At first, Lantern’s light seemed to shine bright.
The e-commerce company quickly became the top marijuana delivery platform in Massachusetts after spinning off from Drizly in 2021. Propelled by a $40 million parting investment from its former parent, Lantern ads popped up everywhere in the Boston region — billboards, sidewalk trash cans, and even gas station pumps.
But now, just as quickly, Lantern is being snuffed out: Chief executive Meredith Mahoney announced this week that the company will cease operations at the end of January, citing regulatory hurdles in other states that doused its expansion plans.
“While our Boston-area business continued to grow and serve the expanding cannabis community… it proved difficult for Lantern to expand outside of Massachusetts, due to both the speed of legalization and the challenging regulatory framework,” Mahoney wrote on LinkedIn. She declined to comment further.
Lantern’s demise could fuel increasing anxiety throughout the Massachusetts marijuana industry, which sputtered badly in 2022 as a rise in the number of growers and dispensaries caused prices to crash and investors to tighten their wallets.
More immediately, a number of major retailers who offer delivery through Lantern in Massachusetts are poised to lose the marketing muscle and steady flow of customers provided by the company and its centralized online marketplace.
But with the vast majority of marijuana revenue in the state coming from brick-and-mortar sales, Lantern’s closure will have the biggest impact on the state’s licensed recreational delivery companies, which are required to be independent from the recreational shops they work with.
All 15 or so delivery firms currently in operation are owned by entrepreneurs from disenfranchised communities, under Cannabis Control Commission regulations meant to ensure equity in the marijuana market after decades of racially disproportionate arrests for the drug. Many participated in an incubator program offered by Lantern, which helped them develop business plans, open bank accounts, and meet investors.
“Without that, we wouldn’t be here today,” said Chris Fevry, co-owner of the Your Green Package delivery firm, which emerged from the incubator. “It’s yet to be seen what [the shutdown] means for our business, but they generate a lot of orders for some companies, and at some point those orders won’t be coming through anymore. It’s very concerning.”
While Fevry and other delivery licensees gave Lantern high marks, state cannabis regulators around the US have expressed wariness about a large Amazon-like platform dominating the pot delivery market and gaining inappropriate leverage over licensed marijuana operators through its power to promote or hide different offerings.
To avoid that scenario, Massachusetts has banned delivery companies from accepting investments from platforms such as Lantern, which advertise dispensary menus on their websites and transmit orders to licensed operators but do not themselves hold a permit to handle pot products. The state also requires delivery outfits to negotiate “arm’s length” contracts with third-party platforms that are based on set fees instead of profit-sharing.
New York has gone even further, banishing third-party platforms altogether. That decision has aggravated delivery entrepreneurs who say companies like Lantern can help their new brands acquire customers efficiently and providing software tools for managing orders and logistics. It also apparently figured into Lantern’s decision to shut down.
“We wish every state approached ancillary third-party tech companies the way our home-state of [Massachusetts] did, but unfortunately that’s not how regulations are being proposed in key northeast markets such as New York,” Mahoney said in her announcement.
While Massachusetts is less strict, industry executives say the delivery market here runs on surprisingly thin margins, thanks to the investment restrictions and onerous requirements such as a mandate that two workers — one wearing a body camera — ride in each delivery vehicle.
The Massachusetts Cannabis Association for Delivery industry group and others have lobbied the state’s cannabis commission to relax rules so licensed delivery services can better compete against their illicit counterparts.
“We have regulations here that limit the ability of delivery [companies] and tech platforms to succeed,” said Aaron Goines, the association’s president.
Goines said the shutdown of Lantern likely won’t be fatal for delivery firms, which could switch to other platforms such as Leafly. But it still constitutes a major disruption to the market.
”With one less aggregator out there, acquiring customers is going to be that much more difficult and expensive” for equity companies that need exposure, he said. “And supposedly 50 percent of delivery volume was going through [Lantern] — that’s a real hit.”
H/T: www.bostonglobe.com
