Get the new issue of HIGH TIMES Medical Marijuana, on newsstands now!
By John Geluardi
On a sunny morning in San Francisco’s Mission District, three men move about a well-appointed industrial kitchen in crisp, waist-length white coats and bright red chefs’ hats. They could easily be mistaken for professional pastry makers working to supply an upscale confectionary, but on closer inspection, they are busy creating one of the newest edibles on the medical-cannabis market: Gummi Cares, a chewy, cannabis-infused Gummy Bear–style product that founding partner Demetrio Ramirez is quick to distinguish from candy and other sugary sweets. Gummi Cares have a pleasant taste, but in the same way as some cough syrups or throat lozenges, and the packaging is medicinal in appearance, more like a packet of ibuprofen than a peanut-butter cup.
“Gummi Cares are very strong, and they are designed for medical-cannabis patients who don’t have the option of smoking,” Ramirez notes. “They can be particularly beneficial to cancer patients who have been ravaged by chemotherapy or people who are in hospitals or hospice care.”
The gelatinous disc, about the size of a silver dollar, retails for $8 and has been flying off the shelves so quickly that local dispensaries have been having difficulty keeping them in stock. With a staff of just four, Gummi Cares is barely able to keep up with the demand. “We are at capacity now, and we haven’t even begun to promote yet,” Ramirez says as he drops a rubbery tablet into a packet and runs it through a heat sealer. “We are still just a little grassroots company – but that is about to change.”
By some estimates, edibles account for as much as 10 to 15 percent of dispensary sales, and in the growing number of states that allow such storefront operations, the range of options is always expanding. In Denver, CO, the Ganja Gourmet, a restaurant-style dispensary, offers a takeout menu that includes cannabis-infused pizza, lasagna, spinach pie and baklava. The Mile High City is also home to Jessica LeRoux, far better known as the Cheesecake Lady, who earned her moniker selling individual medicated treats on the sly outside local concerts. LeRoux has since gone legit, with her Twirling Hippie Confections startup now operating out of a state-licensed commercial kitchen and wholesaling up to 16 different cheesecakes to Colorado’s rapidly growing dispensary scene.
And keep in mind that these high-flying edibles entrepreneurs represent just one segment of a multibillion-dollar-per-year legal cannabis industry that could turn out to be the biggest new investment opportunity to sprout up since the dot-com boom of the 1990s – not to mention the source of an increasingly large and competitive green-jobs market.
Harvard economist Jeffery Miron, who conservatively estimates that Americans spend approximately $25 billion per year buying marijuana, quickly points out that any aspect of the industry that involves direct contact with cannabis remains illegal under federal law. “There were just raids carried out by the federal government against dispensaries in Montana … that doesn’t happen at Starbucks,” Miron observes. But thanks to the burgeoning bud business, the infrastructure will already be in place once cannabis is legalized, so that it “would be like a totally normal industry in a matter of minutes.”
Back when the bud business existed entirely in the black market, all it took to kick-start a cannabis career was a few friends in need and a source – or, better yet, some seeds and a secluded patch of reasonably good soil. Even in the early days of state-legal medical marijuana, opening a dispensary or staffing one was mostly a matter of possessing a working knowledge of the merchandise and a willingness to risk arrest. But all that is changing – rapidly.
As the industry becomes more professional and competitive, both entrepreneurs and job applicants must meet a higher standard to succeed. Prospective investors and employers now pore over résumés and evaluate a person’s work history, education and training. In fact, providing the industry with qualified workers has become an industry of its own: Medical-cannabis trade schools like Oaksterdam University (see sidebar “Get A Job!” below) prepare aspiring employees for the green-jobs market by offering a core curriculum that covers cannabis history, government policy and effective social activism, plus training in cannabis cooking, cultivation, budtending and dispensary management.
Curtis Ohlson, Ramirez’s partner in Gummi Cares, recently graduated from OU in preparation for launching their new joint venture. Together, the “Gummi Guys” devoted more than a year to research and development, consulting with professional confectionaries, studying the science of sugar, refining their recipe, and developing their branding and packaging.
“We weren’t the first to develop a gummy-type edible, but we are the first to perfect it,” Ramirez says. “Infused gummies are not original, but getting them to work right is a real art.”
To help meet the steady increase in demand, Ramirez is in the process of purchasing and calibrating a metered machine that will allow him to boost his weekly unit production from 3,000 to 30,000.
“Up to this point, our ability to produce the product has been limited,” Ramirez admits. “But soon, we’ll be able to promote Gummies on a website and at trade shows and expos.”
In 2007, Mike Aberle was an agent for Statewide Insurance Services who noticed that there were no insurance policies tailored for the medical-cannabis industry. Plans were available, but they were limited and not informed by the specific needs of dispensaries or growers. Soon, Aberle became one of first insurance agents to offer dispensary owners protection against spoilage, theft, vandalism and delivery-vehicle accidents.
“What we did,” he says, “was to take a standard retail insurance model and a little bit of restaurant and deli, mix them together, and we had a product that specifically meets the needs of dispensary owners.”
There are now cannabusiness-specific policies available from a variety of vendors that cover just about every aspect of operation, including cultivation, dispensaries, transporters, product liability and edibles production. No one currently offers protection against law-enforcement raids by the feds, but most policies do cover damage from state or local enforcement so long as policyholders can prove they have followed state laws and local ordinances and are found innocent of all raid-related charges.
Statewide now boasts an entire medical-marijuana division and also sells its tailored cannabis-industry services to other insurers who’ve fallen behind the times. Gaslamp Insurance has also aggressively entered the market, pitching its policies directly to dispensary owners with a special website (mmjinsurance.com) that features three well-cured marijuana buds on the front page. Did you ever think you’d see the day?
For those interested in training for a cannabis career, trade schools like Oaksterdam University aren’t the only option when it comes to higher education. Students for Sensible Drug Policy, a nonprofit organization dedicated to fighting back against the War on Drugs, has seen many of its college-age members move on to paying jobs in the legal medical-marijuana industry. Formed on just five campuses in 1998, SSDP currently weighs in as one of the largest grassroots organizations in the United States, with more than 200 chapters nationwide.
Kris Krane, now 32, was a founding member of SSDP as an undergrad. His career path provides an excellent example of the cannabis industry’s new upwardly mobile double threat: an astute businessperson with a background in political advocacy. In this industry, Krane considers the two skill sets inseparable.
A dedicated activist throughout his college years, Krane went to work at NORML’s headquarters in Washington, DC, after graduation, where he started as a chapter coordinator and worked his way up to director for national operations. In 2006, he returned to SSDP to serve as the organization’s executive director. Then, in 2009, Krane left the nation’s capital, lured by the growing green rush of opportunity in California – in particular, a gig working for medical-cannabis entrepreneur extraordinaire Steve DeAngelo at his newly formed consulting company, CannBe.
“I felt there was an opportunity to go into the for-profit sector and try something a little different while still working toward the same goals that have motivated me for my entire career,” Krane says.
CannBe’s partners included some of the most respected names in the medical-marijuana industry, and the company offered prospective dispensary owners the opportunity to tap their vast knowledge of the industry, as well as a commitment to help its clients develop business plans, file applications, navigate local regulations, lobby local officials, create security strategies, train employees and design efficient floor plans. Dispensaries would maintain their own branding and identity, but would reflect CannBe’s emphasis on raising industry standards of professionalism, which Krane says makes both political and business sense.
“If the medical-cannabis industry does not maintain high standards of operation,” he explains, “it will not bode well for the future. In Montana, there was a sense among the public that the industry was out of control, and [as a result] legislators have been trying to repeal the state’s medical-cannabis law. If dispensary operators don’t see the big picture – if irresponsibility prevails – we risk a backlash that could push us back into the shadows. We’re at a serious crossroads.”
Despite CannBe’s experienced partners, the company dissolved earlier this year. But Krane barely missed a beat before co-founding his own consulting company, 4Front Advisors, backed by a financial heavy hitter, University of Phoenix founder and drug-law reform funder John Sperling. Once launched, 4Front will focus on offering consulting services to cannabusinesses in the state of Arizona, where voters legalized medical marijuana by initiative in November’s election. Having moved from activist to employee to upper management, Krane says he’s looking forward to receiving employment applications from SSDP alumni, because they already have a proven track record in effective advocacy as well as a “big picture” understanding of the industry.
“I’m feeling very positive about the new venture,” Krane says. “If we can help a dozen or two dozen highly professional dispensary operators to set up, we think that will have a tremendous resonance in other states like Wisconsin, Connecticut, Minnesota and Iowa that are looking at ways to introduce the medical-cannabis industry.”
Maps of the Future
In 2008, Justin Hartfield used his newly issued medical-marijuana card for the first time to gain access to a medical-cannabis dispensary – an experience that not only had a profound impact on him but would ultimately change the industry.
“It was such a pivotal moment in my life,” Hartfield recalls. “I had this great sense of freedom, and I just knew this was the future.”
At the time, Hartfield, a self-described “geek,” had recently graduated from the University of California at Irvine with a science degree and was actively looking for business opportunities involving the Internet. Shortly after he walked out of that dispensary, medicine in hand, it dawned on him: Why not create a Yelp-type site to help patients navigate the increasingly complex medical-marijuana landscape?
Shortly afterward, Hartfield launched Weedmaps.com, now the most comprehensive medical-cannabis listing service in existence. Patients use the website and related smartphone apps to locate dispensaries in their community (or while traveling), find daily specials and compare pricing. Patients can also connect with other patients and rate dispensaries, locate doctors, search for jobs, instant-message one another, or sign up for text notification of specials and pricing updates. There’s even a personals page to help you “find 420 love.”
Weedmaps’ revenue comes from dispensaries that pay a fee to list the various strains they currently have available and their daily pricing. Basic monthly rates start at $295 and can go as high as $1,000. Hartfield says Weedmaps now has 1,400 clients, the vast majority of them in California and Colorado.
The business started slowly. At first, the site was only getting about 12 visitors a day. Then it went up to 24. By the end of 2008, Weedmaps was receiving 1,500 visitors daily. The company now receives 25,000 visitors a day and brings in more than $400,000 per month in revenue. As you’d expect, other locator sites have followed Weedmaps’ lead, such as Weedtracker.com and DispensaryGuide.com, but as yet none have been able to replicate Hartfield’s rapid growth.
And Weedmaps continues to innovate. This year it added another new wrinkle to the medical-cannabis industry by introducing a daily Groupon-style service that will issue coupons online to its members, who can redeem them for significant discounts at their local dispensaries. In some cases, the markdowns have been as much as 35 percent on popular strains.
Hartfield says he sees the industry expanding greatly over the next five years – and as it grows, so too will opportunities in related technology businesses. At the same time, he adds, the industry won’t reach its full potential until marijuana is fully legalized on a national level: “I see [medical marijuana] as a box canyon – we really need legalization or business opportunities could stagnate.”
But stagnation seems a long way off for Hartfield. In November, Weedmaps was acquired by General Cannabis, Inc., a publicly traded tech-based company that has been aggressively positioning itself “to support the medical marijuana market through management services, internet verticals, financial services, lobbying and policy.” That’s right – to make money in this new green rush, you no longer have to grow some top-grade OG Kush, cook up pot-infused chewables or launch an Internet startup; you can just invest in medical-cannabis stocks and (hopefully) watch your money grow.
Speaking from General Cannabis, Inc.’s new 20,000-square-foot office space in Newport Beach, CA, chief executive officer Jim Pakulis describes with a quiet, matter-of-fact confidence the rosy future of the medical-cannabis business sector. “I think the industry has seen a tremendous groundswell that will continue for the next three to five years,” he says. “And I see General Cannabis as the company to assist all the various entities that exist in the cannabis industry. We want to be the go-to company.”
Since the federal government still considers marijuana illegal in all its forms, General Cannabis has carefully cultivated subsidiaries in market segments that don’t grow or dispense marijuana directly, but instead provide technical assistance to those who do. The company’s goal is to capture a significant market share of three technical areas in the medical-cannabis industry: media/technology, medical management and merchant services.
There are an estimated 25 companies that trade medical-cannabis stocks, but Pakulis says that none have been as fully vetted as General Cannabis. The company recently submitted a 260-page report, known as an SEC Form S1, to the US Securities and Exchange Commission that included a full audit of its subsidiaries, a detailed business model and a report on competition. “We fully disclosed everything,” Pakulis says. “We are the first medical-marijuana company to file a complete S1.”
And if you’re thinking these cannabusinesses will soon be needing their own “green” accountants, better get in line behind Peter H. Friedman, CPA, and a slew of other bean counters more than happy to help cannabusiness owners keep their tax filings in order. As the head of his own accounting firm with several clients in the industry, Friedman understands that while the medical-cannabis business offers tremendous opportunities, it also remains completely illegal under federal law, which translates into some unique risks and opportunities for those willing to stick their necks out.
“With dispensaries, I have to go over the floor plan, allocation of rents, determine the exact cost of goods versus general and administrative costs,” Friedman notes. “I don’t have to do that with other businesses.”
On the other hand, the medical-cannabis industry has certainly come a long way when some operators now worry more about the IRS than the DEA.
Get A Job!
Find your place in the legal medical-cannabis industry, and you can open up a 401(k) without giving up your 420.
Medical marijuana has quickly grown into a thriving industry, with opportunities for retailers, software engineers, graphic designers, union reps, attorneys, consultants, pastry chefs, cultivators, insurance brokers, educators, professional activists, investment bankers and just about everything in between. In fact, a recent study determined that a major obstacle to the growth of the medical-marijuana industry isn’t a surplus of DEA agents, but rather a lack of skilled executives. So here’s a sample of just some of the cannabis career paths worth pursuing:
Budtenders: Selling medical marijuana over a dispensary counter is a common entry-level job for those interested in learning the retail side of the business. Wages range from $10 to $15 an hour, sometimes with benefits. Candidates should communicate well and have serious knowledge of marijuana strains and their medicinal effects.
Dispensary management: Managers must be familiar with running a retail-style operation and show proficiency in maintaining the safe and efficient flow of medicine through a dispensary facility. Candidates should be active in the cannabis community, have entrepreneurial drive and be eager to make positive social change. Salaries can reach six figures, with full benefits.
Doctors: Licensed physicians who choose to specialize can earn as much as $500 a day evaluating patients to determine if they qualify for a medical-marijuana recommendation, with the added benefit of helping those in need access a safe and effective medicine.
Techies: As the medical-marijuana industry continues to go mainstream, technical-support positions have opened up at dispensaries, medical clinics, cannabis-testing laboratories and social-networking companies like Weedmaps.com, which are looking for IT personnel, software engineers and mobile app developers. Annual salaries typically range from $65,000 to $100,000, with full benefits.
Cultivators: Those with a seriously green thumb can always put their horticultural knowledge to good use by supplying legal medical-marijuana collectives and dispensaries with cannabis, concentrates and related products. But be warned: As the industry moves out of the black market, competition among cultivators is expected to grow rapidly, resulting in lower wholesale prices for pot. Compensation depends on a wide variety of factors.
Dispensary buyers: Qualified applicants must know a lot more about Mary Jane than the average cannabis enthusiast, including a clear understanding of all the major (and even obscure) varietals and how to spot perfectly grown, harvested and processed pot. Start by convincing a prospective employer that you’ve got the discriminating eye required to find the best-quality herb available, as well as the attention to detail necessary to ensure that it’s free of mold, insect infestation, fertilizer residue and other potential problems. By keeping standards high, dispensary buyers play a vital role in ensuring that patients maintain access to safe, high-quality cannabis.
Edibles chefs: You can have your pot job and eat it too by supplying legally operating dispensaries with cannabis-infused edibles. Start by familiarizing yourself with the basics of commercial food production, then visit a few dispensaries near you and sample the goods already on the market while you search for possible employers or a new edibles niche that you might fill …. Then let them eat ganja cake!
Get the new issue of HIGH TIMES Medical Marijuana, on newsstands now!
Get the new issue of HIGH TIMES Medical Marijuana, on newsstands now!