How cannabis company Caliva survived a business-ending regulation

In January, delivering cannabis in California became a lot more complicated. That’s when a series of state regulations passed, including a mandate that cannabis companies employ drivers and pay them at least minimum wage — plus benefits. Unlike most other companies, such as pizza parlors or laundry services, contractors would no longer be allowed.

The law quickly killed off a lot of delivery businesses. Many dispensaries couldn’t afford to pay drivers more. But at the California company Caliva, a different conversation happened. Caliva grows its own cannabis, makes its own products, wholesales them, and operates its own store — but it defines its mission more simply: “ubiquitous access.” That is the brand’s North Star, says CEO and president Dennis O’Malley. Everything it does must be aimed at expanding access to cannabis.

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So, what about the regulations? Caliva treated them as a business opportunity. If competitors were going to simply meet the regulations, Caliva would exceed them.

“We never considered doing anything other than growing [the delivery service],” says O’Malley. Cannabis retail sales are banned in 390 of California’s 481 municipalities, so delivery is often the only way to reach people. Many of Caliva’s users are in senior homes or have a handicap and are unable to get to a store. As other companies stopped delivering, Caliva saw an opening.

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The company had tried using contractors for deliveries in the past but wasn’t happy with the results, so it was already employing its own drivers as well as partnering with a delivery service, Eaze. But now its competitors would also be employing drivers — which, in a tight labor market, means recruitment would become tough. (The San Francisco Bay Area, for example, has a scant 2 percent unemployment rate.) So Caliva upped its offer. It would start drivers at between $15 and $17.50 per hour, well above the state’s $12 minimum wage. Full-time drivers receive health insurance, vacation time, a 401K, stock options, and the chance to purchase more stock during the company’s investment round. Some of that would be available to part-time employees, too.

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The benefits package has helped Caliva hire more than 125 drivers this year, many of them lured away from gig work with Uber, Lyft, and DoorDash. And critically, says O’Malley, it’s made for happy drivers who are eager to represent the company. “We rely on the people who are delivering our product to be the face of Caliva,” O’Malley says. “That’s a very powerful role.”

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The downside, of course, is that delivery now takes a bigger chunk out of the bottom line — but O’Malley’s investors get it. Caliva aspires to reach 70 percent of adults in the state with same-day delivery, and investors appreciate the long-term play.

It appears to be working. This year Caliva saw a more than 300 percent year-over-year revenue increase in the first quarter of 2019, and in January the company closed $75 million in funding. Investors include former Yahoo and Autodesk CEO Carol Bartz and former pro quarterback Joe Montana. Last July, Jay-Z partnered with the brand to help with strategy.

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With that cash on hand, O’Malley says, the company will now amp up the pursuit of its goal of ubiquitous access. “People really flock to the mission of providing a plant-based solution for health-and-wellness needs,” he says. “Our drivers meet a lot of people who always love to see them at their door.”

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Peter Page