Cannabis presents a huge opportunity for transportation and logistics firms willing to navigate the chaos of an emerging market, a leading cannabis economist said.
“Because this is such a nascent industry, there really are no rules and regulations, or they are based on precedents of other industries,” said Beau Whitney, a Portland-based senior economist with New Frontier Data, a cannabis intelligence firm.
“So for those who are first or second movers in the logistics space, they have an opportunity to interface with legislators and policy makers and help define the industry while it’s still being developed.”
Whitney himself has ridden the cannabis wave to career success. A former high- tech business analyst, he got into the industry five years ago, after a student in an economics class Whitney was teaching at the University of Phoenix asked him about the size of the cannabis market.
That inquiry led him to develop an economic model showing the Oregon market was valued at around $600 million. This was in 2014, the year the Oregon voters passed Measure 91, the ballot measure legalizing recreational marijuana use. The state had already legalized medical marijuana.
“I saw this opportunity,” Whitney recalled. “If I can ramp a [high-tech] product from low-volume to high-volume, why can’t I ramp businesses from low-volume to high-volume going from the medical to the adult-use space?”
Riding the wave
So Whitney signed on with Golden Leaf Holdings, (GLH: CNSX) a Toronto-based cannabis company, first as chief operating officer and then in a government affairs capacity, where among other tasks he helped shape the regulatory structure for emerging cannabis markets.
Two years ago he joined New Frontier, a data analytics firm that has expanded its purview from the U.S. to North America and now worldwide, where according to New Frontier’s latest forecast, the value of the market is estimated at $350 billion.
“You’ve got this massive movement on a global scale of legalization of cannabis, either adult use, medical or industrial,” said Whitney, who also helms his own business consulting firm, Whitney Economics. “As all this takes shape, there is going to be trade and international trade.”
“And that’s logistics, right?”
The European market, he said, is much more sophisticated on this score than the U.S., “where it’s like – ‘how do I get in the market?’ In Europe, it’s, ‘how do I operate? What are the mechanics of operation?’”
A complex market
It is an understatement to say the mechanics are hugely complicated. For one, unlike many other industries, there is no global cannabis standard.
“The standards in Canada are slightly different than in the European Union and slightly different than standards in Australia,” Whitney noted. “It’s similar to what’s occurring in the U.S. – you have legal state experiments, and each one is unique and different and each one has its own regulatory body.”
“That’s why there is so much interest in getting product from point A to point B.”
From risk management to delivery
Whitney ticked off an example of a company that shipped cannabis oil from Eastern Europe, sent by UPS or FedEx. The firm was charged standard shipping rates but didn’t have any insurance – even though the product was worth tens of thousands of dollars
“There was a lot of unknown risk around this product,” he said. “There is an opportunity for logistics and transportation folks to educate the business-to-business aspect of this on what are proper logistics procedures.”
Another logistics opportunity revolves around the all-cash nature of legal cannabis exchange. “People need to figure out: How do I reduce my risk on these shipments so that if somebody does put a gun to my head and says, ‘give me all your money?’ How do you insure against that in a market that is mostly uninsured?”
Traditional secured transport companies have yet to figure out how to operate in this space, Whitney said, and, “from a capitalistic perspective, wherever there is an opportunity people will fill that gap.”
Delivery services constitute another market niche. California recently adopted a law allowing companies to deliver into jurisdictions that had banned brick-and-mortar stores. The Oregon legislature is working on tweaking its regulatory structure to allow for similar delivery services. A framework that would allow excess cannabis to be exported into other states is also in the works
These developments are the tip of the iceberg.
“Because the market is evolving at such a rapid pace, all of these processes are in development,” Whitney observed. “It’s kind of like building a car while it’s going down the highway. They’re trying to figure all this stuff out.”
