Cannabis Business: The New Reefer Madness

Are you contemplating what to do if the there's an end to the new Prohibition?

By Dave Fusaro, Editor in Chief

Can you picture it? Dec. 5, 1933: Breweries and distilleries that (supposedly) had been out of business for 14 years, eagerly watching the news (papers, I assume), waiting for Utah to become the required 36th state to ratify the Constitutional amendment ending Prohibition.

Beer had been allowed nine months earlier, a critical first step in the repeal of the 18th Amendment. “When the new law went into effect, the Budweiser Clydesdales made their debut. They began a nationwide marketing tour, including the delivery of a commemorative case of beer to the White House,” according to an essay in the National Constitution Center.

Yes, this marked the rebirth of firms like Anheuser-Busch … but also National Distillers and Schenley Distillers, proof that even opportunists don’t necessarily last forever. Which is a sobering lesson for any company thinking about diving into this legal cannabis thing.

Tread carefully. It could be a gold mine or a land mine. Know that you're not alone, that many companies are thinking about it and devising sophisticated plans to capitalize on the current and future opportunity.

In Canada, marijuana and cannabis-derived products became legal on Oct. 17. The next morning’s news was not filled with stories of debauchery or drug-induced deaths. It was, as that cancer drug commercial says, “the new normal.”

In a lot of conversations, it is becoming the new normal. Even the Institute of Food Technologists’ summer Food Expo devoted a technical session to “Clearing the Haze: An Overview of the Edible Cannabis Scene.” I suspect it had more attendees than “New Insights into Photo Emission To Image Lipid Oxidation Patterns in Food Matrices,” although, regrettably, I did not attend either.

There’s a session at the Nov. 7-10 Supply Side West conference and show in Las Vegas – although the organizers warned exhibitors and others against bringing any “samples” to the exhibit hall. I can’t wait to see the topics at next March’s Natural Products Expo West, a traditionally leading-edge show.

An A.T. Kearney survey says 41 percent of Americans are willing to try recreational cannabis in appropriate foods (such as candy) if it becomes legal. More were interested in foods with cannabis derivatives than in alcoholic or nonalcoholic drinks with the stuff.

The interest is no longer coming strictly from the tie-dye shirt and hemp skirt crowd. Molson Coors, Constellation Brands and Diageo already are involved, working with Canadian marijuana companies to create beverages with about the same mood-altering power as a couple beers or martinis. Coca-Cola Co. reportedly is interested in developing a non-intoxicating beverage that would alleviate pain. Anheuser-Busch so far is staying aloof. Several venture capital funds are in or eyeing deals.

Will national legalization happen in the U.S.? It may take a while, but it seems likely, as the “reefer madness” of the past generation gives way to the “I remember doing that in college” of aging baby boomers. Nine states and the District of Columbia already have legalized recreational use. More are considering it. 30 states and DC have legalized it for medical use. Cannabidiol (CBD), a marijuana component that does not create a “high,” has become a proven treatment for various pains – and it’s not addictive, like opioids.

Right now in Canada, the future Anheuser-Buschs of the pot world are staking their claims. But so are the National Distillers and the Schenleys. It will be fascinating to see how this plays out on both sides of the border. Anyone contemplating getting in must keep a clear head.

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