Imagine a Saturday night in the not too-distant future. After a spectacular dinner at The Whale Wins, you and your pals make your way to an intimate spot where, after swiping your membership cards, you swap your dinner jackets for smoking jackets and then are seated in a semi-private lounge with heavy curtains and low lights. From the comfort of overstuffed leather armchairs, you can see the live music area where some couples are dancing what looks to be a prelude to some pretty serious schtupping. Your server comes around to offer an assortment of smoking accessories, and within minutes you’re enjoying the various strains you’ve brought with you. With the passing of the state of Washington’s Initiative 502, this scenario is far from fanciful, and many dispensaries are worried that their days are numbered.
The new laws bring a new set of regulations regarding the purchase and use of Cannabis. Although the Washington State Liquor Control Board has no later than Dec. 1, 2013, to establish a system to regulate the sale and growing of Cannabis, it has been established that three separate types of license will be issued: a producer’s license, a processor’s license and a retailer’s license. The costs of the license and associated taxes have local dispensary owners feeling the pressure of corporate competition, and many fear the end of the independent neighborhood dispensary.
Each license carries a $250 application fee along with a $1,000 annual issuance and renewal fee. A separate license will be required for each individual location. In addition to general state and local sales use tax, a 25% excise tax will be imposed upon each producer, processor and retailer, making it nearly impossible for co-ops and the independent grower to compete with larger corporations with deeper pockets.
The tenets set forth in 502 no longer limit Cannabis’ availability to medical patients, but also makes Cannabis available for recreational use to anyone 21 and older and decriminalizes possession up to one ounce, making the previously-mandated medical card obsolete. Redmond, Washington-based Microsoft Corp. former manager Jamen Shively is a prime example of an entrepreneur with deep pockets eager to turn pot into profits. Shively, along with his partners, plans to open dozens of premium retail Cannabis shops in both Washington and Colorado, where the state’s Amendment 64 legalized the herb at the state level. The opening of two private Cannabis clubs in Denver and Del Norte was widely reported on Jan. 1; the clubs do not sell Cannabis but instead sell subscriptions for users to bring their private supply and smoke in the clubs. A far cry from the medicinally tinged dispensary, these private clubs put pot for pleasure on the same level as the martini bar or cigar lounge. Just as there is both the cozy corner dive and the A-list hot spot operating a few miles apart, it’s not difficult to imagine a plethora of future clubs catering to every imaginable social, sexual and situational stratification.
In Europe, Amsterdam has become the de facto host city of High Times magazine’s Cannabis Cup, where breeder/growers from around the globe compete for top prizes in several categories. In 2008, a record 2,300 participants judged entries. In addition, as many as 75% of Amsterdam’s annual 1.5 million tourists overwhelmingly visit the city for the city’s 220 coffee shops and their open sale and consumption of Cannabis. Imagine how many domestic tourists Washington and Colorado might lure if the coffee shop experience can be had sans the transatlantic airfare and the hassle of obtaining a passport. The spreadsheets are staggering.
Tourism aside, the sheer number of potential jobs created by the new laws is significant. As well as generating an estimated $500 million in annual tax revenue in the state of Washington, the business opportunities arising from the new producer/processor/retailer classifications can give dispensary owners many different niches in which to specialize and capitalize.
Producers can take advantage of the outstanding genetic breeding results readily available on the Internet. Amsterdam breeders Sensi Seeds (www.sensiseeds.com), or Resin Seeds (www.resinseeds.net) from Barcelona, Spain, both provide seed strains that have been perfected for a wide variety of medical and recreational targets. Sensi Seeds is the breeder of Jack Herer, one of the most famous strains, while Resin Seeds are continuously evolving the plant and produce Cannatonic, one of the highest CBD strains now available. International seed banks such as Seedsman (www.seedsman.com), Hemp Depot (www.hempdepot.ca), Attitude Seeds (www.Cannabis-seeds-bank.co.uk) and Mr. Nice (www.mrnice.nl) will be able to provide licensed producers with a wide variety of strains from which to choose, as will seed breeders like Serious Seeds (www.seriousseeds.com), who recently acquired Magus Genetics, Dutch Passion (www.dutch-passion.nl) and DJ Short. DJ Short does not have a standalone website, but is sold through many other distributors. Seedbay (www.seedbay.com), an online seed auction site similar to eBay, gives the producer access to thousands of varieties of seeds developed by independent breeders and is a virtually limitless resource for anyone interested in developing their own strains.
The ancillary marketing opportunities arising from the new laws are as widely varied and potentially profitable as the product itself. MedBox, Inc., of Hollywood, Calif. (www.thedispensingsolution.com), is a company giving new meaning to the concept of thinking outside the box: they market a hightech automated medicine dispensing system (MDS) similar to a bank ATM that uses a fingerprint to unlock the system and dispense the legal amount of medical Cannabis to a registered patient. The new laws may mean that recreational users may someday be able to stop by the MDS on their way home from work to grab some product with which to wind down after a long day.
Grow shops that previously avoided marketing directly to Cannabis growers may now be able to target their stock and marketing dollars more effectively with the acknowledgement that no; they weren’t really into begonias. Grow shop weGrow, in Phoenix, Ariz., opened their doors June 1, 2011, with advertising aimed directly at the Cannabis cultivator. Maps showing dispensaries are readily available on the Internet, and access to Cannabis games, Cannabis recipes and grow advice is just an app download away for all mobile devices.
Not surprisingly, states with liberal Cannabis laws have seen a significant uptick in real estate sales, so much so that the news website Business Insider (www.businessinsider.com) lists real estate as one of the top ten ways to make money from the legalization of Cannabis. Many of the homebuyers are patients with medical reasons to use Cannabis, who have chosen to relocate to a state where their chances of criminalization are diminished.
Oaksterdam University, in Oakland, Calif., (www.oaksterdamuniversity.com) bills itself as “America’s first Cannabis college,” and is working to keep its position at the forefront of Cannabis education and training. Founded in 2007, the for-profit, unaccredited institute provides a wide array of training for Cannabis industry-related skills and has met with explosive success. Seminars in distant cities and states fill as soon as they are offered, and the college’s outreach to veterans with discounted tuition and a Freedom Fighter scholarship widens their potential student base even further. Building on the momentum of 2012 being billed by The New York Times as “The Year of the MOOC (massive open online classes),” Oaksterdam has recently unveiled an app to attend class via smartphone. Since the founding of Oaksterdam, several other Cannabis colleges such as Med Grow (www.marijuanacollege.com) have sprung up, but none have attempted to open a physical campus. However, the thought of someday being able to major in Cannabis agriculture at the state university level suddenly seems entirely plausible.
With medical Cannabis legal in 18 states and pending legislation to legalize in three others, it is no longer a question of ‘if’ but ‘when’ Cannabis will become a prescription drug covered under health insurance plans. How big pharma will assert its gargantuan reach into this equation and how that will affect every aspect of cannabusiness remains to be seen. In the frontier environment that has dispensaries scrambling to decipher how they will be regulated and to whom they will be selling, it is clear that a “business as usual” mindset will be no less than a death sentence. Although it has not yet been determined by the WSLCB how many wholesale/retail licenses will be granted, dispensaries will have to adapt to whatever new rules and regulations shake out, and their clientele will no longer be limited to medical card holders. With a clear understanding of what the new laws mean and an aggressive strategy of marketing, advertising, and seizing new opportunities as they present themselves, the independent dispensary can remake themselves into successful players in Cannabusiness 2.0 — if and only if they keep one step ahead of the competition.