Why Last-Mile Logistics is a Major Headache to Selling Weed in Amsterdam
Paradoxical legislation, overwhelming demand, and opaque supply chains are stumbling blocks to run a successful Dutch marijuana enterprise
A hearty welcome to the 17th edition of The Logistics Rundown, a weekly digest that aims to put some perspective on what’s brewing within the logistics industry. This is a space where we religiously dissect market trends, chat with industry thought leaders, highlight supply chain innovation, celebrate startups, and share news nuggets.
There’s a lot to be fascinated about the last mile. Especially the contrast associated with it. This could be about regular delivery vans coursing through the city streets or pavement robots briskly delivering products across a neighborhood, or VTOL drones air-dropping packages over the porch. And then there are situations where the last-mile is a bit more...stealthy.
Walking through the narrow streets crisscrossing the central district of Amsterdam, the smell of marijuana is unmistakably strong. This is courtesy of the ‘coffeeshops'—the Dutch equivalent for a store that sells and allows the use of marijuana on its floor. But there’s something interesting about these coffeeshops that doesn’t relate to marijuana, and it’s their last mile.
For starters, it is a misconception that weed is legal in Amsterdam. Selling drugs of any kind is illegal in the Netherlands. They are, however, tolerated if they are sold in a coffeeshop. However, the kicker is this—it is illegal for the coffeehouse to procure the drug in wholesale quantities. The law states that while the coffeeshop can grow ‘little’ amounts of weed to sell, they cannot do anything at scale. Essentially, while upstream B2B operations to the coffeehouse storefront are illegal, downstream B2C operations stay legal.
While upstream B2B operations to the coffeehouse storefront are illegal, downstream B2C operations stay legal.
This means that it is an open secret that to sustain coffeeshops, owners must look to procure their marijuana stash from a dealer who often is a drug smuggler. Then comes the issue with storing the inventories. Drugs bought from the smugglers cannot be directly stored at the store, thanks to yet another weird Dutch rule that makes it illegal for coffeeshops to stock more than 500 grams (~1.1 pounds) at a given time in the store.
The 500-gram restriction is not something to be played with, as the Dutch police have been known to bust coffeeshops that hold stocks over the limit. Ask Nemo, a well-known coffeeshop in the central Amsterdam area, reportedly closed several times by the authorities for holding excess inventories in the store.
This is a huge problem. While small coffeeshops are sprinkled all over the city, the bigger ones cause quite a stir amongst their patrons. Mega coffeeshops do brisk business, selling between 10 and 12 kilograms (~22-26.5 pounds) a day, mostly selling to tourists who visit Amsterdam. In essence, for a mega coffeehouse to not run out of marijuana stock during business hours, they would have to buy supplies anywhere between 20-25 times over the course of the day.
For a mega coffeehouse to not run out of marijuana stock during business hours, they would have to buy supplies anywhere between 20-25 times over the course of the day.
Imagine a big-box retailer like Target or Walmart replenishing stocks a dozen times during the day. While we can argue that the range of products in the coffeeshop inventory is minuscule compared to the former, what happens at the Dutch coffeeshops is nothing short of a logistical nightmare. Fact is, these coffeehouses have been dealing with high frequency, small order sizes before e-commerce made it cool.
With the 500-gram restriction in place and with an illegal back-door supply chain, there is little wiggle room for the coffeeshops to work through. Store owners run tiny secret rooms in and around the city, all under a cloud of judicial uncertainty. Little quantities of weed are then ‘smuggled’ from these secret rooms to the coffeeshops by ‘runners’—the last-mile equivalent of delivery workers.
What makes these weed supply chains fascinating is the last-mile traffic they can generate. Let’s do some math here. Amsterdam is one of the most-visited places on earth, with a 20.1 million footfall in the city in 2019. That’s roughly 1.675 million tourists every month. This number is higher than the total number of residents in Amsterdam, which is close to 1.2 million.
There are over 160 coffeeshops in Amsterdam. A research study commissioned by the municipality of Amsterdam found that about 23% of the tourists head to one of these coffeeshops to get high. That’s over 4.6 million people buying weed every year in an Amsterdam coffeehouse. Another Dutch rule—a coffeehouse can only sell a maximum of 5 grams per person.
Considering a bulk of these tourists are newbies and are trying weed for the first time versus a small section of heavy users, let’s fix an average of 2 grams of weed per person buying at a coffeeshop. That would give us 9,200 kilograms (~20,000 pounds) of weed sold on average every year. With the 500-gram limit on coffeehouse storage, there would be over 18,000 last-mile stealth weed delivery runs every year in Amsterdam. And oh, this does not include the marijuana that locals consume.
With the 500-gram limit on coffeehouse storage, there would be over 18,000 last-mile stealth weed delivery runs every year in Amsterdam.
This might sound like it is not a lot of movement, but most of these coffeeshops function close to the central district that’s famous for its narrow aisles hugging the picturesque canals. While motorized vehicles are largely restricted in these streets, they are still weathered down by the chaos of cyclists and excited tourists. And sometimes, this traffic could get overwhelming. With a significant part of pedestrians not sober, accidents are common. Ambulances are rushed in around 400 times every year to rescue people who’ve fallen off the street and into the canals. A handful of them don’t survive.
While we cannot comment on town planning options or crowd control, it is evident that the weed last-mile could be rethought to make a difference. For one, legislative measures should be looked at seriously. Regulations today are paradoxical, making it hard for coffeeshops to run their businesses entirely legally. Improved legislation that enables downstream marijuana logistics stakeholders to do business in the open will be a start.
The 500-gram rule is a massive hurdle to streamlining the marijuana last-mile. By doubling the allowable inventory in coffeehouses, the municipality of Amsterdam can cut marijuana last-mile transits by half.
Legislation aside, coffeeshops in the same neighborhood could look to partner amongst themselves, batching their weed supplies and storing them in a common secret house. Runners could time their movement based on when stocks deplete across multiple coffeehouses, reducing the number of transits. In the future, where legislation is loosened and drone deliveries are a possibility, the idea of runners can be phased out and marijuana could be air-dropped to coffeehouses from their storage spaces. Maybe, it’s closer to reality than we think.
The Weekly Roundup
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...said who?
"We would have expected that respondents would have framed COVID-19 and the pandemic as something that happened to them and that they therefore need a pass from their sustainability goals. As it turned out, that isn't how they framed it. They say it as something that happened to the entire world and that we are all going to do our best to get through it."
- David Correll, a research scientist at the MIT Center for Transportation and Logistics, while commenting on the results of a survey conducted by MIT that showed businesses to not have cut back on their emissions target in '20, even during the onslaught of COVID-19.
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