Uber wants to be able to deliver a joint with your pizza. But don’t expect Uber to be competing with Eaze, Emjay, or other cannabis delivery companies this weekend.
In an interview with CNBC last week, Uber CEO Dara Khosrowshahi said that they won’t risk it in the state-legal markets. “When the road is clear for cannabis, when federal laws come into play, we’re absolutely going to take a look at it,” Khosrowshahi said.
Although legalization is inevitable, ordering weed via Uber is going to take a while. And when the coast is clear for a publicly traded U.S.-based company like Uber to enter the industry, they’ll encounter a highly restricted market with serious competition, says Khaled Naim, the CEO and co-founder of Onfleet, a San Francisco-based delivery management software company.
“You can’t just drop it off like a pizza,” says Naim, whose company powers tens of thousands of cannabis deliveries every day. “There will be a lot of red tape around it when it’s federally legal. Even the alcohol industry, which has been legal for so long, has a lot of requirements.”
Naim says many states require alcohol delivery to be done in-house. For cannabis, every state that allows it has unique rules. In California, the dispensary must employ the delivery driver and the vehicle must be enclosed, meaning no scooters, bikes or motorcycles. The majority of states that have legalized cannabis markets also require delivery to be done by the dispensary, but Massachusetts allows third party delivery, however, they have to be a social equity recipient. (Nevada has a liberal delivery program that allows for third parties.)
It is also a fragmented and highly competitive market. Big brands like Caliva and dispensary chains like MedMen have their own delivery fleets, not to mention the ecosystem of delivery companies like Snoop Dogg-backed Eaze, Amuse, I Heart Jane, Sava, Emjay and more.
“By the time Uber gets into it, there will be even more companies in the space,” says Naim, who thinks Uber will probably enter the cannabis market through an acquisition.
Customers also expect a high-touch experience. Delivery grew out of the illicit market, where the buyer-seller interaction was more intimate than a food delivery transaction. “It’s a more nuanced space,” says Naim. “It’s not just pick-up and drop off.”
Delivery is big business for Uber. Uber Eats is a goldmine for the company, bringing in more than $1 billion in annual revenue. The company has big plans for alcohol delivery as it announced a deal to acquire Drizly for approximately $1.1 billion in stock and cash in February. Drizly, based in Boston, is the leading on-demand alcohol marketplace in the United States.
And cannabis could be huge, too. By 2025, Cowen estimates the legal cannabis industry will generate $40.1 billion in annual sales and by 2030 the market will reach $100 billion. If Uber can bogart a slice of the weed delivery market, it could be another substantial business vertical for the tech giant.
Perhaps the best signal that Uber is not ready for the cannabis industry just yet is the fact that its acquisition of Drizly did not include Drizly’s subsidiary Lantern, a cannabis delivery company that operates in Colorado and other states.
That’s why Andrea Brooks, founder of high-end cannabis delivery platform Sava, which serves 70 cities around San Francisco, isn’t moved by Khosrowshahi’s statement.
“It’s a great headline, but nothing with Uber will happen soon in cannabis,” Brooks says. “Same with Doordash and all the others—they won’t make a move until it’s federally legal due to the liability concerns—they’d all be great big fishes to catch should something go sideways.”