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Pot Economics: What's the Future of the American Marijuana Market?

With widespread legalization more than just a pipe dream, the U.S. now grapples with an influx of a new form of 'over the table' income.

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In addition, “five states (California, Tennessee, Kentucky, Hawaii and Washington) had marijuana crops worth over $1 billion,” with the national pot crop worth more than our national soybean and wheat crops combined.

Not all of the money to be made will come from selling marijuana to consumers as a drug. While only the female buds of the plant cannabis sativa contain adequate levels of the chemical THC (tetra-9-hydrocannibol) to cause a “high,” the rest of the plant has a variety of applications that may pique the interest of small and big business alike.

Hemp — as the non-intoxicating parts of the cannabis plant are called — is used in over 25,000 products worldwide, according to a 2013 report from the Congressional Research Service, and is used frequently in products sold by companies like The Body Shop and Whole Foods, which are forced to import their hemp products due to U.S. laws prohibiting the cultivation of any kind of cannabis. The same report estimated the current size of the U.S. hemp market at about $500 million, with a large potential to grow should its products be more widely available for sale (both inside and outside of the United States).

From the Corner to the Boardroom?

These mouth-watering figures have been and will likely continue to be a part of the argument made by politicians and business types in favor of making marijuana legal. But it’s important to put them in perspective, and consider who really stands to gain. It’s not yet clear whether American pot growing and selling will, in the future, be managed by a dispersed network of independent producers or fall into the hands of large corporations.

Put simply, will smokers be buying from Mom and Pop’s Pot Shop, or going down to the corner store to buy a pack of Marlboro Greens?

In August 2013, a young entrepreneur named Brian Laoruangroch made digital headlines when a wacky commercial for his new company Prohibition Brands premiered, featuring Laoruangroch sporting a cowboy outfit and hokey southern accent. In it, Laoruangroch touted what he saw as an oncoming “green rush” in the marijuana industry as part of a pitch to raise “up to $50 million through venture capital groups, crowdfunding sites, and investors.”

Although most media outlets made light of the crass humor and sexy cowgirls Laoruangroch used in the commercial, it was interesting how the 2½ minute video put a face (in this case, a mustachioed face) on the fast-growing realm of Big Marijuana—that is, corporate production of legal marijuana. When I interviewed Allen St. Pierre, the Executive Director of NORML and a marijuana advocate for several decades, he laughed at the mention of Laoruangroch’s antics, but said that the emergence of figures like him wasn’t surprising.

According to St. Pierre, the new generation of pot entrepreneurs is more motivated by monetary gains than their older, rogue counterparts, and often come from much different backgrounds. “These people have CVs not based on being the toughest guy on the block, but from having gone to Yale and Harvard,” he said.

Not that St. Pierre believes big business should be shunned. In the past decade many legalization advocates like NORML have been among the biggest proponents of a marriage between big business and marijuana, seeing a so-called “free market” approach as vital to marijuana’s successful transition from the black market.

“Do we gird against the idea of corporate tobacco? Yeah, because that industry has been shown to be really malevolent,” says St. Pierre. But “NORML doesn’t think that corporations are evil, or that capitalism is bad.”