Cannabis Regulation) needs to help it run the L.A. cannabis program the way it should,” Mabugat said.
The Greenberg Glusker attorney added that she expects many cannabis companies to consolidate in the coming years as a way to position themselves for the possibility of federal legalization of marijuana.
Here’s a look at some of the companies in the cannabis delivery space in Los Angeles.
Amuse Holdings Inc.
HEADQUARTERS: Santa Monica
FOUNDED: 2020
CO-FOUNDERS: Joey Brown, Alex Becker, Drew Keslowitz
EMPLOYEES: 250
FUNDING TO DATE: $23 million
Amuse was ideally positioned for the space from the start with ecommerce and cannabis industry veterans teaming to launch the company.
Drew Keslowitz, a former senior program manager at Amazon.com Inc., joined with Alex Becker, formerly head of acquisitions at Atom Tickets, and Joey Brown, who served as senior general manager at Bird Rides Inc., to launch Amuse because they saw that the cannabis delivery industry had room to grow.
Amuse is a cannabis marketplace and delivery company that operates its own warehouses in Los Angeles and Northern California.
The company, which was founded in January 2020 and rolled out to the public in August, started with deliveries in L.A. County. It has since expanded to the San Jose and San Francisco markets.
“We felt there was an opportunity for a best-in-class ecommerce delivery service that placed customers first and delivered products reliably and safely at everyday low prices,” Becker, co-founder and chief revenue office of the company, said in an email.
Amuse added $12 million in funding in October from New York-based cannabis industry private equity firm Gotham Green Partners.
And in March, the company secured a partnership with Seth Rogan’s Chino Hills-based cannabis brand Houseplant to deliver the brand to Amuse customers.
Becker said in an email that Amuse plans to nearly double its staff and open two more cannabis depots by the end of 2021.
Good Tree Holdings
HEADQUARTERS: Long Beach
FOUNDED: 2018
FOUNDER: Rashaan Everett
EMPLOYEES: More than 50
ANNUAL REVENUE: $6 million (2020)
Good Tree is a cannabis brand that also offers 60-minute-or-less delivery service in Long Beach, Los Angeles, Oakland and San Francisco.
“We’re really passionate about providing affordable products directly from the farm,” said Good Tree founder Rashaan Everett.
Most of the company’s 50-plus employees are people of color, according to Everett.
Though the pandemic halted Good Tree’s plans for retail expansion in San Francisco, Everett said the company saw growth skyrocket over the past year. With $6 million in revenue in 2020, Good Tree said it ranks among the top five cannabis delivery services in California by revenue. It also said it is one of the 10 most ordered brands on Weedmaps in 2021.
In 2019, Everett launched Growing Talent, a business that helps other cannabis companies obtain licenses with the same technology Good Tree uses.
Herbarium
HEADQUARTERS: Fairfax
FOUNDED: 2018
CEO: Adie Meiri
EMPLOYEES: More than 60
Herbarium is a family-owned retailer offering both in-person shopping and delivery within a 10-mile radius of its stores, with maximum wait times of 60 minutes.
The company approaches cannabis as an alternative medicine, giving discounts specifically to medicinal users, customers with disabilities and seniors.
At the start of the pandemic in April 2020, Herbarium added a “Covid care package” that included face masks and a roll of toilet paper with each order, the company said.
In March, the company opened its third location in Lompoc with plans to offer delivery within a 30-mile radius of that location. It also plans to add drive-thru service and a wellness center that offers massage therapy at the Lompoc storefront.
Rebud
HEADQUARTERS: North Hollywood
FOUNDED: 2019
CEO: Arman Siradeghyan
EMPLOYEES: Less than 20
RETAIL PARTNERSHIPS: 6
Narek Khachatryan, Arman Siradeghyan and David Bagdasarian founded Rebud as a software solution for cannabis ecommerce businesses.
But after realizing that implementing their software into other companies’ operations would be too complicated, Khachatryan said, Rebud pivoted to delivering cannabis through its own system.
The company works with cannabis brands and retailers to sell and deliver their products online. It offers on-demand service with wait times of about two hours for each delivery.
Rebud has depots in North Hollywood, Montebello and Oakland. Each depot can deliver to a roughly 25-mile radius, Khachatryan said.
“For the consumer, the great experience is, ‘Oh wow, I can order my cannabis products and have it delivered to me like a pizza,’” Khachatryan said. “This was great, for example, when stores were shut.”
Amid the pandemic, Khachatryan said the company added two new retail partnerships and has three more pending. The company’s goal is to open more depots and partner with more brands and retailers to “cover California” by the end of the 2021, he said.
Speedweed
HEADQUARTERS: Hollywood Hills
FOUNDED: 2010
CO-FOUNDERS: AJ Gentile, Gene Gentile and Jennifer Gentile
EMPLOYEES: 55
ANNUAL REVENUE: $2.5 million
With more than 200,000 members, SpeedWeed is one of the largest cannabis delivery companies in Los Angeles.
Founded by Gene Gentile, his brother, AJ, and AJ’s wife, Jennifer, the 10-year-old membership-based service partners both with cannabis brands and dispensaries.
In 2019, SpeedWeed launched a platform that allows customers to order cannabis directly from brands rather than through dispensaries.
“We’re improving how customers interact with the industry’s top brands,” AJ Gentile said in a statement. “Our (direct-to-consumer) platform lets people transact with brands directly. Customers can trust that the products are authentic and safe.”
The company also counts at least one high-profile member, comic Joe Rogan, who has touted the virtues of SpeedWeed during his top-ranked podcast.
Sweet Flower
HEADQUARTERS: Culver City
FOUNDED: 2018
CEO: Timothy Dodd
FUNDING TO DATE: $15 million
Sweet Flower is a cannabis retailer offering delivery and in-person shopping at locations in Hollywood, downtown, Studio City and Westwood.
The company was founded as a “medical collective” and opened its business to recreational patients in 2018. Success from recreational sales allowed the company to add three more locations over the past three years in Southern California.
In March, the company raised $15 million in a Series A round led by Santa Monica-based venture capital firm AFI Capital Partners.
The funding will enable the company to scale its expansion, such as launching a flagship store in Culver City along with additional stores throughout the state. Sweet Flower also plans a manufacturing and distribution hub downtown and expects to roll out a private-label program, allowing it to produce its own products.
“Our ability to win new premium licenses and launch new stores while doubling same-store revenues (year over year) speaks to the strength, bench depth and focus of our management team,” Sweet Flower Chief Executive Timothy Dodd said in a statement.
In April, Sweet Flower was chosen as one of the first dispensaries to sell Seth Rogan’s cannabis brand Houseplant.
The company plans to open more physical locations by the end of 2021.
