California’s Second Green
(er, Gold) Rush

Dozing on the couch yesterday with football on, I was listening more than watching the game.

But it was the commercials that caught my attention.

“Grab some buds!,” the voice over beckoned.

No, this wasn’t an ad for legal marijuana in California (yet); it was for Budweiser beer, Anheuser Busch’s flagship product.

But if California legalizes marijuana at the polls tomorrow, how long before the same ad could be touting a very different product?

$5 Billion Market

And why wouldn’t companies like Anheuser Busch — not to mention Seagram’s, Phillip Morris, and even big pharma’s like Pfizer and Merck — vie for a slice of the legal marijuana market?

Even if no other state follows suit, the market for legal marijuana just in California is already estimated to be $3 – $5 billion annually.

Margins on growing and selling marijuana should be just as high (sorry) as those for tobacco.

Plus, with sales now dominated by hundreds of Mom-and-Pop “medical dispensaries” and no dominant brands, the market is highly fragmented and ripe for consolidation.

Battle of the Brands

So, will any of the big companies bite?

And would it be a good thing if Big Business muscled its way into the nascent industry?

To answer the second question first, yes, if a multi-national drug cartel is ultimately going to capture the marijuana market, I’d prefer that it be a group of (semi-accountable) U.S.-based corporations than a clutch of lawless, murdering Mexican gangs.

Presumably, whichever companies prevailed would steal a page from Phillip Morris and be sure to share the spoils with local governments (via taxes) and cultural groups/the arts (via donations).

“Smoke Responsibly”

Which leads back to the first question: which big companies will risk the stigma of selling legal marijuana in return for the juicy profits?

I’d put my money on the alcohol and cigarette makers, if only because they have less reputation to lose.

Unlike big pharma, whose products are supposed to have medicinal properties and whose reputations could be sullied by selling marijuana, no one makes that claim for cigarettes or alcohol (red wine’s health benefits aside).

Put it this way: are Coors or Absolut drinkers going to suddenly boycott distillers if they start selling marijuana?

I don’t think so.

The alcohol industry would hardly have to tweak its existing marketing campaign: at the end of every TV ad, I can already here the announcer’s admonition: ‘smoke responsibly.’

P.S.: And yes, I’m aware that federal laws still prohibit the sale or use of marijuana. But such laws could go the way of Prohibition faster than people realize.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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