Marijuana Laws Spur Small Businesses

An incremental acceptance of medical marijuana has spurred a cottage industry of business ventures — from iPhone applications to lobbyists — whose expansion shows no sign of slowing despite the recession. Instead, pot is the new growth industry.

The market began to take off in 1996, when California became the first state to approve the sale of marijuana for medicinal purposes. Today, medical marijuana sales in California are estimated at $700 million to $2 billion per year. Profits from “canni-businesses” as a whole are potentially much greater.

“It is a social movement with cash flow,” said James Anthony, an activist and attorney who has advised numerous dispensaries, of which there are at least 2,100 nationwide, according to the National Organization for the Reform of Marijuana Laws.

The group estimates that Californians alone consume nearly $6 billion of marijuana annually.

The money has always been there, Anthony said. It has just risen to the surface because people think there is less risk of being prosecuted.

The most obvious beneficiaries of what has been dubbed a “hempire” are dispensaries, growers and doctors, who charge up to $200 per consultation.

Newer are the small business ventures such as delivery services and publishers of books about how to start pot-related businesses. Pharmacologists are standardizing the safety and strength of the pot consumed in everything from lemon bars to olive oil.

Companies are preparing special machines, packaging and containers for the industry.

Hotels also are affected by cannabis-related tourism, conventions and competing trade shows that draw thousands to cities. And if anyone has trouble finding what they need, the iPhone and iTouch offer a cannabis application that allows users to locate resources worldwide.

Media involved with pot also have expanded. The Web-based station “Marijuana Radio” has been featured on the front page of the iTunes comedy podcast section, and the Denver Westword news weekly went further by posting a help wanted ad for a reviewer of Colorado’s marijuana dispensaries and their products.

In addition, the number of pot lawyers and political consultants have exploded, and a half-dozen marijuana lobbying groups have sprung up in Washington, D.C., a few on K Street. Oakland activist Richard Lee said he spent more than a $1 million gathering signatures for a measure that would permit adults to possess cannabis for personal use and allow local governments to tax it.

Cannabis has become a regular political issue instead of just a crazy, hippie dream, Lee said. His “Oaksterdam University” was the first cannabis college. There are now at least a half-dozen in California, and others are looking at creating online versions of the classes available for about $50 a seminar.

Lee said last year he took in between $4 million and $5 million from his businesses, which also include an advertising agency, a tour company, a bicycle rental and glassblowing business, a gift shop selling souvenirs and merchandise, and the Bull Dog Café in downtown Oakland. (Visitors can take an “Oaksterdam” tour of the city’s cannabis dispensaries through Segway of Oakland.)

The Harborside Health Center, an Oakland dispensary that offers numerous services, had about $20 million in gross revenues last year and expects to pay $400,000 in taxes to Oakland in 2010, according to founder and longtime activist Stephen DeAngelo. He employs 76 full-time workers, up from 43 in 2008.

“We are seeing the first stages of this industry that has been in the shadows come into the light,” said DeAngelo, a longtime advocate for cannabis legalization. “A legal cannabis industry would be a huge economic benefit.”

Those potential benefits have prompted cash-strapped cities and states to take another look at marijuana. Oakland in 2004 became the first city to license medical cannabis outlets. That year, the city’s four licensed dispensaries reported $26 million in revenue. Advocates projected income to reach $64 million in 2009.

Those numbers are dwarfed by the $280 billion pharmaceutical industry. But the pot-based figures were enough to convince Oakland voters in July to approve a tax on the proceeds of medical marijuana sales that could raise $300,000 per year for the city.

Advocates also were heartened recently by signals from President Barack Obama’s administration that federal authorities were backing off pursuing smokers or distributors of medical cannabis as long as they operate according to the laws of their state.

That does not mean selling marijuana is legal or that the patchwork of local, county, state and federal law has been coordinated. But, DeAngelo said, “it is a significant change.”

“Every day I went to work,” he said, “I didn’t know if I would be going to prison or coming home at night.”

– Article from the Oakland Tribune on November 1, 2009.