Denver officials want to save struggling cannabis delivery businesses

Weed delivery has yet to catch on in Denver, but government officials are pushing dispensaries to drop their resistance to save the transporter businesses of marginalized entrepreneurs.

“Delivery has not taken off in the way that we had hoped that it would,” said Molly Duplechian, Excise and Licenses Department director. “We’re hearing that they’re struggling.”

At a marijuana industry check-in meeting on Tuesday, the department proposed a bill that would permanently limit store deliveries to licensed transporters owned by social-equity applicants. Stores wouldn’t be allowed to do their own delivery.

If Denver City Council approves it, the new policy would replace the current three-year exclusivity period for social-equity applicants that lasts until July 1, 2024.

“Honestly, I think some businesses were waiting it out,” Duplechian said, hoping this move will serve as a signal to them. “If you’re going to get into delivery, you have to work with a social-equity transporter.”

She intends to put the proposal before council next month and anticipates support. The policy giving social-equity applicants exclusive access to both medical and retail marijuana manufacturing and transporter licenses would remain until July 1, 2027.

Right now, only 18 store locations out of more than 200 in Denver have obtained delivery permits to use any of the 16 licensed transporters, according to data by the Excise and Licenses Department. Delivery still isn’t popular in the Mile High City for myriad reasons, including economic factors, consumer habits and easy access to dispensaries, Duplechian said.

However, “it requires industry participation and industry partnerships that we have not seen,” she said. “A lot of consumers don’t even know it’s an option.”

Michael Diaz-Rivera, owner and operator of Better Days Delivery Co., described the proposal as “a great help.” A social-equity transporter himself, he launched his company last year, and has partnered with one Denver dispensary so far. Diaz-Rivera said he completes about five deliveries daily.

“Since I’ve started my business, two other social-equity delivery businesses have gone under because they couldn’t get their partnerships,” he said at the Tuesday meeting. “By supporting us, we can make it so everyone can thrive.”

Last year, the Denver government took strides to clear away barriers to the cannabis industry, providing licenses intended to help marginalized entrepreneurs break into the sector. In Colorado, only about 18% of regulated marijuana business owners identify as minorities, as of June 1, according to the Marijuana Enforcement Division.

The state is a cannabis pioneer, with medical marijuana first legalized in 2000 and recreational pot in 2012. However, Duplechian said, no social-equity programs were adopted early on.

“What that resulted in is a high percentage of white men being owners in the industry,” Duplechian said, which prompted the recent changes to broaden industry access.

The eligibility criteria for social-equity licenses includes Colorado residents who either reside in a designated low-income community for a certain time period, maintain a specific household income, or are related to a family member who was arrested or convicted of a marijuana offense, among other qualifications.

Silvia Cervantes, a social-equity applicant with the goal of establishing her own dispensary, said she would be excited to work with a social-equity transporter when she eventually opens her space.

The proposed bill would also lower fees for transporter licenses and delivery permits. Among them, the annual delivery license fees for both transporters and stores would respectively drop from $2,000 to $25.

The annual license fee for a retail marijuana transporter license would fall from $2,500 to $200, and the annual license fee for a medical marijuana transporter license would tumble from $1,500 to $200. With initial applications, both would be waived.

Audible “wows” were heard in the Excise and Licenses Department hearing room Tuesday when proposed fee reductions and adjustments were presented to the in-person audience of more than 30, along with almost 50 present virtually.

“We really want our social-equity transporters that are doing delivery right now to feel like they have certainty of what the future holds,” Duplechian said. “We already had one business that decided not to renew their transporter license this year.”

Last year, the state’s marijuana sales hit a record, with a 2.2% jump over those in 2020, according to the Marijuana Enforcement Division. In 2021, Denver contributed the most marijuana sales – over $679 million – in the Centennial State.

That December, almost 950 retail store establishment licenses for both recreational and medical marijuana were active in Colorado, the division reported.

However, the state’s marijuana industry is contending with more challenges this year, including the looming U.S. recession, hurdles around profitability, supply-chain problems and weakening flower prices.

Total sales for marijuana in Colorado stood at almost $148 million in May – a 24% decrease compared to $194 million sold that month last year, according to the Marijuana Industry Group, the trade association for the state’s cannabis industry. Medical sales specifically took a hit, plunging to about $21 million in May from almost $37 million last April.

The number of medical marijuana business licenses is down in the Mile High City for the fifth year in a row, according to Denver’s 2022 annual marijuana report. However, for the second consecutive year, retail business licenses are up.

Tiffany Goldman, chair of the Marijuana Industry Group, described the industry as nearing “a breaking point.”

Colorado cannabis businesses directly provide more than 43,000 jobs. However, the state’s industry skews toward a lower retention of budtenders, or cannabis retail sales employees, with more than a third both beginning and ending their employment from June 2021 through May 2022, according to Headset, which provides insights into cannabis consumer trends.

“We need to protect this critical Colorado industry so that small businesses can stay open, continue to provide good paying jobs, and generate critical tax revenue for our state many years to come,” Goldman said in a statement.

Gov. Jared Polis’ administration recently awarded Cannabis Business Pilot Grants to 16 recipients, which is aimed at aiding social equity cannabis businesses through access to capital.

“Our nation-leading work promoting equity and supporting innovation in Colorado’s thriving cannabis industry supports our economy, saves small businesses money, and ensures our state remains the best business-friendly destination in the country,” Polis said in a statement.