Dive Brief:

• Waitr has announced its intention to acquire Cova, a cannabis dispensary point-of-sale company, for $90 million. In a statement, Waitr CEO Carl Grimstad said transactions on the Cova platform could reach approximately $2.3 billion.
• This isn’t Waitr’s first play in the cannabis space. In March, the company announced a partnership with Flow Payments to create a compliant marketplace, delivery and payment solution for dispensaries selling cannabis.
• The global licensed dispensary sales of cannabis is expected to grow to $40.6 billion by 2024 with a compound annual growth rate of 24%, according to a report from ArcView Market Research and BDS Analytics. The report predicts the U.S. will account for about 73% of that market.

Dive Insight:

The Cova acquisition comes as Waitr expands its footprint and grows into more markets and verticals, including alcohol. By increasing its foothold in the cannabis space, Waitr shifts into a market with major money-making potential, but also a lot of unknowns — particularly in terms of regulations — that could stifle growth. 

The cannabis business is highly profitable and popular, especially since the pandemic began. One delivery service located in Northern California experienced a 500% increase in sales after lockdown orders in March 2020, for example. Currently, about 44% of medical marijuana users across the U.S. regularly use a cannabis delivery service and that is expected to increase as legalization spreads. Recreational use of cannabis is now legal at the state level in 18 states and the District of Columbia.

Such popularity is driving a boom in the cannabis delivery space, and established delivery players are paying attention. Uber CEO Dara Khosrowshahi told CNBC his company could start delivering cannabis if federal regulations relax, for instance. Although Waitr has generated profits, such diversification could help foodservice delivery players with profitability, which still remains an elusive target for many. 

Khosrowshahi's comments illustrate that while the marijuana delivery space is growing, it is still a complicated market to enter. Compliance with disparate regulations mean operations vary across jurisdictions. Driver safety has also been a concern, as cannabis products are expensive and in high demand. Dispensary technology also tends to be dated and manual, according to GPS Insight. However, Grimstad notes Cova provides solutions for such challenges.

“Cova’s software solution is currently utilized by approximately 2,000 dispensaries in Canada and the United States and will provide an opportunity to offer these retailers regulatory compliant payment solutions and, when and if provincial regulations in Canada and federal and state regulations in the United States evolve, potentially the ability to offer delivery services as well,” Grimstad said in a release.

Grimstad added that the solution could also eventually be integrated into restaurants for food delivery services.

“We believe that we may be able to adapt the Cova POS solution for restaurants in order to offer our restaurant base an integrated solution for in-house and food delivery services,” he said.

Waitr has experience integrating different technologies, teaming up with Olo in 2019 to streamline point-of-sale systems on its platform, and partnering with Shift4 to bring its Harbortouch POS system to restaurants. Waitr is also working to build a suite of payment services to its partners that include loyalty programs and payment processing, such as those offered by Cape Cod Merchant Services, which Waitr recently acquired.