From the June 2014 issue of Entrepreneur

Marijuana

Tracking the marijuana marketplace

A glossy full-page ad in a recent issue of Culture, a "cannabis lifestyle magazine," reads: "Our munchies give you the munchies." The advertiser is Dixie Elixirs & Edibles, Tripp Keber's 4-year-old startup that manufactures more than 100 cannabis-infused products for Colorado's adult retail marijuana market.

Targeted to users who are worried about the health effects of smoking, Dixie uses an array of "innovative delivery systems" for THC (the active ingredient in cannabis) that range from its flagship carbonated beverages to mints, fudge bars, capsules, chocolate truffles and oil cartridges for vaporizer pens. Dixie Dew Drops? Squeeze a bit under the tongue for "sublingual THC delivery in six refreshing flavors." In addition to edibles, the company makes massage oils, lotions and bath soaks for transdermal delivery.

For trailblazers like Keber, the years since Colorado began allowing the sale of medical marijuana and the months since its recreational legalization have been "like the wild, wild west," he says. "In addition to building innovative delivery systems, we're building a brand. When the market evolves, and it's possible to grow beyond state lines, that's when I put on my intellectual-property hat and align myself with the best of the breed."

Aaron Smith, executive director of the National Cannabis Industry Association, represents some 500 companies working in the legal marijuana business in 27 states. "What we hear from dispensaries is that retail sales of edibles are surging," he says. "As the biggest infused-product company in Colorado, Dixie is very well-positioned for the future, as the industry matures."

Chris Walsh, editor of the digital newsletter Marijuana Business Daily, adds, "We have yet to see a truly national marijuana brand materialize because of the many legal hurdles involved. Dixie is trying to become one of the first. Given its expansion strategy, there's a good chance it will eventually be a household name in multiple cannabis states."

Based on data from the Colorado Governor's Office, statewide marijuana sales are expected to exceed $725 million over the next 13 months. Dixie products are sold in an estimated 90 percent of the state's dispensaries.

"Dixie has been around a long time," says Cameron Mitchell, a "budtender" at the Medicinal Oasis dispensary in Denver. "It's made a name for itself in terms of the consistency of its consumable products." Mitchell estimates that 20 percent of his customers buy weed to smoke; another 20 percent buy only edibles; and about 60 percent buy both.

For eventual expansion, Keber hopes to license the Dixie brand, recipes and methods for sale to companies in other states. He expects Dixie products to be sold in a handful of states by the end of the year. "Right now, the marijuana must be cultivated and consumed in the state it's licensed," he says. "No interstate transport is allowed. I believe that will change. But in the meantime, there is no law against exporting the brand."

He's not the only one who thinks things will change--and quickly. In April, one U.S. congressman predicted that the prohibition on pot will be lifted entirely by the end of the decade. Until then, Dixie has a "very well-thought-out structure to avoid breaking state or federal laws," Keber says. "But this has never been done before. There is no Marijuana Business for Dummies book."

More Marijuana Brilliance


Medbox provides automated cannabis vending systems and consulting services to the medical marijuana industry


The ArcView Group investor network is devoted solely to funding ancillary marijuana businesses. More than 170 accredited investors have put up at least $50,000 and predict a 64 percent growth in legal cannabis markets this year.


Rodawg provides handsome tin joint containers to consumers and premium packaging similar to that of fine spirits to dispensaries (as opposed to herbs in plastic baggies).


MJ Freeway helps growers, processors and retailers track every gram and stay in compliance with ever-changing regulations with its POS, inventory-tracking, cultivation-management and patient-management software systems.


The Yelp-like medical cannabis database Leafly encompasses some 65,000 reviews of marijuana strains, spanning type, effects and more, along with 40,000 dispensary reviews.


The comparison-shopping site Wikileaf enables users of medical marijuana to locate nearby dispensaries in six U.S. states and identify the best deals, complete with Wikipedia-like entries on strain properties and usage recommendations.


BioTrackTHC is a business-software platform with tools to track cannabis from seed to sale.


Apeks Supercritical manufactures botanical oil-extraction machines for producing cannabis extracts used in making edible marijuana products.


Terra Tech specializes in hydroponic plant cultivation, selling equipment for greenhouses. The company's stock trades on the OTC market.


100 Brilliant Companies

Modern Food and Drink
Fashion
Music
Social Media
Marketing
Health and Fitness
Marijuana
Travel and Transportation
Data and Analytics
Hiring