By Bob Sechler
Austin American-Statesman
WWR Article Summary (tl;dr) As Bob Sechler reports, “A number of speakers during South by Southwest’s “Cannabusiness” track, which was added to the conference for the first time this year, also offered blunt advice for would-be entrepreneurs in the rapidly evolving legal marijuana industry: Act fast.”
Austin American-Statesman
If there’s any doubt marijuana has emerged from the illicit shadows and become a mainstream business opportunity, the treatment it received at South by Southwest made the transformation clear.
Aside from occasional use of the word “weed,” the SXSW panel discussions on pragmatic topics that included strategies for building consumer brands and attracting venture investment wouldn’t have been out of place at a craft ketchup symposium.
But a number of speakers during South by Southwest’s “Cannabusiness” track, which was added to the conference for the first time this year, also offered blunt advice for would-be entrepreneurs in the rapidly evolving legal marijuana industry: Act fast.
“The globalization of this thing, I think in three years it is almost going to be over,” said Bruce Linton, founder and chief executive of Canopy Growth Corp., a Canada-based cannabis company that has received a multibillion-dollar investment from Constellation Brands, the maker of Corona and Modelo beer.
Linton said newly minted cannabis companies in areas of the United States where it is legal should be quick to trademark their brands and patent their intellectual property, so that big players “are going to have to buy that out and work with you” as the industry develops nationwide.
Such guidance is of little use for the time being in Texas, however, a state considered a huge potential market by cannabis proponents but that remains a holdout amid the widespread legalization movement.
Marijuana for medical purposes has been legalized in 34 states — including all four Texas border states — while 10 states also allow adult recreational use. Texas lawmakers’ lone foray into legalization, a medical cannabis bill called the Compassionate Use Act approved in 2015, is so restrictive and serves so few patients that it isn’t viewed nationally as a significant medical cannabis program.
Kevin Murphy, CEO of Acreage Holdings — which counts former Republican U.S. House Speaker John Boehner as an advisor — said the Texas market could be “monstrous.” But he also said Texas will have “missed the boat,” in terms of establishing its own home-grown cannabis entrepreneurs and brands, if it’s “the last state of the union to legalize before it basically goes federally legal,” which he contends could happen in a year or two.
The size of the global legal marijuana industry is estimated at about $12 billion annually, with most of that economic activity attributable to the United States, according to Marijuana Business Daily. The figure is expected to nearly double within the next few years.
Boehner agreed that the U.S. cannabis industry is poised for tremendous growth and likely will be larger than the cigarette industry in the next five years.
“We are in the very, very early stages of what is going to be a huge industry,” Boehner said at South by Southwest on Friday. “This industry is going to grow exponentially over the next 10 to 20 years.”
While no precise monetary forecast is available for the Texas market, Murphy said Texas would generate well over 3 million customers for cannabis companies if marijuana was legal here for all adult purposes. That estimate is based on what he called anecdotal evidence that about 12 percent to 14 percent of a state’s population opts to use cannabis products when they’re allowed.
Still, Murphy said in an interview prior to participating in the South by Southwest session with Boehner on Friday that his company is unlikely to make any investments in Texas unless it has more clarity that the state is on a path to loosen its strict marijuana prohibitions. Acreage Holdings, which is based in New York but publicly traded on the Canadian Securities Exchange, invests in the cannabis sector and operates growing, processing and dispensing facilities in 19 states.
“We would love to be in Texas sooner or later,” Murphy said. “But it wouldn’t make sense today. It’s not economically feasible right now” given the prohibitions.
Texas marijuana proponents are aiming to make headway on lifting some of those restrictions during the current session of the state Legislature.
They have pinned their hopes to a number of high-profile cannabis-related bills, including one that would expand the Compassionate Use Act by making medical marijuana available to many more Texans at greater potency, and another that would decriminalize low-volume pot possession. A state House committee held a public hearing on the decriminalization bill earlier this month but has yet to vote on it.
While loosening some Texas prohibitions could allow a home-grown cannabis industry to take root, expansion of Texas-born companies outside the state’s borders might be another matter.
A number of small-scale entrepreneurs from states where cannabis already is allowed said at South by Southwest that the patchwork legal framework around the country has been a hindrance to U.S. growth, because they’re largely unable to export products or recreate their business models elsewhere amid myriad local zoning, advertising and distribution regulations.
“It’s a great market,” said Lilach Mazor Power, founder of Giving Tree Dispensary in Arizona, which grows and sells cannabis. But “this is not an easy business to operate — there are so many hurdles you have to go through.”
Power said options for entrepreneurs who want to “scale up” in the cannabis sector by expanding beyond their states’ borders include licensing their brands to counterparts in other states, or looking internationally to countries with more simple regulatory frameworks, which her company is doing.
Adam Bierman, co-founder and CEO of California-based cannabis company MedMen, said many such challenges facing the nascent U.S. cannabis industry are the result of growing pains and the status of the product as still illegal under federal law.
“The day that (federal) prohibition ends, this industry will go from a caterpillar to a butterfly,” Bierman said.
Speaking during a featured South by Southwest address touting what he views as a dawning “new normal” of cannabis as a mainstream consumer product, he also said the goal of ending the social stigma around marijuana is on the verge of being achieved in the United States.
“We’re close,” Bierman said. “My mother-in-law has a vape pen in her purse. She’s in her late 60s, she’s the most conservative person I know — and she has a vape pen in her purse.”
