From Cannabis to Logistics Solutions, ManifestSeven Delivers
September 18th, 2019
App, Exclusive, News, Top News
Before California legalized medical marijuana in 1996, all cannabis was shuttled around clandestinely in pockets and backpacks between suppliers and users. Even with medical marijuana permitted, the industry was still the Wild West, with limited oversight and growers still acting as the supplier to end users.
But, with the legalization of recreational marijuana in California via the passage of Proposition 64 in November 2016, lawmakers set out to establish and enforce the framework to better regulate the industry. It’s no easy task. With nearly 40 million citizens, California is by far the largest cannabis market in North America and, according to a new report by industry research firms Arcview Research and BDS Analytics, on track to become the biggest in the world with 2019 sales of $3.1 billion.
Over the next five years, the analysts see 19% compound annual growth for legal cannabis sales in California to $7.2 billion.
The Logistics Challenge
The market conditions surrounding the emerging cannabis industry are basically unprecedented. Following nearly a century of prohibition at all levels of government, legalization has been pushed by individual states, with 33 now having some form of legalized cannabis. Meanwhile, the fact that marijuana remains a Schedule I drug at the federal level only complicates matters. The business picture gets even hazier when you consider that local municipalities in California can still ban marijuana or implement byzantine rules to deter legal cannabis business.
With the plant remaining illegal at the federal level, cannabis products can’t cross state lines even if an adjoining state has legal marijuana. Federal prohibition also means that product can’t be transported by large trucks because any vehicle weighing over 10,000 pounds requires a license from the U.S. Department of Transportation.
The challenges that states face to create legislation are only rivaled by the frustrations of companies trying to build a business and keep up with an ever-evolving set of rules. That includes growers giving up their independence as marijuana transporters in favor of licensed distributors.
Because there is no precedent, lawmakers are looking for guidance from established industries that are similar in nature, particularly alcohol, as to how business is conducted, taxed and monitored. This means establishing the regulatory structure for distributors to handle transportation and logistics in the legal cannabis supply chain.
Just like with alcohol, it is up to the distributor to work with the retailer to ensure that the products on the shelves are compliant with all local, state, and, where applicable, federal laws.
“It’s a bit of a labyrinth on most levels,” said Sturges Karban, CEO of ManifestSeven, a Commerce, California-based company merging compliant distribution with a retail superhighway. In a phone interview with CFN Media, he added: “That’s okay, though, because I think the complexity keeps potential competitors, even large logistics companies, from seeking licenses to enter the market.”
Karban explained that there is a bit of irony to the fact that there’s been an almost exclusive fixation – from both the industry and politicians – on matters pertaining to growing and selling cannabis. All the while, conversation has been almost non-existent on how to move product from point A to point B.
“You could grow the best premium product or have cutting edge, automated manufacturing capabilities or the best retail location imaginable or a heavily trafficked e-commerce site, but if you can’t move product, none of that matters,” Karban explained.
For Karban and ManifestSeven, or M7, a capitalistic approach to fill voids in logistics and transport was a unique opportunity. The company, formerly called MJIC, has assembled an impressive leadership team to execute on an aggressive business model including a fully-licensed logistics network initially focused on the Californian market and then beyond.
M7 is in the later stages of the process to become a publicly traded company on the Canadian Securities Exchange (CSE), expected by the end of this fall.
The company has seven hubs strategically located throughout California, integrating its distribution operations and retail channels (brick-and-mortar stores, delivery and and e-commerce) into a single, seamless platform providing B2B (business-to-business), B2C (business-to-consumer) and supply chain solutions.
To widen its footprint, M7 in June acquired M Delivers and the phone asset 1-800-CANNABIS, which now serves as a call center to access the company’s products and services. M Delivers, a cannabis delivery firm, employs about 50 people, including a staff of phone operators taking orders from about 30,000 customers spanning the ocean side of San Diego County to the U.S./Mexico border.
M Delivers’ operations are expanding into other areas where M7 has licenses, including Orange County and the San Francisco Bay area.
Along with M7’s MyJane subscription service, M Delivers and 1-800-CANNABIS are housed in the company’s newly launched B2C unit called “Weden”. To that point, M Delivers has been branded “Weden Delivers”. M7 made another substantial addition to the Weden brand in August, acquiring the Haven dispensary in Santa Ana, California. The popular dispensary, formerly operated under the ShowGrow moniker, is being branded as “Weden Santa Ana”.
Weden Santa Ana is permitted to conduct dispensary and delivery services. To date, Santa Ana is the only municipality in Orange County to issue cannabis retail licenses. Weden Santa Ana holds one of a maximum of 30 licenses allowing recreational marijuana sales the city intends to issue.
Building a portfolio of complementing assets is a key to success, according to Karban. “Vertically integrated companies that understand regulatory matters and have logistics and omnichannel sales solutions are now, and will continue to be, in high demand,” he said.
California will serve as a benchmark for many other states for intrastate commerce and set future standards as the industry evolves. There are many dynamics to consider going forward.
What happens if the federal government does end cannabis prohibition? How will logistics look for interstate commerce? What about exports? What about imports? What about insuring shipments in a mostly uninsurable industry because of federal laws?
More broadly, cannabis is legal in one form or another in almost 50 countries (albeit with strict rules in some cases), covering more than one billion people. When considering this current market size, it is mind-blowing as to how big, how complex and how important the cannabis logistics industry is.
“We’re still very early in the emergence of a global industry and you could say that regulators are building the plane in the air in many cases,” Karban commented. “That said, we’ll never see another opportunity like this in our lifetime and we will continue to move as quickly as possible to build our franchise as a premier brand for consumers and valuable partner for businesses.”
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