Go Corporate or Stay Underground?
Photo: Press VIEW / Corbis via Getty Images
The most expensive brand of marijuana on Phil * 4/20’s menu was Wild Cherry, an incredibly potent strain with a THC level of 29%, and he was selling it for $ 75 per eighth – which isn’t a big deal at all. bad price. . In fact, sales have been good for Phil recently. With affluent professionals and wealthy students worried about the pandemic and stuck at home, he has expanded his six-year delivery business beyond Manhattan, and his private Instagram page has grown to more than 500 followers. He won’t say how much he won last year, but he called the amount “decent” and then “considerable” in a way that made it difficult to tell if he was downplaying or bragging.
Now everything is about to change. Governor Andrew Cuomo last month enacted the country’s most progressive marijuana legalization bill, making New York the 15th state to legalize recreational marijuana. While the law should be a boon to the legions of marijuana vendors, distributors and growers who have been selling the drug here for decades, it has instead flooded the industry with sophisticated investors from Wall Street and Silicon Valley – making a future in an already precarious environment. industry even more uncertain. Phil said he’s now in survival mode, working seven days a week to prepare for what he thinks will be the subway crash in a few years. He estimated that it would cost millions of dollars in licenses and lawyers to navigate the regulated market, and he wants to partner with a big funder so he doesn’t get left out of his own industry.
“New York is an always competitive market,” he told Curbed. “The legal market is full of so many talented and ambitious people – and ruthlessly ambitious people – who have a lot of money. Even if you are the smartest guy on the black market and have a lot of money, which is going to be pointless, you will never be able to compete.
Phil is not alone. New York is one of the country’s largest marijuana markets, with annual sales estimated at $ 3.7 billion, according to a recent study. Right now, there are just 40 medical marijuana dispensaries – ten in New York – for the state’s roughly 20 million people, far fewer than in states like Florida, Michigan and the ‘Illinois, according to the New York Medical Cannabis Industry Association. Weed dealers, accustomed to the aggressive and instinctive world of illicit drug sales, are now trying to figure out how they are going to make money against a new breed of competitors who are more likely to have MBAs than to break records. Four who spoke new York said they were looking to change the way they run their businesses, although they all differed on whether to go it alone or partner with Big Weed as they fully shine the spotlight on their business. While some weigh in on tax schedules, chat with branding experts, and plan how to grow their business for the eventual uberfication of the weed market, others are not so impressed and plan to double illicit sales.
“There will always be a black market,” said G., who was selling grass and edibles in a backpack on a chess table in Washington Square Park on a weekend in April. He believes the costs of running an airline, from license fees to sales taxes, will make illegal work even more attractive. “When you charge $ 60 to cover overhead, you have a guy down the street who charges $ 40,” he added.
After all, one of the big changes in the marijuana industry will be the shift from an almost entirely laissez-faire industry to a taxed and regulated industry to support one of the most extensive social justice programs in the world. State. “New York [new] the laws are the most progressive to date, and historically things that happened in New York have a wave westward, ”said Catharine Dockery, founder of Vice Ventures, a venture capital fund backed by Netscape founder Marc Andreessen and Andrew Yang advisor Brad Tusk. invests in marijuana businesses. The law was drafted with the legacy of the War on Drugs in mind, reserving half of the licenses for businesses owned by women and minorities, allowing 150,000 people to have their records for possession. erasedand divide the income by an additional 13% tax on air sales between education, community grants and drug treatment. New York predicts that the new airline industry will create up to 60,000 jobs and bring in up to $ 350 million for the state.
G. has stated that he plans to operate in both the air and illicit markets, and estimates that he needs around $ 220,000 to $ 250,000 to start a legal business, in addition to covering the costs. general like insurance. According to him, there will be a market for those who are willing to pay high prices and stay legitimate and those who want to pay less and don’t care so much about quality. In Colorado, he notes, “Not all weeds grown for distribution meet the same standards because they have to meet the standards to be sold at a dispensary. They always sell it underground.
Tommy, a vendor who operates in another part of the park, said he and other street vendors might try to find jobs at dispensaries once they open, but he didn’t think the metro would go away. “The black market will always be there. You can get weed on the black market which is just as good or better, ”he said.
There is precedent for believing this. Two years after California legalized recreational marijuana, illegal sellers outnumbered legal sellers three times more, according to one study at the time. “You would be surprised how many delivery dispensaries in California are not legal. It is very expensive to start the process, ”said M., who has been running a delivery service in New York for about 10 years.
For businesses, operating on the surface is much more complicated than staking out a table or managing an Instagram account. State law will require a license for just about anything they do, although the Office of Cannabis Management website is light on details. Dealers have said they are also wary of the practical details of the transition, such as working with banks or real estate agents who will be expected to review their track records.
“Why view the income history of an illegal business?” Said Phil. “Unless you’ve also laundered your money and made a lot of it, you need outside capital.”
“It’s obvious who will be the big winners. The people with the money, Wall Street, “said Mr.” The same guys who said shit on the grass 10 [years] there are gonna make all the money. This is the sad part. Guys who live the weed lifestyle will mostly be left out of the billions generated, and let’s not even talk about minority communities.
M. – who communicated with me through screencaps sent through an intermediary – said he plans to focus on culture and culture, and could expand to operating a dispensary, even if he thinks the black market will remain strong. “Once this is completely legal, I will be growing all of my own produce and no one will be able to compete with my prices or quality,” Mr. “I collected seeds from the best varieties. Some seeds cost over $ 50 a piece and sell out in seconds. I’ve had hookups from some of Oakland’s top geneticists. Also, I have Ethiopian strains that no one has. Really nobody.
Some of these folks suggest that gaining more control over the genetics of the product – rather than relying on the weed-left stream of Western states – would be a boon to a separate brand. “Once I start playing God with varieties it’s over,” Mr. said. “I’ve been studying weed for over 30 years. All of my dealers call me a nerd. Carving out that image is a key step in getting noticed and growing, in a largely commoditized market – and perhaps becoming a part of Big Weed. “It helps to market yourself,” said Yin Lin, managing partner of 64 Squares Strategy Group, which advises companies on marijuana licensing in New York City. “If the numbers make sense, it will allow them to take a leadership position that will lead to acquisitions or lead to an opportunity to merge with a larger company. There is an inherent value in their companies’ stocks that they don’t capture by staying on the black market. “
The dealers have also studied California, with the aim of modifying their brands to attract their more sophisticated clientele from the East Coast. “It’s all like the Californian rapper-stoner aesthetic, and it’s just because he’s the one who grew and bought the best weed out there,” Phil said. “Then these brands were very successful. But all of that particular aesthetic isn’t what really works with the segments of the New York market that I work with.
Phil said he knows that financiers who fund companies like his spread money like venture capitalists, trying to take a stake in whatever company will be the biggest winner. But, he added, all that extra money could go a long way in dominating the market. “Throw enough money on a problem and you’ll have the right people,” he said, before blowing smoke into the phone’s receiver. “There’s nothing stopping you right now except the rules.”
* The names of illegal dealers have been changed.