Rebranding the exploding cannabis industry

A brand new market was opening before their eyes, currently valued by some counts at $2.7 billion (though others have pegged it much higher) and expected to reach $8.2 billion by 2018. And they would not even need to build the consumer base, since nearly half of Americans consume the product, including 6.5% of high school seniors, who smoke it daily.

Rebranding Pot: How Squares Are Sparking The Next Massive Industry

This article on Fast Company about, mostly, Privateer Holdings exemplifies the explosion of the cannabis industry. And the pitfalls, hurdles, stigmas, etc. still attached to anything or anyone involved with the industry:

It was a flawless business plan, except for one little thing: the drug still carried stigma. Their challenge would be to bring cannabis out of the shadows and transform it into an everyday product, like wine or coffee. Their mission was to rebrand pot.

This stigmatization of cannabis and businesses built around cannabis is something that anyone involved faces, even us at The 420 Agency (ask our wives and friends!). Christian Hageseth describes these travails in a very entertaining but nevertheless poignant manner in his famous book, Big Weed.

As we have stated before, we believe that a lot of the reactions we all get from friends, families and mainstream businesses have to do with misconceptions about marijuana and, more importantly, with the legal mess surrounding the cannabis industry. As the Fast Company article very succinctly and accurately summarizes it:

Marijuana is still a dangerous business from a legal perspective. Today, state and federal laws surrounding the drug are literally all over the map. In Alaska, Colorado, Oregon and Washington, both recreational and medicinal marijuana are already legal, or will be in the next few months; this is also true in the cities of Portland and South Portland in Maine. There are 23 states, plus the District of Columbia, where medical marijuana is effectively decriminalized. But in each state, laws have their own nuances and inconsistencies. In Washington, for instance, employers have the right to fire workers who test positive for marijuana on a drug test, even with a doctor’s note. Or if you wanted to set up a medical marijuana dispensary in New York, that might involve importing marijuana plants through states where they are not legal. And since the federal government considers marijuana illegal, it is almost impossible for marijuana businesses to get a traditional bank account in any state, since banks fear being prosecuted for aiding and abetting illegal drug dealers.

Privateer Holdings strategy to get around these issues are laid out in this quote:

“We have created a language that would allow us to speak about the industry maturely and professionally,” Kennedy explains. “We assume the end of prohibition is inevitable and that the product is already mainstream.”

Interestingly, they are not the only ones banking (pun intended) on the end of MJ prohibition:

Given the challenges of securing bank loans for a marijuana business, private equity is stepping in to fill the gap. While Privateer is a notable example of this, there are others too. Dutchess Capital Management in Boston has invested $2 billion in transactional value in over 400 companies in the last two decades, includingMassRoots, a social media platform for cannabis users. High Times, the New York-based marijuana lifestyle magazine announced last year that it was launching High Times Growth Fund and was in the process of raising $300 million for the fund.Emerald Ocean Capital was founded in 2013 by Justin Hartfield, the creator of the marijuana review and discussion site WeedMaps, and is currently raising up to $25 million to invest in other companies.

All of this is adding up to a very vibrant ecosystem and a lot of opportunities for entrepreneurs with business skills and disciplined approaches to enter the market with success odds higher than what can be found in Silicon Beach/Valley/Alley.

By: JP Clement