Saturday September 19, 2020

How legal marijuana has spawned a billion dollar industry

The potcom boom is looming

30th October, 2016
11
Could marijuana become the latest moneyspinner for the already huge economy of California? Pic: Getty

They’re calling it the potcom boom. Nine days from now, the state of California is poised to take the momentous step of legalising recreational marijuana – and if Proposition 64 is passed, plenty of savvy operators are poised to cash in

The potcom boom is looming. California’s so-called Green Rush (after the Gold Rush) is around the corner, with the US’s most populous state gearing up to legalise recreational marijuana on November 8.

Mark Twain once wrote that the Gold Rush fundamentally changed the American character, ending the gradual mastery of self, talent and money. Gold, he claimed, created the get-rich-quick mentality that has possessed the country ever since.

Mind you, Twain also wrote: “When everyone is looking for gold, it’s a good time to be in the pick and shovel business.” Right now, those words of wisdom are being applied to California’s marijuana business with gusto. Everyone wants a piece of the action – and the service industry around the production and distribution of legal pot is where vast fortunes are expected to be made in the near future.

Warren Buffett, the so-called Sage of Omaha and chief executive of Berkshire Hathaway, has snapped up companies that manufacture equipment for growing and harvesting cannabis.

Stock market analysts are obsessing over which of the dozen or so publicly traded companies that are investing in the growth, production or distribution of marijuana will become the Apple of the pot industry.

A dope Steve Jobs

So far, Mike Straumietis is looking like the industry’s answer to Steve Jobs. Flashy, flamboyant and with a penchant for throwing massive parties in his Los Angeles mansion, Straumietis has a serious side that is concealed by the Trump-esque lifestyle and a penchant for hyperbole. Known as ‘Big Mike’ or the “Marijuana Don’, the 6’7” pot entrepreneur certainly knows how to work a room.

Straumietis claims his firm, Advanced Nutrients, is “the most powerful privately held cannabis company in the world”. He has been growing his company for the past 16 years. He claims that, as a farm boy in Illinois, he first tried his hand at growing pot. His farming background led him to experiment with different types of fertiliser to see which was the most effective in boosting plant quantity and quality.

He discovered that cannabis plants needed more magnesium and calcium than most fertilisers contained, so he added more, becoming something of an alchemist in the process. The Eureka moment came when he grew a strain of marijuana that, he claims, “just ripped people’s heads off”.

“People always think you’re an overnight success. They don’t see the 15 years you sweated it out in the lab,” he says.

In his case, it was labs in Bulgaria, where he hired PhD graduates to conduct controlled research into the medical benefits of cannabis. He says the next phase in his work will be to develop new ways of ingesting cannabis, but also cannabis that will be tailored to produce a specific result. “We will be able to manipulate the plant so that specific cannabinoids and terpenes are isolated and can bring about precisely the effect the user is looking for. So you would take one type to assist with creativity, another for muscle recovery and another for pain relief.”

Because the human body contains endocannabinoids, Straumietis and his team believe that in the not too distant future, a person’s DNA profile will make it possible to assess which isolates of the cannabis plant will be most beneficial to that person. “If you get paranoid while you’re smoking, we know that’s the AKG1 pathway, specifically the RS2494732 gene variant.” He says he can “manipulate the cannabinoid so you don’t get paranoid”.

Optimal high

In California, where obtaining a state-authorised card that permits individuals to use marijuana for medical purposes is a relatively easy process, there is a bewildering array of “dispensaries” that have opened up to provide medical marijuana in every form imaginable. These Aladdin’s Caves for stoners provide every possible strain, flavour and permutation of buds – usually with the proviso they are entirely organically farmed and locally grown. They also sell vapes, pipes, bongs and just about anything else you might need to facilitate your high.

Even the most humble, hole-in-the-wall dispensary offers a bewildering variety of cannabis strains with charts on the walls that helpfully and earnestly advise the customer how best to reach their optimal high. They will recommend a THC from the Indica strain for a sleep-inducing state of relaxation. Sativa, on the other hand, is just what the doctor ordered if you feel like a high-energy buzz or a night on the tiles.

Most people who inhale cannabis recreationally do so for the ‘high’, the feeling of relaxation or euphoria it induces when Tetrahydrocannabinol (THC) – marijuana’s main psychoactive ingredient – binds to the CB1 receptors in the human brain. But not everyone likes to inhale, and already the market is producing ‘edibles’: cannabis-infused chocolate, lollipops, ice cream, granola, even cannabis-infused coffee. Products are also being developed specially for pets, which remove the high, but provide relief for cats and dogs suffering from cancers, arthritis, even stress or anxiety.

Working in the grow room at the 3D Cannabis Center in Denver, Colorado

Arizona, Nevada, Massachusetts and Maine – all of which already permit the use of medical marijuana – will also vote on whether to legalise recreational marijuana use on November 8. Meanwhile, voters in North Dakota, Arkansas, Montana and Florida will decide whether to legalise the use of medical marijuana.

With national polls suggesting that between 57 and 60 per cent of the US electorate support the legalisation of recreational and medical marijuana, it is likely that on November 8, nine states will permit the growth and distribution of recreational marijuana and 33 states will allow the use of marijuana for medical purposes. The commercial implications are enormous. Analysts predict that within the next decade, medical marijuana will be available throughout the US and recreational in all but the flyover states. A current glance at the marijuana map shows that the Bible Belt states – with the sole exception of Louisiana – are the only areas where there are no plans to introduce legislation.

Hippy clichés

In Colorado, where recreational marijuana has been legal for almost two years now, the tourists are arriving in droves. Locals in pristine, picture-postcard towns like Boulder and Aspen complain they are becoming a stoner’s Las Vegas. In Boulder, it doesn’t take long to get over the incongruity of seeing a ‘specialty smoking shops’ next door to the courthouse offices and the Mom and Pop café’s and kitschy shops selling Western cowboy gear and homemade quilts.

Part of the reason for the rapid change of policy is down to the advocacy groups that are pushing for the legalisation of marijuana. These are nothing like the clichés that conjure up tie-dyed hippies wearing granola earrings and driving to protests in beat-up camper vans.

Organisations like Drug Policy Action, the National Organisation for the Reform of Marijuana Laws, and Marijuana Majority are run like K Street lobbying firms and PR agencies, with highly-paid professionals in charge of communicating their message to politicians and the public. They are quick to point up the social benefits, refute suggestions that cannabis is a “gateway drug”, and can conjure up a mountain of research that shows the medical profession is solidly behind the use of cannabis, citing current research which suggests its potential to treat a wide array of conditions is only being discovered.

Legalising marijuana would really cut the drug cartels' legs out from under them

Medical marijuana is currently legally prescribed for the relief of pain associated with chronic and acute conditions; the alleviation of nausea and other symptoms related to chemotherapy treatment for cancer patients; the relief of pain associated with multiple sclerosis; and the relief of insomnia, anxiety and depression. But several advocates have informed this reporter that this is only the tip of the iceberg.

While sceptical about claims that the legalisation of marijuana will be a panacea for many medical and social ailments, new research shows that an increasing number of Medicare patients are being prescribed marijuana instead of anti-anxiety medications and stronger painkillers – bringing savings of tens of millions of dollars.

Authored by a University of Georgia research team and published by the Health Affairs journal, the study found that in the 17 states with medical marijuana laws in place by 2013, prescriptions for painkillers and other drugs dropped significantly, compared with states that did not legalise medical marijuana. Medical marijuana’s availability in these states saved $168 million in 2013, because of lower prescription drug use.

W David Bradford, a health economist and co-author of the study, as well as a public policy professor at the University of Georgia, says that if all states followed California’s lead in legalising medical marijuana, the overall savings to Medicare would be roughly $500 million a year. Even bigger savings could potentially be made on Medicaid (a health care subsidy for the poorest Americans.)

Certainly, the outcome of California’s Proposition 64 vote will have a huge impact on the federal approach to cannabis legalisation. California has the biggest population in the US, the biggest number of congressional representatives and in July this year, new data from the World Bank showed that it now amounts to the world’s sixth-largest economy.

During the recession, it had slipped to eighth place in global rankings, but a GDP of $2.5 trillion in 2015 pushed it to the top of the rankings. Almost 33 million Americans – one in ten – live in California.

It was the first state to legalise medical marijuana in 1996 and, since then, under the protective blanket of medical “research”, its pot growers have been researching and developing new strains of marijuana that they claim are “platinum standard”.

The big-business juggernaut

Proposition 64 is extremely right-on, to say the least. You’d have to be the Grinch who stole Christmas to vote against it. But a surprising number of small cannabis farmers are doing just that. They believe that legalising marijuana for recreational use will have the same effect on their business as intensive farming did on family ranches. They say that it will invite big business in and the small farmers who take pride in their product will be trampled by the equivalent of McDonald’s-type franchises.

However, McSpliff’s outlets aren’t likely to start popping up any time soon. Proposition 64 outlines 19 different types of licences for the various growers, sellers, ‘bud and breakfast’-type micro businesses that would appeal to tourists.

But licences won’t be granted to big producers for five years. The small farmers say this isn’t enough; that they will start buying up acreage and setting out their stalls in the meantime, and as soon as the juggernaut is allowed access to the market, it will crush them all.

Of all the economies in the US, and indeed globally, few are better positioned than California to exploit this new market. For decades, it has been known as a grower and distributor (albeit illegally) of the world’s premium marijuana. It already has the optimal conditions for a pot boom: the reputation and a producer of some of the finest strains available, acreage, cheap labour, a favourable climate, public support and top technology.

Lynne Layman, the California state director for the Drug Policy Alliance, has been invited to address every interest group in the US, from the pharmaceutical industry to local pot growers’ collectives to the State representatives and politicians on Capitol Hill.

She points to Colorado as proof that legalising cannabis is an effective way to tackle international drug cartels, particularly those that operate from Mexico. “We’ve seen how Colorado has started to undermine them, but legalisation of marijuana in California would have a far bigger impact. It would really cut their legs out from under them,” she says.

Like many marijuana legalisation advocates, however, Layman’s organisation has its concerns about how the tobacco industry may try to monopolise what has hitherto been the preserve of small farmers who specialise in high-quality organically grown produce, and use mass production techniques to push them out of business.

But with proper regulation, she says, California’s mom-and-pop cannabis industry can be preserved. And anyway, with two-thirds of the population reportedly in favour of legalisation, there’s no turning the clock back.

An angry country

So why the relatively sudden change of heart? After all, hundreds of thousands of people have been imprisoned in the US just for cannabis possession. Until a decade ago, most of the country was virulently opposed to any form of decriminalisation of any drugs.

There are several reasons but, as usual, money and resources top the list. With every new generation in the US, the cigarette market shrinks as fewer teens smoke or become addicted. It makes perfect sense from the perspective to Philip Morris or RJ Reynolds to diversify. They’ve already got the distribution, the marketing, the vending machines. A quick switch from tobacco, and the slew of health and legal problems it has triggered, to the relatively benign world of recreational or indeed medicinal cannabis, means the companies will be looking at the sort of profits they haven’t seen since the era of Mad Men.

But it’s not just big business. Taxes on the sales of marijuana products – including edibles, vapes, buds and the associated paraphernalia – represent potentially huge sources of income for state coffers.

California’s state treasurer estimates that a 15 per cent tax levied on recreational marijuana will generate a minimum of $1 billion a year. And that’s just the tip of the iceberg. The number of jobs created, the boost to its already booming tourism industry with ‘bud and breakfasts’ – think wine valley tours with a kick – and the estimated $150 million a year it will spend on the prosecution and incarceration of petty drug offenders and it would seem to make little financial sense to oppose it.

Not to mention the soporific effect on a country that is more angry and agitated than at any time in the past half-century. Here in California, a topic that is often seriously debated is whether Donald Trump would have got the traction he did, had a hefty proportion of his key demographic shown a preference for cannabis over crystal meth.

It’s hard to imagine even Trump riling up an arena full of spliff-heads. Indeed, during several visits to Colorado on the campaign trail, where the recreational marijuana business isn’t just legal but thriving, attendees at Trump rallies seem noticeably less rancorous – aside from the antics of Trump himself, of course.

It has widely been conceded in the US, and recently by former UN secretary general Kofi Annan, that the multitrillion-dollar war on drugs isn’t working. In the US and globally, it has failed to reduce the level of criminal activity, violence and health and social problems that are costing governments tens of billions of dollars a year.

And with opiate addiction and overdoses taking a savage toll in the Rust Belt and southern states in particular, advocates are arguing that the regulated sale of cannabis would be a safer and preferable alternative to the over-prescription of opioids that currently plagues the US and generates billions of dollars in income for big pharmaceutical companies.

Reforming the drug laws

According to data sourced from the US Bureau of Prisons, the US has the highest prison population of any country. The country is home to roughly 5 per cent of the world’s population, but almost 25 per cent of its prison population. More than 2.3 million Americans are in federal or state prisons and city or county jails. Half of the population in federal prisons are convicted of drug offences. In state prisons the figure is around 15 per cent.

In addition, approximately 16 per cent of people in state prison and 18 per cent of people in federal prison reported committing their crimes to obtain money for drugs. It’s estimated that if the possession of marijuana were decriminalised, the corresponding drop in the prison population would save billions of dollars a year in prosecution and imprisonment charges. It would also enable law enforcement to more efficiently pursue dealers and those in possession of Class A narcotics.

The reform of drug criminalisation laws, spearheaded by outgoing US president Barack Obama, is one of the only issues in Congress that currently enjoys anything approaching bipartisan support.

Republican and Democratic representatives co-authored the Sensenbrenner-Scott bill and other bills that would reform drug-crime sentencing, restrict the use of mandatory minimums, broaden the use of probation, and increase the discretion given to judges in sentencing nonviolent drug offenders. Even the US Civil Liberties Union and Koch Industries have joined forces in supporting the Sensenbrenner-Scott bill.

The Colfax Pot Shop, a medical and recreational marijuana dispensary located on Colfax Avenue in Denver

In California at the moment, there are near-weekly conventions, gatherings, festivals and networking events that revolve around the medical – and potentially recreational – marijuana business. Would-be growers can attend intensive weekend courses where they can also purchase everything they need to grow their own weed, from fertiliser to seedling trays to hydroponic equipment.

And other states are keen to muscle in on California’s turf. Next April in Pittsburgh, the Compassionate Certification Centre hosts the extravagantly-titled ‘First of Its Kind Medical Marijuana Expo to Educate Thousands of Healthcare Providers, Patients Seeking Medical Cannabis Knowledge and Next-Steps in Pennsylvania’s Newly Legalised Market’.

“CCC is hosting this event in Pittsburgh because we believe the time to educate and expand knowledge regarding medical marijuana is now,” Dr Bryan Downer, chief executive and co-founder of Compassionate Certification Centres, a network of centres that prescribe and dispense medical marijuana, told The Sunday Business Post.

“It is imperative that all physicians and providers have a baseline understanding of medical marijuana. Whether you support medical marijuana or not, healthcare providers have a commitment to their patients to understand this new and developing treatment option.

“An increasing number of patients want information about medical marijuana as a possible treatment option and, in order to provide the accurate answers they are seeking, healthcare providers must have at least a minimal knowledge base on the subject. Our aim is to provide this knowledge base in an unbiased and interactive nature.”

There is understandably a good deal of scepticism about the medical claims and indeed about the benefits of legalising marijuana. Opponents say it’s a gateway drug, that people will still buy it illegally, that it will do little to alleviate the misery caused by drug use and the international drug cartels who often resort to savage means to protect their markets.

The debate will continue, regardless of whether November 8 brings the big pay day that many investors anticipate. And while those who are deeply opposed to the legalisation and exploitation of any drugs for recreational use will continue to press their argument, history has shown that economic priorities have a peculiar way of overcoming moral imperatives every time.

How cannabis changed one sick child’s life

Tristan Forde was suffering 20 seizures a day

By Fearghal O’Connor

For some people, the cannabis debate has nothing at all to do with smoking a joint or getting high.

Cannabis is increasingly used internationally by sufferers of a range of disorders including pain, nausea, HIV/Aids, cancer, dementia, Parkinson’s and seizures.

Yvonne Cahalane and her husband John Forde, from Dunmanway in Cork, credit cannabis with transforming, if not saving, the life of their son Tristan, who turns three in December.

At the age of five months, Tristan suffered frightening seizures and was rushed to hospital. “We didn’t know if he was going to come out of it or if he would be brain-damaged. It was very scary,” says Yvonne.

Tristan was subsequently diagnosed with Dravet Syndrome, a severe form of epilepsy. He was suffering up to 20 severe seizures a day, and had to take nine different benzodiazepines. “He was just a zombie,” says his mother.

A year ago, in desperation, Yvonne and Tristan moved to Colorado where medicinal cannabis is legal. Life apart was a struggle for the family, but Tristan quickly thrived on a cannabis tonic he takes under supervision from neurology specialists at Children’s Hospital Colorado. He is now close to 99 per cent seizure-free, and takes only a fraction of the heavy-duty pharmaceuticals prescribed to him in Ireland.

“He has had a vast improvement in every aspect of his life. He can eat for himself, speak for himself, walk, run, play and sleep the night through,” says Yvonne. “All his team are amazed by his progress. If we had stayed at home, his seizures would have only got worse, and we always feared the next one would kill him.”

But now Yvonne and Tristan must return home, and it is unclear whether Tristan can bring his medicine with him. Unlike some treatments that are based on hemp and often ineffective, Tristan’s tonic is a “whole plant” medication, meaning it includes THC and other psychoactive substances. This makes it illegal here, but is also crucial to its efficacy, says Yvonne.

“We will be home in December, and we are working every single day with a lot of people to make sure medical cannabis is accessible for Tristan when we get home,” she says.

Will the Irish authorities refuse Tristan access to his medicine, thus risking him relapsing into a life of constant seizures? Or will his case, and his parents’ relentless campaigning, help change attitudes towards medicinal cannabis for others here who could benefit?

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