Cannabis in Colorado
How a mid-west American state developed the most advanced weed economy in the world.
Future retrospectives on the commercialisation of cannabis will undoubtedly have a special chapter dedicated to Colorado.
The state has effectively become a petri dish for legal commercial cannabis. How consumers are responding, the formation of market regulation and the tactics being deployed by startups are all being analysed far and wide.
Scrutiny and fascination has continued to grow ever since the state voted for legalisation in November 2012. Since the law was implemented 14 months later, the state has created the most advanced and stable legal cannabis market in the world.
Coloradans are currently consuming more than their fair share of weed. There are just 5.3 million of them (1.5% of the country’s population), but they bought 30% of all legal cannabis in the US last year, spending £460m, split 50:50 between recreational and medical sales. This year is set to be a bumper one, on course to double the sales from the previous year.
Erosion of joints
Coloradans are also consuming cannabis in different ways than you might imagine. While there’s a perception in the UK of a bleary-eyed stoner rolling a tobacco-mixed spliff, across the state people are eating and drinking it instead.
Over five million cannabis oils, chocolates, mints, fizzy drinks and other edibles were sold in 2014. Vapes (akin to e-cigarettes) are also growing at a rapid rate. It’s possible that joints will soon become the vinyl of cannabis consumption.
Legalisation in Colorado has led to cannabis looking and feeling like a consumer category. People are no longer happy to merely accept whatever weed happens to be available; purchasing is increasingly made by flavour, quality, value and supplier.
Retailers publish vast lists of products on their websites, complete with descriptions (the ‘Presidential Kush’ offers ‘a balanced head and body high, with a tropical flavour’). There’s a star-rating and customer-review system, options to add products to wishlists, and the choice of arranging by price or name. The sites could be selling wine or washing machines.
Intoxicating projections
The retailing of cannabis is quickly evolving in Colorado too; a fragmented mix of single shops have grown alongside the emergence of a clutch of what can fairly be described as mid- sized chains. Warehouses that have laid empty since the decline of industrial America are now being put to use to grow cannabis. A local property firm estimates that over two million square feet of warehouse space in Denver is now occupied by cannabis growers.
The success of Colorado has been pivotal in other US states considering recreational legalisation. Commercial lobbyists are pointing to the success of businesses in Colorado, but the tax income is also providing a powerful argument: in 2014 the state earned £50m from sales and business fees.
Dixie Elixirs: America’s first modern weed brand
The company that sells cannabis infused drinks and chocolate and has had to build a vault to store its cash.
In less than ten years, Tripp Keber has gone from selling retirement properties in Florida to being one of the leading operators in the American marijuana industry.
He quit property following the 2008 financial crisis and began making small investments in cannabis businesses. Spotting promising signs of a lucrative industry, in 2010, just before recreational sales were made legal in Colorado, he embraced the sector wholeheartedly with his own THC-infused fizzy drink.
The £22 chocolate
Keber earned the nickname ‘the Willy Wonka of weed’ after building Dixie Elixirs and Edibles, the biggest edible cannabis brand in the US. There are 50 staff and a dizzying range of cannabis-infused products: drops, mints, drinks, capsules and truffles, along with a range of other unlikely ways to ingest cannabis.
In April this year, Dixie released its ‘Colorado’ chocolate, priced at £22, which racked up 10,000 preorders from marijuana dispensaries across the state.
Enormous vault
The various Dixie products are made in a £2.5m facility that no US insurer would underwrite. It meant Keber looked to the UK for insurance, to Lloyds of London specifically, which was happy to do business at a hefty premium, says Keber.
Another problem with skirting the state-versus-federal lines of legality is that Dixie does 85% of its dealings with retailers in cash. It’s led to Dixie building an enormous, reinforced vault capable of incapacitating intruders that’s reminiscent of something out of a Las Vegas casino.
‘One of the problems of running a business that, on a federal level is highly illegal, is that no banks will touch you,’ says Keber.
Alabama arrest
By the sounds of things, Keber may have to upgrade his vault. He claims to have tripled earnings this year, and to have multiplied revenue fivefold. ‘We’re growing at hyper-speed. Last year we could make 500 drinks in a day; now we can make 1,000 an hour.’
Living in the bubble of a legal cannabis culture is something Keber has encountered at close quarters; he was arrested for possession on holiday in Alabama, despite running a legal, multimillion-dollar cannabis firm in Colorado. Federal law has also left Keber unable to patent the technology behind his infusions.
Market explosion
Due to federal laws, selling or transporting his products across state lines is illegal, so a new facility needs to be built in each state Keber wishes to expand into, to the tune of £1.5m every time.
The expense isn’t something he sees as a barrier though and he’s currently building facilities in California and Oregon, and finalising plans for Arizona and Washington. ‘A $2–3m investment can be recouped in a year,’ he claims. ‘The returns aren’t over the horizon; they’re right in front of me. The market is going to explode, and I want to be there to catch the dollars as they fall from the sky.’
