COVID-19 is changing industries across the globe, and the cannabis industry is no different.
After the coronavirus pandemic hit, cannabis regulators moved quickly to decide whether and how cannabis shops could remain open. Most states declared cannabis essential, both for medical and adult use, with the exception of Massachusetts, which halted adult use sales as part of the effort to stem the spread.
The COVID-19 rules have meant that cannabis consumers must practice social distancing when making purchases, or, for example, they have to pick up products curbside. But one topic in particular that has gained traction amid the long-term planning around COVID-19 is cannabis delivery.
Cannabis Wire had a conversation with Meredith Mahoney, president of Lantern, and Jaci Flug, general counsel for Drizly Group, which is the parent company for Lantern and Drizly. Lantern is a cannabis delivery platform off-shoot of Drizly, a national alcohol delivery platform.
Flug is also currently a member of Denver’s newly formed Marijuana Licensing Work Group, which held its first meeting last week on delivery with a focus on equity. And, formerly, Flug served as general counsel of the New York State Liquor Authority.
So far, Lantern has only launched in Boston, Massachusetts, and only for medical cannabis. But Lantern’s ambitions stretch outside Massachusetts, as their lobbying registrations have shown, and beyond medical cannabis.
(This conversation has been lightly edited for clarity.)
Alyson Martin, Cannabis Wire: What are you hoping is the outcome of Denver’s Marijuana Licensing Work Group?
Jaci Flug, general counsel, Drizly Group: What I’m hoping will come from it, is that the city of Denver will choose to actually allow delivery and start delivery, especially for the medical patients. And that they can work towards a regulatory system that includes social equity in the delivery area of the cannabis business.
Meredith Mahoney, president of Lantern: We have also been working informally with a group of operators in the Denver area. Not really in an official capacity, but just really aligning and communicating and collaborating on what our goals for delivery would be. We are obviously also looking toward business development relationships with those operators, once we have an opportunity to operate in Colorado. But I think that it’s been a very, very positive experience for us to really get to know the people in Denver that are influential in the space. I’ve just been personally very impressed. It’s just a very thoughtful, large group of people with really good intentions.
Alyson Martin, Cannabis Wire: Based on your experience, what are the areas that regulators tend to grapple with when it comes to cannabis delivery? What are some of the things that might not be obvious?
Jaci Flug, general counsel, Drizly Group: Regulators are used to dealing with a licensed location, and it’s an enclosed space, and you can always be conscious of and track what’s going on in the enclosed space. So, I think once you start taking products out of the location, regulators are concerned with record keeping, they’re concerned with safety, and they’re concerned with access by minors. I think those are the three big concerns.
Alyson Martin, Cannabis Wire: How has COVID-19 changed the conversation around alcohol delivery and cannabis delivery?
Jaci Flug, general counsel, Drizly Group: Here, in New York City, and in many other states, regulators have permitted on-premise licensees, the restaurants and the bars, to now deliver not only closed containers of alcohol, but mixed beverages, like sort of just putting it in a container, which never, never, ever under any state’s law was possible before. I think regulators have bent over backwards for the on-premise licensees to give them some sort of economic viability during this time, and using alcohol sales for that. Also, it has changed some of the delivery procedures. There are six states that actually require the recipient or customer who’s getting the alcohol delivery to sign for the delivery. But wanting to make things as contactless as possible, those states have simply now allowed the delivery person to mark down the person’s name themselves.
Meredith Mahoney, president of Lantern: I think on the business side, pre-COVID, delivery was, if you stack up the list of priorities for a dispensary operator, it might have been fourth or fifth on the list. And now all of a sudden, it’s number one. And so Lantern, our service is a really unique turnkey solution for dispensaries to start offering delivery. And for us, from a business development standpoint, it has definitely accelerated the conversation.
Alyson Martin, Cannabis Wire: We cover lobbying a lot at Cannabis Wire, and I noticed that Lantern was lobbying on cannabis in New York. What is Lantern specifically lobbying on? Is it related to cannabis delivery in New York?
Jaci Flug, general counsel, Drizly Group: Yes, in New York, the only issue that Lantern lobbied on is delivery of cannabis.
Alyson Martin, Cannabis Wire: Can you characterize the potential opportunity for cannabis delivery in New York?
Meredith Mahoney, president of Lantern: Delivery has really become a very important part of the consumer experience in the last few years, across a lot of categories. And New York has been at the forefront of that, given the way people live in New York City. People get everything delivered in New York City. It’s one of Drizly’s biggest markets, number one or two, if I’m not mistaken. So, I think it’s just a natural next step to bring cannabis delivery to the state of New York and New York City.
Alyson Martin, Cannabis Wire: How are you all thinking about California as a market for cannabis delivery? It seems complicated, given existing competition from other delivery companies, and the persistent illicit market.
Meredith Mahoney, president of Lantern: I don’t want to comment on our plans for California, from a business roll out perspective, but I will give you my thoughts on the sort of questions you are asking. It is a complicated market. It’s very saturated. It’s very mature. Taxes are high and that’s driving the gray market there. It doesn’t incentivize consumers to purchase legally. Obviously, we very much would hope that customers purchase legally. But I think when you’ve got such high taxes, that can be an impediment to customers. Eaze is certainly a very important player in California. They’ve undergone a shift in their business model away from what our business model is. So I definitely think that we could co-exist with Eaze. But it is not a simple place to operate, to your point.
Alyson Martin, Cannabis Wire: On the lobbying front, I can flip through the filings, but I’m curious, where else is Lantern lobbying, in other states or at the federal level?
Jaci Flug, general counsel, Drizly Group: Lantern has retained lobbyists in New Jersey.
Alyson Martin, Cannabis Wire: Same question as before, what are the specifics? Anything related to the upcoming ballot initiative, or just cannabis delivery?
Jaci Flug, general counsel, Drizly Group: Simply delivery.
Alyson Martin, Cannabis Wire: Jaci, you were the former general counsel to the New York State Liquor Authority. How does your background in both law and alcohol inform how you think about cannabis delivery?
Jaci Flug, general counsel, Drizly Group: The first time I ever put the two together in that sense was in a discussion with Rick Garza, the head of the Washington State Cannabis Commission there several years ago, just talking to him, like, “Wow, your agency took on cannabis. Isn’t that difficult? Tell me about it.” And Rick kind of looked at me and he was like, “You know all about prohibition, you know about when it ended. You know how to regulate a controlled substance. And you know that you ought to know about somebody’s background.” And Garza really just made the full analogy for me. So I do think it’s really analogous to alcohol because you are dealing with a product that has been outlawed yet still widely consumed by many people. And I think if you take the things that work from alcohol regulation, you can get a really good regulatory system for cannabis.
Alyson Martin, Cannabis Wire: I know that you don’t have a crystal ball, but if you could try to read the tea leaves, what do you anticipate when it comes to cannabis delivery? How do you see this unfolding, state by state? Do you see certain markets as easier to work in? Or do you see some markets, like Nebraska, just never coming around?
Jaci Flug, general counsel, Drizly Group: From a regulatory perspective, taking that prohibition lesson, the one size model doesn’t fit all, with Congress saying, OK, we realize that everybody’s feelings toward alcohol depends on what community you’re in. And each community has different feelings. In California, you can buy alcohol in CVS along with your toothpaste. That’s not going to happen here in New York. I don’t think you’re ever going to see wine in grocery stores here. And when you’re in upstate in Ithaca, bar closing hours are probably two o’clock and down here in New York, it’s four o’clock. I think most states are taking the same position with cannabis, that this is a local issue and you have to deal with the feelings in each community. And so every state is going to deal with it differently, whether it’s referendum or state legislation. And then, as you’ve seen in Colorado, you know, opt-ins for local communities. It doesn’t seem like a crazy way for it to happen on a local basis, winding up with a patchwork, just like you have an alcohol.
Meredith Mahoney, president of Lantern: From a business perspective, I think that we would actually prefer to see it roll out the way Jaci described, for two reasons. I think that given our relationship to Drizly and all the work that Drizly on the bev/alcohol side has done for eight years to really pave the way with all of the regulatory relationship, compliance, all of the technology, it helps us as Lantern create a moat around ourselves. Not just anyone can enter the space and do cannabis delivery in a compliant, flexible way that meets state and local requirements. So that’s the first reason, and I think it differentiates us. We will do it the right way, no matter how that gets set up out there in the world. And then, just related to that, I agree it’s a local issue. You’re not going to be successful as a business if your customers don’t feel very comfortable, safe, and confident in the category with your service, and that comes through there being input at a local level.
Alyson Martin, Cannabis Wire: How big of a role does tech play in Lantern’s business model?
Meredith Mahoney, president of Lantern: We could never roll out a flexible, responsive customer experience across all of these states and local municipalities without really sophisticated tech. I’ll give you an example of something we’re working on: just getting the language, the right regulatory language, for each state that we’re going to operate, and making sure that the customer who is in that state sees that state’s regulatory warning language. That’s a pretty simple tech project. But it’s also something that is just the tip of the iceberg. We have to make sure that we’re fully compliant, no matter where we’re operating, and we have to know where the customer is, what matters, what the experience needs to be. The shopping experience actually will be different in Boston than it is in Denver because of regulations, so to make sure we build that experience to be flexible depending on where you are. I have no idea how anyone would do this if they didn’t really think about it from a technology-first perspective.
Alyson Martin, Cannabis Wire: Where is Lantern currently active in cannabis delivery, and are there any plans to more broadly roll out delivery of CBD products, given that the Farm Bill legalized hemp?
Meredith Mahoney, president of Lantern: We’re currently operating in Massachusetts. We have one city, Boston, that’s live right now, and we’ll be live in the second city in the next couple of weeks with another partner. And then we’ll be launching in another state in June that we’ll be announcing shortly. And then from there, we’ll continue to expand nationwide as we’re allowed to, legally, from a regulatory standpoint. CBD is not our first priority. I wouldn’t rule it out, but cannabis is where we’re focused right now, and in particular in Massachusetts, with medical cannabis.
Alyson Martin, Cannabis Wire: Is Lantern going to go global, given that there are active legalization discussions from Mexico to New Zealand?
Meredith Mahoney, president of Lantern: I would say it’s definitely a possibility on the long term road map, but we’re very focused right now just on the US.
