[420 Girl]

In his new book on the national nuttiness that was the 18th Amendment, "Last Call: The Rise and Fall of Prohibition," historian Daniel Okrent gives due credit to American ingenuity, as demonstrated by a business that sold mail-order kits packed with dried grapes, along with careful instructions on how to avoid accidentally turning the contents into an alcoholic beverage.

That's precisely the stage of development that the marijuana business has now reached.

Fourteen states now permit the use of marijuana for medicinal purposes, and more are considering it. This fall, Californians will vote on Proposition 19, which calls for outright legalization of marijuana for recreational use by adults. The most recent Field poll shows a narrow majority opposing the measure, about 48% to 44%.

The reason for all this action is, of course, that state officials coast to coast are facing the mind-altering experience of financial desperation. Suddenly, legalized marijuana is a taxable commodity, a boost to entrepreneurship and a load off of law enforcement officers who have worse crimes to worry about. Except in the Bible Belt, where it’s still a tool of *****.

In the many places where marijuana is now a legal cash crop, the early birds are small-business people who run pint-sized indoor farms or sell seeds, run coffee-and-pot cafes or pharmacy-style dispensaries. For a complex blend of practical and ideological reasons, they hate the idea of marijuana as a big business.

But inevitably, there will be a Budweiser and a Sam Adams of marijuana, never mind a Lalique and a Lilley of bongs, and a KFC of weed. Nobody is talking publicly about it, but you can bet they’re working on the business plans.

Who’s likely to dominate the marijuana market? There are several strong possibilities:

Tobacco companies. Everybody thinks they’re evil already, so what do they have to lose? Certainly, Altria Group (MO), Lorillard (LO), and Reynolds American (RAI) have the infrastructure in place to grow, process, market, and sell chopped-up cured leaves rolled in paper.

Pharmaceutical companies. It’s worth asking whether the loosening of restrictions on marijuana is an opportunity or a threat, or both, to Eli Lilly (LLY), Johnson & Johnson (JNJ), or Novartis (NVS).

Legalization advocates tout marijuana mainly for its ability to relieve pain. It could replace any or all of hundreds of over-the-counter and prescription pills available in pharmacies today.

Then again, pharmaceutical companies are skilled at manufacturing perfectly symmetrical and clinically clean little pills that contain a precisely measured dose of a drug. Logically, many consumers may prefer their brand-name marijuana products to a bundle of weed sold by a glassy-eyed guy down the corner.

The pharmaceuticals also might provide some much-needed hard research into the benefits and attributes of marijuana, and even synthesize more effective varieties. Herbal Supplement Companies. They already package stuff like kava kava for anxiety, ginseng for energy, and St. Johns wort for depression. Legality aside, it’s hard to find a difference between these plant products and hemp. They even have industry experience on their side. Okay, that was pre-1937, when marijuana was effectively illegalized nationally.

Not much joy for investors here, though. The big herbal supplement manufacturers and distributors all appear to be privately owned companies.

The difficulty is coming up with any hard numbers for the legal marijuana trade.

A new and much-quoted study from the Rand Corp. suggests that the retail price of marijuana could plunge as much as 80%, from about $375 an ounce for high-quality varieties to about $40, if California approves the referendum. Meanwhile, the study predicts that use of marijuana will soar.

Add $50 more per ounce in California state tax, based on a proposed measure already drafted and ready for the State Legislature to vote on if the referendum passes. The ballot proposal also gives local jurisdictions the right to tax and further regulate marijuana. Oakland got in first there, with a local tax on medical marijuana dispensaries already in place.

But the study’s authors freely admit that there are a lot of unknowables behind those numbers, and any others that claim to estimate the eventual retail price or consumer demand for legal marijuana. The numbers floating around, all in the billions, are fairly obviously plucked out of the air.

The biggest barriers now to development of marijuana as a large-scale enterprise are the severe restrictions most states have imposed on growers and retailers to give some credibility to the notion that its use is purely medicinal and heavily regulated. It's truly a cottage industry at this point.

But if California is the first to legalize marijuana for recreational use, the doors open wide to business development. The state, in return, is sure to scoop a big share of the benefits in tax revenue, tourism dollars, and new businesses, from hydroponic farming equipment to smoke-filled clubs and cafes.

And what else? A retro revival in tie-dyed fabric? A severe shortage of M&Ms? Soaring sales of Zig-Zag papers? (Zig-Zag papers are manufactured by a French company and distributed in the U.S. by a privately owned American company. Bummer.)

Meanwhile, the federal government is likely to do nothing at all. Marijuana -- growing it, carrying it, selling it, smoking it -- is illegal under federal law, and is likely to remain so. In the only semi-official policy change, the Obama administration has signaled that the priorities of federal law enforcement no longer include raiding marijuana businesses that are operating legally under state laws.

If California voters fail to seize the initiative, for once, other states are likely to step in. A New Jersey legislator is pressing to turn the state’s Rutgers University into a national academic leader in marijuana research and curriculum. (Surely my alma mater, Syracuse University, was a pioneer in the field.)

In any case, the marijuana industry is following the same arc that the liquor business took. The gangster-run black market has been usurped by a gray market of “medicinal” sales. A patchwork system of state regulation is taking shape. The last step to true legalization will be taken. If it’s not California, it will be another state that decides that this prohibition didn’t work either.


NewsHawk: Ganjarden: 420 MAGAZINE
Source: MSN Money
Author: Carol Kopp
Contact: MSN Money
Copyright: 2010 Microsoft
Website: Next big US industry: Legal marijuana


http://www.420magazine.com/forums/in...marijuana.html