Marijuana Goes Mainstream
In October 2015, Oregon legalized the sale of recreational marijuana. The following month I flew to Portland to gauge the market. I visited 5 stores and monitored foot traffic and sales.
The atmosphere was somewhere between furtive and matter-of-fact. The products were fairly limited: cannabis buds and smoking accessories.
Business was very hot. In a one hour period during the afternoon on week days, I counted roughly 25 visitors per hour per store, with a spend of at least $40 each. Nearly $1000 an hour, all cash.
And that was during the off-peak hours.
Two years later, in November of 2017, I again flew to Portland and visited the same shops.
The question I wanted to answer whether or not cannabis was a novelty. If so, then business would have dropped.
Instead, I saw the exact opposite: business was just as high as when it was first legalized. More interestingly, because it was close to the holidays, the stores were offering gift baskets.
The product lines had evolved: in addition to green buds, they offered oils and edibles. There were also more accessories, but of a higher quality.
Imagine a Starbucks gift basket, but for cannabis.
The gift baskets spoke to the mainstreaming of cannabis.
There were identical sample packs that offered a variety of buds (a smoke-of-the-day club experience), a mix of edibles, or a mix of different cannabis products (oils, edibles, buds). There were baskets that gifted both the cannabis and the means to imbibe. Everything was wrapped in the same happy rattan baskets.
How is this mainstream? First, ubiquity. Every store had them.
Second, visibility. These gifts of joy were being given openly, without concern that recipients or givers would be outed.
Third, price. Holiday gift giving tends to follow a price point. These were novelty items or “cheapies.” The minimum price was $50.
Fourth, popularity. Many of the baskets had been sold out.
This mainstreaming is important. At some point, high volume products like Doritos will likely add cannabis oil.
And it is that oil where the investing opportunity sits. As demand for cannabis expands, it will drive up the use of oils. The facilities that convert marijuana bud into oil will be highly profitable.
KEY TAKEAWAY: The cannabis industry is booming. More states are heading towards full legalization. Companies that convert marijuana buds into oil will be huge winners in this industry. I’ll keep a lookout for the winners and report back.
Editor of Moneyball Economics