The Green Rush: Behind the Growing Medical Marijuana Industry
By Gwen Parkes, Posted Apr 25th 2011 @ 12:32PM
We've all heard of the California Gold Rush, but if you haven't yet heard of the Green Rush, you are late to the game. The Green Rush describes the growth of the medical marijuana industry during 2008-2010, when many western and central states saw an exponential boom in the number of dispensaries, or stores, that sold marijuana for medicinal purposes.
Despite the stigma often associated with drugs, today's medical marijuana business (MMJ) is booming. The herb is used to alleviate symptoms for physical ailments such as gout, chronic pain, vision problems and nausea caused by chemotherapy treatment.
Put aside your assumptions: Pot is no longer only a fringe drug used by hippies at concerts or sold by shady people in alleys; its consumption is becoming more common than ever before. Likewise, the Green Rush is not about a few college kids getting high on a joint or making some pocket money; it involves a lot of hard work and business sense to turn a profit.
Take Erik Santus. He is the owner of Lotus Medical, a medical marijuana dispensary in Colorado. "We approach it [the business] completely differently. We don't put pot leaves on anything. My office looks like a lawyer's office and we run a really tight ship across the boards. That normalcy is what throws everyone off, but it helps us generate consistent sales month after month."
Santus suffers from severe gout, and his wife, Shonna, has endometriosis. In 2007 Erik and Shonna got their medical marijuana cards, meaning that they were permitted to go into dispensaries in Colorado and purchase pot for consumption to help with their ailments. "We went to 30 different places in the first four months, and my wife never found a place she would go back to on her own," he says.
The couple opened Lotus Medical in October 2009 to "make a cool environment for people to learn about this [medical marijuana], where it doesn't feel like a drug deal," Santus says. He admits that they initially got into the MMJ business because it seemed like "crazy profits," but he has learned the hard way, "that isn't the case."
Challenges of the business
The most common initial hurdles involve finding and securing a space to be used as a dispensary; getting financing from a bank; and getting a grow warehouse to create your product, which can cost as much as $200,000 to set up and another $15,000-$20,000 each month to maintain.
After that, you have to keep up with a slew of paperwork regarding your licenses; you have to find, hire, train and retain reliable employees; you have to keep abreast of the constantly changing laws regarding MMJ selling, growing and dispensing; and you have to keep a steady flow of good quality product on your shelves so that you can keep repeat clients coming back.
The biggest and most surprising challenge that Erik has found is learning the grow side of the bud business. "Getting the quality on the shelves and keeping it there is tough, and it involves so many variables. Having a grow house is like setting up a whole farm inside and is really costly."
Catering to a diverse clientele
"Our clientele is varied," says Mitchell Wollhiser, owner of Northern Lights Rx in Edgewater, Colo. "Yes, we have some young customers, but they have real needs. Maybe they fought in Iraq and have PTSD or perhaps they are a construction worker with chronic pain. We have baby boomers that use it too, and we even have a man in his 70s who uses our edible products to relieve back pain and help him sleep."
Elizabeth Robinson, owner of VolumePR and founder of Grow Room Communications in Denver, Colo., says that while "price matters," it is "only one component of why a patient chooses a center." Other driving factors that bring patients into dispensaries are the experience, the owner, the quality of the product and the variety of the product.
Santus says that most of the clients who come into Lotus are women. "I think that is a testament to who we are as a business. Women feel comfortable here and we keep a wide variety of product in stock -- sometimes as many as 28 different strains of marijuana."
Pros and cons
Even with the stress of learning as he goes and being subjected to the rules of the game that are continuously changing as the regulation process unfolds, Santus says that he likes being able to legitimately help people in need, like his mother who is going through cancer treatment for the fourth time. "It gives people alternatives." Wollhiser says that he originally was drawn to the MMJ business in 2009 because it's an emerging market, which is exciting.
The biggest drawback is the unpredictability of the business. Not knowing what the laws will be in the next six months or two years makes it frustrating. "You have to roll with the punches," notes Santus.
"This is a legitimate cash flow business that will be around for the next 5-10 years," Santus says, "but to make it go the distance, you have to do the right things so that you can continuously produce a stream of revenue. The people whose businesses are not going down and are still making money are the ones who aren't doing anything illegal."
Wollhiser believes that regulation of businesses is "important" and that "regulation of the MMJ industry is no different." At the same time, he reminds everyone to "tread carefully" and "respect that it [marijuana] is not legalized. It's for medical use only."