CANNABIS CORNER: Solving the Last Mile Problem

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street.

We’ve talked about how the smart money in cannabis has swung from the cultivators at the literal ground level toward the retail customer where companies can actually add value and create efficiencies.

After all, the agricultural product is just a commodity, subject to the basic economic laws of supply and demand. Too much plant matter on the market pushes wholesale prices down until demand can catch up.

And with too many big farmers aggressively pumping out plant product, I’ve been predicting a shakeout on that end of the industry for years now. But their pain masks relatively robust conditions on the retail side.

Consumers stuck at home are more eager than ever to indulge in order to dull the boredom and anxiety of the pandemic. U.S. sales are up 40% from last year, approaching what could become a $20 billion run rate.

And because those consumers are stuck at home, the dispensaries have needed to hustle just as hard as restaurants and groceries to build out their delivery capabilities. Those who figured it out say their customers are never going back to the old system.

But emergency delivery systems become a drag when they become permanent. That’s why companies like Drop Technologies in Austin, Texas are changing the world.

Drop doesn’t run the delivery network. They don’t pay the drivers or handle the cash. They aren’t “the Uber of cannabis.” They simply built the software that allows online ordering and driver routing.

Dispensaries love it. This is the future. And while Drop isn’t public yet, retail investors can learn more about the company via its Crowd Funding site. I’ll let IPO Edge subscribers know my thoughts soon.

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