Location Intelligence Underpins Cannabis Sector Growth

News of a rising cannabis industry is nearly impossible to avoid these days, as global perception and regulatory structures have changed dramatically over the last decade.

It is an industry that, as your favorite uncle may have told you, has been around forever, man. But the sudden loosening of marijuana prohibition has led to a unique opportunity to examine modern capitalism and how rapidly an industry can go from nascent to fully grown. And as cannabis players of all sizes mature, Location Intelligence, spatial analysis, and other data-driven business solutions become critical differentiators in a highly competitive landscape.

A Green Tide Lifts All Boats

For those looking to understand how rapidly the cannabis industry is growing, and the benefits of that growth, the numbers speak for themselves:

  • 211,000 full-time jobs in the US alone. (Forbes)
  • $10.4bn in sales in 2018. (Fortune)
  • 400% increase in funds raised by marijuana companies from 2017 to 2018 (to $13.8bn). (Fortune)
  • Over $1bn in tax revenue since legalization in Colorado alone. (CNN)

And with states like New York, with market estimates from the governor topping $3bn per year, poised to take up legislation towards legalization, the boom is set to continue. And this growth is not relegated to any one type of company. The cannabis industry as a whole is a melange of what investment and industry experts refer to as Touch (or actively handling cannabis’ psychoactive ingredient, THC) and No Touch (or operating in support of the industry without dealing with the still-federally-illegal substance) companies.

Touch companies include cultivators, distributors, and producers, while No Touch companies include growing supply companies, marketing, packaging, and legal services companies. All of them are operating in an increasingly competitive environment, and all of them can leverage location data towards a competitive advantage.

Logistics Optimization for the Cannabis Industry

As we’ve discussed above, the cannabis industry has a lot of moving parts, and keeping those moving parts optimized to reduce costs such as gasoline and other travel expenses, storage costs, and more could make the difference for companies of any size looking to stay competitive in the crowded new market. Two of the common spatial problems that companies in the cannabis industry will face are delivery services and supply chain optimization challenges.

For No Touch companies, such as Scott’s Miracle-Gro, whose Hawthorne Gardening subsidiary (which is focused on being the number one supplier for hydroponic cannabis farming operations, except for the plant itself) is generating a growing and significant percentage of the company’s total sales, these problems are more straightforward. Common spatial data science methodologies can help them optimize their supply chain for the delivery of specialized goods such as fertilizer and pesticides, lights, and full hydroponic growing systems.

Supply Chain Before After

The above gif, taken from our blog post What is Supply Chain Network Design and How Does It Work?, shows the impact of optimizing supply chains. In the post, our team shares how spatial clustering and route optimization can lead to instant cost saving, and these techniques can help give a leg up to cannabis growing supplies distributors and other No Touch companies.

Want to learn more about supply chain optimization?

Check out our webinar with TomTom!

For Touch companies, like Canadian cannabis giants Canopy Growth Corp and Aurora Cannabis, or smaller, local distributors and dispensaries, questions of supply chain and delivery optimization can be more challenging. Due to the shifting nature of cannabis legislation and regulation across the United States, with variation even at the local level, more advanced spatial data science becomes necessary. While a normal delivery operation is solving a common traveling salesperson problem, a cannabis delivery service is likely looking at the same problem but with significant constraints.

Spatial Data Science techniques like building out optimized delivery routes using an origin destination matrix are critical for the growing cannabis delivery market. Smart routing can help companies looking to compete in this area to overcome higher costs associated with additional constraints as well as the general difficulties that accompany last-mile delivery optimization.

Site Planning for Dispensary Expansion

As in any industry, site planning is an important decision step. Small variations in store location can have a significant impact on future revenue and a location’s overall longevity. Common factors to account for in site planning, as seen visualized below include foot traffic data, nearby transit, demographics, and modern data streams for transaction data and mobility data.

Site planning for cannabis is just as important, but can be more complicated. Due to the fluid nature of marijuana legalization and legislation, finding a location that is compliant with local laws is a challenge all its own. Constraints can be strict. In San Diego for example dispensaries must be:

  • More than 1000 ft. from any church
  • More than 1000 feet from any school
  • More than 1000 feet from a residential zone
  • More than 1000 feet from another compliant property

So in addition to looking at more common factors, those looking to open their own dispensary need a solution that can introduce hyper-local constraints into the site selection process. Per HighTimes, as of February 2018, Colorado had 520 active dispensaries. That is one dispensary for approximately every 11,000 residents. If a state like New York were looking at similar usage, that would imply a market for 784 dispensaries. That is more than the number of McDonald’s locations in the state. As huge markets begin to open and entrepreneurs look to cash in, Location Intelligent site planning will prove pivotal.

Holistic Location Intelligence for Cannabis

As we’ve outlined, the cannabis industry is at once both similar and more complax than many other industries where Location Intelligence can provide a competitive edge. And that is not just in the areas of logistics, site planning, or delivery. Just like in other retail spaces, incorporating location data is critical for geomarketing efforts, sales territory management, risk assessment, real estate decision making for cultivators, and more.

But cannabis comes with unique constraints in these areas as well. Geomarketing for cannabis, for example needs to be adapted to local legislation, as some states may restrict advertising across some media, such as billboards and digital advertising. The cannabis industry is also poised to generate its own modern data streams, with services like Weed Maps and Leafly providing visibility and review data, and management and tracking companies like metrc, Cultivera, and Leaflink creating a more interconnected digital landscape.

It is a unique time for the growing cannabis industry. For entrepreneurs and investors who are drawn to what many are billing as a modern gold rush, competition is fierce. Making business decisions using spatial analysis and location data will play a big role in determining which companies emerge as true contenders in the coming years.

About the author

Content Marketing Manager at CARTO.

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