- Legalization set to compound cannabis logistical challenges
- Build-out of state-wide cannabis distribution network
- State-compliant cannabis track & trace software good to go
If it’s true that an army marches on its stomach (an aphorism attributed to both Frederick the Great and Napoleon Bonaparte), that observation goes to show how highly some of history’s most renowned leaders regarded an efficient logistics operation. When asked what a soldier needed most in war, Napoleon was in no doubt that it was ‘a full belly and a good pair of shoes’. ‘A good pair of shoes’ gets your forces into action in a timely fashion, while ‘a full belly’ gives them the energy to do so. As in war, so in business, as logistics giant Amazon has proven. Finished products, particularly perishables, sitting in a warehouse are really finished, if they can’t get to market quickly. Now that California’s cannabis market has expanded with the legalization of adult recreational use, the logistical challenges of getting product to point-of-sale have become formidable. The market is projected to reach $5.1 billion in 2019. TransCanna plans to seize this commercial opportunity. The company will help cannabis suppliers get their products to market. To do so, it is setting up a distribution network throughout California to serve the state’s billion-dollar cannabis industry.
Since California’s adult recreational market debuted on January 1, 2018, sales of cannabis products have been moving along at a healthy pace, albeit less than state projections. ‘In the first two months of cannabis legalization, consumers bought an estimated $339 million worth of marijuana products from retailers in California’, according to a report in the Sacramento Bee (http://ibn.fm/WDjYh). Extrapolating these numbers means market size for the first full year after legalization would reach $2.4 billion. However, ‘BDS Analytics estimates sales of cannabis to hit $3.7 billion by the end of 2018 alone, and predict that number will increase to $5.1 billion in 2019 as more dispensaries come online’. By comparison, in 2017, beer sales in California were around $5 billion. Transporting all of this cannabis is starting to look like a weighty proposition.
Current wholesale prices hover around $1,400 per pound. The U.S. Cannabis Spot Index, maintained by Cannabis Benchmarks, was at $1,331 per pound on April 13, 2018, with prices set to rise (http://ibn.fm/1DNg0). The price for delivery in May is $1,425 per pound. That seven percent monthly jump in the index could be just a blip. However, it may be a sign that, already, cracks in the current logistical system are starting to appear. At an average of $1,400 per pound, getting $3.7 billion of cannabis to customers means delivering 2.6 billion pounds of product to hundreds of retailers. In February 2018, more than 6,000 dispensaries and delivery services located in California were listed on Weedmaps, in addition to the 580 state-licensed dispensary and delivery companies. Weedmaps is an online platform for anyone with an interest in marijuana that has been referred to as a Yelp for cannabis.
Logistical complexities in California are intensified by a plethora of local community regulations. Despite being allowed by state law, cannabis sales can be prohibited by local jurisdictions. So far, just one-third of California’s cities have allowed retail sales. For those that have, retail operations must be compliant with state imposed regulations. As a result, TransCanna has entered into an Intellectual Property Rights and Royalty Agreement for the Track & Trace software platform required by the state of California. It has received a transportation and distribution permit from the city of Adelanto, and the company has also executed a land lease to build a 10,000 square foot transportation and distribution facility in Adelanto.
For more information, please visit http://ibn.fm/TransCanna
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