Drugs

Beating Marlboro to the Joint: How Federal Prohibition Allows Micro Marijuana Companies to Thrive

It's the first time in economic history that a growing, multi-billion market has no big, multinational players.

Photo Credit: Deviant / Shutterstock.com

Friday afternoon in a cozy, hip bar in downtown Oakland, Californiacalled Cafe Van Kleef, and Im sitting across the table from the frizzy-haired, denim-jacket-clad blogger for StuffStonersLike.com. Hes sliding a glimmering, dark, cigar-looking package across the table as a big smile breaks out across his face.

“Is this it? This is awesome!” he exclaims, holding up the Schedule 1 illegal drug.

None of the happy hour crowd or the bartenders seem to care. This is Oakland — among the most progressive cities in America, where marijuana is officially the “lowest enforcement priority” for the police.

StuffStonersLike’s founder has a medical cannabis doctor’s recommendation, there are pot clubs down the street, and even though pre-rolled joints are literally given away for free in the San Francisco Bay Area, he’s mesmerized. The office workers enjoying cocktails don’t bat nary an eyelash.

Call it ‘the Cohiba of chronic’.  Or, ‘the seventeen dollar doobie.’ This spring, celebrity pot professor Ed Rosenthal brings to market the Ed Rosenthal Select Sativa Medi-Cone — an elegantly packaged, $17 marijuana cigarette that’s destined to give weed heads a major buzz and legalization’s critics fits. 

It’s a premium, branded, cone-shaped joint combining one gram of Blue Dream mixed with Mango, fortified with bubble hash and available at about 20 California medical marijuana dispensaries. The ‘Eddie’ is already a hit, and a harbinger of things to come.

Companies like Medi-Cone, California’s Finest, and Cavi Cone in California — and two-month-old Cranford’s in Colorado — are ushering in the era of the pre-rolledpot cigarettes.They come in standard cigarette shapes as well as cone shapes and are hand-rolled or machine-rolled.And while both cannabis legalization and police lobbyists fear the rise of something akin to ‘Marlboro Greens’, the story of the ‘Eddie’ illustrates a more accurate outlook: federal pot prohibition has effectively locked out Philip Morris and other corporatecigaretteleviathans from the weed market.

America is in a short, liminal time where mom-and-pop regional brands — operating in defiance of federal law — have a first-mover advantage over Big Capital. Whether it’s topical ointments, lozenges, or good ole fashioned joints, it’s the little guys’ market for now.

“That’s what’s great about the way this is changing — slowly, over time,” said Troy Dayton, CEO of cannabis venture capital firm The Arcview Group. “It’s giving the little guys a chance to really stake some claims prior to the big dogs getting in.”

Mary Shapiro, a San Francisco trademark lawyer for Ed Rosenthal and other pot brands, said corporations are loath to break the federal law that prohibits the cultivation, possession, sale, or manufacturing of pot-laced cigarettes.

“I don’t think there’s national players, because it isn’t [nationally legal] yet, and it does violate federal law, and it’s only been recently that things have really started to relax,” she said.

The smaller brands that do exist are run by legalization activists willing to break federal law in states that allow it.

This One Goes to 11

Up in the back of a baking hot valley in California’s Northern Bay Area, on a large rural property, union employees with the United Food and Commercial Workers Local 770 efficiently fill tiny, paper cones with blueberry and mango-scented ganja. 

Staff members wear powder-less, latex gloves and hairnets as they fill trays of the pre-fabricated Dutch cones arrayed in big blocks dotted with cone-slots.

The converted living room is clean and air-conditioned, and the team dresses casual, like the staff of a record store, taking turns DJing with their iPhones.

Out back, two sheds house research and development grows. All day, the small teams set up cones, fill cones, pack cones, put cones in hard, clear plastic tubes, fit them in plastic wrappers, and seal it all up in paper cardboard with rollers.

The final product looks as professional as anything else behind the counter in an AM/PM, and each batch gets lab-tested as part of a standardized procedure, yielding powerful, 20 percent THC (the compound in cannabis that gets you “high”) joints. Fitted with a cardboard tip, they look like little baseball bats, and each one can get about ten novices stoned.

Around since 2008, Medi-Cone maintains a low profile since the federal crackdown of 2011, when prosecutors announced a fresh round of raids on California’s roughly $1.7 billion quasi-legal medical cannabis industry. In 2012, Colorado and Washington totally legalized pot for adults over 21, and federal government blinked. An August, 2013 memo from the Dept. of Justice told federal prosecutors to focus on the black market, and look the other way for the rest.

Twenty-one states now have medical marijuana and polls show record-high 55 percent support for national legalization among voters. The president admitted weed is safer than alcohol in The New Yorker, and the Dept. of Justice essentially told its prosecutors that regulations and taxes could succeed where the U.S. war on drugs had failed.

Medi-Cone’s project with celebrity pot author Ed Rosenthal represents a return to the headlines for the brand. Rosenthal said the team went through roughly 35 blends to find right “energetic, social, creative, head” effect without generating anxiety or paranoia.

“If you’re going to smoke it at night, plan on going dancing,” Rosenthal said.

The $17 price tag is steep, until you do the math on one gram of top-shelf flower, not trim, ($17) combined with dry-sieved kief and ice-water hash. The plastic container allows for taking a few puffs and stowing. The cap cuts off oxygen and the joint goes out.

“It was one of the tastiest and most potent joints we’ve smoked in years,” said the Bay Area pot bloggers at StuffStonersLike.com in a review the next week. “This one goes to 11.”

The Rise of Micro-Marijuana

When people talk about the rise of ‘Big Marijuana,’ it’s actually the rise of Micro-Marijuana — similar to micro-breweries, with all their quirks.

“It’s this unique framework where you’ve got a multi-billion market growing at a remarkable clip and yet there are no big, multinational players. That’s something we’ve never seen in economic history,” Dayton said.

The legal weed industry is expected to generate about $2.2-$2.6 billion in revenue this year, the vast majority of which in California. That number is set to grow to $8 billion by 2018.

“Not a single cannabis-related company is bigger than $100 million, not even close. Show me another industry of this size that doesn’t have such a player.”

Pre-rolls are a small but significant fraction of overall sales and stores, Dayton said. Probably under five percent. By comparison, 95 percent of tobacco sold each year on Earth ($346 billion) is sold in the form of machine-rolled cigarettes.)

Over in Colorado…

Down at the weed bazaar Hemp Con in San Jose on April 20, the Eddie’s competition came in exotic colors and flavors.  California’s Finest offers hand-rolled five-packs for $80, featuring the Golden Gate Bridge on the package.

Caviar Gold’s “Cavi Cones” have thrived in Los Angeles for six years, and are in about 200 stores, a company spokesperson and model who goes by the name Trinity said. The brand debuted with a cigarette — the industry calls them “pre-rolls” — and now specializes in a potent, triple-fortified $15 cone that comes in Apple, Strawberry, Vanilla, Grape and Raspberry flavors. At 950 mgs THC, “it’s the strongest pre-roll in the world. No one can take a whole one to the head.”

Colorado’s pre-roll market is smaller, more nascent and more legal than California’s.

The two month-old company Cranford’s marijuana cigarette brand is on fire after a write-up in The Denver Post, said COO Chris Connors. Their packs-of-ten, machine-rolled blends of Scott OG and Larry OG retail for $50-$60 in 20 stores statewide.

Colorado's rules are actually more strict than California’s. Dispensaries have to grow 70 percent of the product they sell, including pre-rolls. That 70-30 rule limits regional brands, said Connors, but the company continues to add dispensaries and will appear in a couple over-21 pot stores in a few months.

Connors said he isn’t afraid of federal intervention. 

“We’re 100 percent compliant,” he said. “We don’t contain any tobacco additives. We’re following all state rules. … Sales have been shooting up.”

In a weird way, the end of the drug war has this small business protectionism built into it, he agreed.

“With federal law, Big Pharma and Big Tobacco can’t step into the game right now,” he said. “That’s why we got in.”

Connors figures Cranfords has at least a few years before federal law changes enough to allow for major corporations to enter the field.

“I’m not too sure,” he said. “Some people think it’s going to be federally legal in ten years. Some people think it’s going to happen in a year or two.”

Dayton said the pre-roll market in Washington is even more basic. Medical pot stores are less legal than in California. Legal retail stores don’t launch until later in the Summer.

Branding Challenge/Opportunity

In the 21 medical marijuana states outside of California, the markets are in their infancy, with dispensaries selling in-house pre-rolls for cheap or giving them away for free.

That idea has been around since the first dispensaries opened in California after Prop 215 in 1996, Dayton said. Pre-rolls are a way for clubs to package shake and trim that they otherwise couldn’t sell. Consequently, pre-rolls have a poor reputation among chronnoisseurs.

“People think, ‘Oh, a pre-roll is just shake’, or a means for hiding otherwise less-than-desirable product in a fancy package. It’s a branding challenge.”

But it’s also a rare opportunity to brand the raw plant as an upscale item, like an expensive cigar or alcohol. “You don’t see many branded tomatoes,” he said.

Pre-rolls are often given away as a new customer promotion, and are perfect for the majority of the population, who cannot roll their own out of naiveté or disability.

“I had a friend who had a stroke and she can’t even roll a joint, so she needs pre-rolls,” Shapiro said.

One of Medi-Cone’s founders started the company because of a medical disability.

“Clearly there’s convenience,” Dayton said, noting that tourists love them. “Pre-rolls are nice because you don’t have anything to throw away.”

Still, machine-rolled forms aren’t likely to dominate fully legal weed like they do tobacco.

For one, medical patients and younger folks have left joints behind and moved to hand held vaporizers, Dayton said, “unless they’re over 40 and are already a part of the cannabis culture.”

Recognizing that fact, Cranfords plans a branded, disposable e-cig for pot for 2015. Regional weed e-cig brands are already on shelves in California.

Perhaps the biggest drawback, the modern commercial joint is much too powerful for the average person. A chronic tobacco smoker might smoke a cigarette in a few minutes and a pack (20) a day. Conversely, a puff or two off an Eddie is enough for several hours.

“Except for the most heavy consumers, people don’t consume [pot] that way,” said Dayton. “A joint for most people — a kind of standardized joint — is not something they would even consider consuming in a sitting, as one person.”

Connors said Cranford’s plans a low-THC version, and “if you’re new to smoking marijuana I definitely would not suggest smoking the whole thing. It’s a very strong, mellow high.”

David Downs is a freelance journalist whose work has appeared in Wired, Rolling Stone, the Onion, and the New York Times. He writes the syndicated weekly column "Legalization Nation" and edits pot blog Smell the Truth on SFGate.com.

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