Mapping The Legal Marijuana Industry

Subject: US: Mapping The Legal Marijuana Industry

Forbes
August 17, 2010

Mapping The Legal Marijuana Industry

Quentin Hardy

OAKLAND, CALIF. - Welcome to Oaksterdam, California's newest, least orthodox tourist attraction. Welcome, possibly, to the future of a multibillion-dollar business around legal marijuana.

Spread over an eight-block area of formerly disused downtown Oakland, the self-described Oaksterdam district neighborhood includes clinics and dispensaries for medical marijuana, coffee shops catering to cannabis patient, pot-themed souvenir shops, specialist law offices and Oaksterdam University, an education center for growing and dispensing marijuana. There are Segway tours, tourists and film crews.

There is also a busy office where a mostly young and energetic staff work to pass Proposition 19, a California ballot initiative that would allow people over 21 to grow, possess and transport marijuana for personal use, subject to local regulation and taxation. They foresee a day when licit marijuana use is widespread, tax revenues reach $1.6 billion despite collapsing prices for the product, and perhaps 100,000 union jobs are created in the legal dope industry.

It is difficult to say what the proposition's chances are in the Nov. 2 vote. The ballot-betting website Intrade puts the odds at about 60-40 against, but that is on relatively small volume. In opinion polls the race is much tighter, though still against it, if a person is asking the question. In automated polls the measure passes overwhelmingly, leading organizers to conclude that the winning swing vote is people who say one thing in public, and vote another way when alone in the ballot booth.

Oaksterdam University's founder, Richard Lee, is one of Prop 19's original proponents. He thinks it will pass, and that legal pot will be an industry "like vintners or brewers... that's why we started a trade school." Oaksterdam's classes involve issues in growing and preparing marijuana, as well as legal and business issues. Lee says 12,000 people have taken classes there over the past three years.

Inside the Prop 19 lobbying office, Dan Rush, a special operations executive with Local 5 of the United Food & Commercial Workers Union, figures legal cannabis is good for his business. "This is an industry that should be regulated, and unions are how you do that," he says. "We want to see tens of thousands of good-paying jobs from a dignified industry that has good worker principles." Besides growing and regulating sales, he says, there are jobs to be had in preparation of pot-laced foods, packaging and labeling, transportation, and hemp-based products that use parts of the plant without the drug.

In Oaksterdam, things already have a feel of legalization's normality.
Prices for both cannabis and a doctor's prescription have fallen with increased competition. Lines form outside the dispensaries after 5 p.m., as some very fit-seeming patients get off work. Seeds and plants come with brand names like Purple Dawg and Sweet Tooth. Somewhat like wines described by their grape varieties, these brands carry info on their genetic heritage (Dairy Queen is a cross of U.K. Cheese, Cindy 99 and Romulan, a once-popular brand).

As with many other industries, the real money in legal marijuana may be less in the product as in the means to produce and manage things--think picks and shovels in the gold rush, Cisco routers in the Internet or Halliburton in oil. Prices for cannabis itself may fall. Lee figures an ounce will be "$100, with $50 of that in taxes," down from $300 or more today. But the business of indoor growing equipment makers and nutrient companies is likely to increase, along with lifestyle publications, as localities license home and industrial growers. Ed Rosenthal, a noted expert in the field, lists his consultancy services in one magazine.

Advocates figure they could still lose, but seem encouraged even by the close call of the polls--a 1972 legalization vote lost by two-thirds--as well as the cash-strapped needs of localities. If California goes, they figure, other states will soon follow, but the earlier legalization and storied past will give California a lasting presence in the business.

"I tell growers in Mendocino [County, a noted cannabis producer] to patent processes, create brands," says Rush, the ironically named union organizer. "They need to think about eventually stimulating exports beyond the border to Taiwan, Ecuador--anywhere."
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