Inside the Canna-business

February 16, 2014

Aspen Daily News

A problem: You want to get into the marijuana business, an industry that, since the passage of Amendment 64 in 2012, has drawn thousands of people to Colorado and millions of dollars in investment.

The solution: Good luck.

What’s that? You grew some in college and wonder how hard it can be?

With Aspen’s first retail marijuana shop set to open, perhaps in early March, a few people in the local industry gave a look behind the green curtain — one that showed some of the complexities involved.

If you have experience in botany, chemistry, finance, accounting, realty, consumer relations or small-business management (but preferably all of those areas), that’s a head start. With bank loans for such business rare, investors or a nest egg are necessary — a minimum of $1 million is needed for a start-up, those in the business say — as are trustworthy and knowledgeable employees at the counter.

Your grower must be ready to combat predators and prey little bigger than specs of dust. There are microscopes to analyze the state of trichomes, THC-filled orbs that are measured in microns; spectrometry devices to gauge a strain’s potency; and alarms, heavy-duty locks and surveillance cameras.

This is a long way from Jeff Spicoli country.

‘It starts here’

A massive air filter buzzes overhead in a nondescript building in the valley. Over the din, Adam Phillips, grow manager for Silverpeak Apothecary, explained how a rack of 60 cuttings, all 6 inches or so high, will eventually produce about 15 pounds of cannabis for the Aspen medical marijuana shop.

With Pitkin County last week establishing regulations for the industry, Silverpeak is expected to be the upper valley’s first retail outlet. Owner Jordan Lewis will be back before the commissioners on March 4 hoping to obtain a retail grow license. He expects to be ready for his first non-medical customers a few days later.

The growing process, from planting a cutting to harvesting its buds, takes 15 weeks, said Phillips, a former IT guru for the business who eventually took over the botanical side.

Radio frequency tags from the Colorado Department of Revenue were attached to the pots, part of the state’s effort to track marijuana from its seed to when it’s sold.

Pungent, flowering plants were in the next room. The plants had been there about five weeks and would remain for another three, during which time the buds will swell to three times their current size before harvest.

Silverpeak Apothecary is the brainchild of Lewis, an ex-bush pilot who flew conservation missions in Africa, and his partners. He said he is “selling cannabis to support my wildlife habit” and hopes one day to return to the conservation field.

To do that, he opened Silverpeak in 2009. It has proved to be a bewildering and at times tedious experience, with multiple licenses needed at the state, county and municipal levels for growing, selling and testing plants, as well as manufacturing infused products.

“It’s mind-numbing,” he said, speaking not of his products but of the regulatory hurdles. “This is one of most difficult things I’ve ever done. You just don’t know which way an arrow is going to come flying at you.

“You do a lot of feeling out in the dark, guesswork and intuition.”

The overall result is both rewarding and frustrating, Lewis said.

An overbuilt industry?

One of the difficulties of legal cannabis is its lack of precedent, said Mac Clouse, a professor of finance at the University of Denver.

Noting the popularity of edible products, many new retail stores ran out of infused chocolate bars, cookies and sodas shortly after opening.

“Unfortunately they had no way to predict that,” Clouse said. “They didn’t have the knowledge that it would be as big a seller as it is.”

Another aspect possibly lacking in entrepreneurs’ business model is the legitimacy factor: Clouse said people who would never buy marijuana on a street corner feel much more comfortable buying from a store.

Colorado may see an oversupply of shops “to meet this pent-up demand from new customers,” he said. “Some of the novelty may wear off, and they may discover the industry is overbuilt.”