Cannabis Delivery Giant Eaze Faces Foreclosure and Legal Challenges Going Forward
Snoop Dogg's Casa Verde Investments backed Eaze, the biggest cannabis delivery firm in California, which was once estimated to be worth $700 million, is currently in danger of going bankrupt. Karan Wadhera, Casa Verde's financial guru, thought the delivery business might have a bright future in cannabis.
SFGate reports that this follows a protracted legal dispute over ownership that lasted more than a year.
WeedWeek reports that Eaze defaulted on a loan issued by tech investor Jim Clark. Clark, the founder of Netscape and other ventures, has been on Eaze's board of directors since 2021. In August 2022, a shell company co-owned by Clark issued a $36.9 million loan to Eaze, which included terms allowing Clark to seize control of the company if it failed to meet specific monthly revenue targets, as stated in a 2023 lawsuit filed by other Eaze investors.
Clark is now foreclosing on Eaze and demanding all its collateral, according to court documents. The CEO of Eaze, Cory Azzalino, told SFGate that investors' concerns over losing their stock rights are what led to the foreclosure.
In November 2023, a San Francisco court rejected a complaint in which Clark was accused of falsifying Eaze's financial situation to draw in more investment.
Azzalino said that Eaze was still in a “healthy financial position” and gave his word that the foreclosure would not affect the company’s day-to-day operations.
San Francisco-based Eaze was launched in 2014 by Keith McCarty to deliver medical cannabis to patients across California. As the company expanded, McCarty stepped down as CEO two years later. Eaze has since developed several spinoff companies, including EazeMD, which helps people obtain medical cannabis recommendations from doctors, and Eaze Insights, a research company. Additionally, Eaze Wellness offers CBD-infused products.
“As California’s largest legal cannabis marketplace, we bring enjoyment and convenience to our customers, break down barriers to access, and cultivate community in everything we do,” the company states. “With nearly 8 million cannabis deliveries to date, we are committed to creating a more diverse and sustainable industry through our Momentum business accelerator, Social Equity Partners, and Eaze Compassion Programs.”
Eaze emphasizes its mission to "deliver good with the goods," highlighting its social equity values. “We believe the legal cannabis market can help address some of the biggest problems facing America and support social and economic initiatives around key issues important to the cannabis community. Every day, we work to embody the values of increasing access, supporting patients, and addressing the harm caused by the War on Drugs."
In 2019, Eaze had to temper its ambitions, revising its projection of $1 billion in cannabis sales for 2020 to less than $500 million in gross transaction value.
Growing Strikes and Unionization Efforts at Eaze
Unionization efforts at Eaze have increasingly clashed with company leadership. According to MJBizDaily, 500 of Eaze’s delivery drivers and depot employees in Los Angeles, Orange County, San Diego, and Northern California were prepared to strike after negotiations for their first labor contract with the San Francisco-based delivery service fell apart last March.
In April, nearly 600 workers at 11 Eaze depot locations in Southern and Northern California threatened to strike over pay and working conditions. The United Food and Commercial Workers (UFCW) supported the strike after members rejected Eaze’s final union contract offer. Former driver Ron Swallow and his colleagues unionized with near-unanimous support in March 2023.
“They cut our mileage rate from 56 cents a mile to 42 cents, costing drivers $300 to $700 a month,” Swallow told The Guardian. “It was the first time I’ve ever come to a job and then been told I was going to get paid less.”
Swallow explained further issues, noting, “They wanted to offer us 45 cents, which didn’t bring us back to our original rate. We’re very united. When you join a union, you become the union, and it’s been amazing to see drivers supporting each other and our underpaid staff.”
Eaze’s Sacramento division also joined the Teamsters, with delivery drivers voting unanimously to join Teamsters Local 150 last March.
The broader cannabis industry in California has faced significant challenges. MedMen, once the state’s largest cannabis distributor valued in the billions, declared bankruptcy last month. Additionally, other dispensary chains have encountered similar conflicts with unionized employees.
With margin compression heating up in the cannabis space, is there enough room for unionized workers and the costs that come with union workforces? Time will tell, but as more and more cannabis companies go under and look for ways to survive, dealing with unionized workers could become "the straw the breaks the camel's back".
Eaze's History and Expansion into New Ventures
Keith McCarty founded the San Francisco-based company Eaze in 2014 with the main objective of providing medical cannabis to patients throughout California. Two years later, as the firm continued to grow quickly, McCarty resigned as CEO to make way for new executives to take Eaze into the next stages of growth. Following this new course, Eaze expanded the range of products it offered and founded several spinoff businesses to better cater to its expanding clientele and change with the cannabis industry.
One significant offshoot was EazeMD, a program that assists consumers in obtaining medicinal cannabis recommendations from registered doctors. This invention streamlined the procedure for patients, making medicinal cannabis more accessible to those in need. Another notable advancement was Eaze Insights, a research firm that supplied useful data and analytics on cannabis consumption patterns and client preferences. This data-driven strategy allowed Eaze to fine-tune its services and products to better suit the needs of its clients.
Apart from these subsidiaries, Eaze introduced Eaze Wellness, an online store specializing in goods infused with CBD. This action took advantage of the rising demand for CBD, a non-psychoactive cannabis ingredient with several medical applications. Eaze Wellness expanded its market reach by catering to a wider demographic that was looking for cannabis' health advantages without the high. In the cutthroat cannabis market, Eaze's dedication to innovation and client happiness was emphasized by this calculated growth.
Eaze’s mission statement reflects its broader goals beyond business growth. The company aims to enhance the enjoyment and convenience of cannabis use, break down barriers to access, and foster a sense of community. Eaze emphasizes its social equity values through initiatives like the Momentum business accelerator, Social Equity Partners, and Eaze Compassion Programs. These programs are designed to create a more diverse and sustainable industry, increase access to cannabis, support patients, and address the harms caused by the War on Drugs. Despite financial setbacks and legal challenges, Eaze remains focused on its mission to deliver positive social impact alongside its products and services.
Bottom Line
Eaze's journey from a pioneering cannabis delivery service to its current financial and legal challenges underscores the volatility and complexity of the cannabis industry. Despite its innovative expansions and commitment to social equity, the company now faces foreclosure and internal strife, reflecting broader issues within the sector. As Eaze navigates these turbulent waters, its future remains uncertain, highlighting the critical need for stability and clear governance in emerging markets. However, with a foundation built on community and accessibility, Eaze's resilience may yet guide it through this crisis, preserving its mission to deliver both quality service and social impact.
UNIONS IN CANNABIS, GOOD OR BAD, READ ON...
