Doug Chayka / The New York Times
People can now vape marijuana, eat it, drink it and apply it, leading to an explosion in sales. These are a few of the inventions of an increasingly sophisticated set of marijuana start-ups, which argue that by pushing the industry past smoke, they can make cannabis convenient and ubiquitous.
Friday, Jan. 26, 2018 | 2 a.m.
The streets of San Francisco have always smelled of marijuana. Yet it’s worth noting that the city doesn’t seem to have gotten much smellier in the new year, after the recreational use of marijuana became legal in California under a law approved by voters in 2016.
Well, obviously: because nobody smokes marijuana anymore. Everyone’s vaping it. Or eating, drinking, sipping, dabbing, sucking on lozenges, chewing on gum, applying unguents or administering a drop or two of a cannabis-infused tincture under one’s tongue, where it is absorbed into the sublingual artery, within minutes producing an invisible, odorless, private high.
These are a few of the inventions of an increasingly sophisticated set of marijuana startups, which argue that by pushing the industry past smoke, they can make cannabis convenient and ubiquitous — the drug of the future, and the next great American bonanza.
Eight states and the District of Columbia have legalized marijuana for recreational use, and it is legal for medicinal use in 29 states. The drug remains illegal under federal law, and the Justice Department has signaled a crackdown on the business. Yet growth of the legal marijuana industry keeps beating even its biggest boosters’ expectations; customers in North America will spend more than $10 billion on legal marijuana in 2018 and nearly $23 billion by 2021, projects the ArcView Group, a cannabis-focused research and investment firm.
That growth is driven, startups in the industry say, by a simple idea: The humble hand-rolled joint was holding marijuana back.
By breaking marijuana free from smoking and its paraphernalia, new delivery methods — especially portable vapes — are transforming the image and utility of cannabis, and helping it grab a mainstream audience. In the booming new market, the drug of lazy stoners is being rebranded by startups as the “wellness” drug of tomorrow. It’s a cure-all for an anxious, tech-addled society — a salve for every ailment, a balm for every mood, ibuprofen meets a glass of red wine cut with Prozac and a hint of Deepak Chopra, all delivered to your door.
“This can be the challenge of cannabis, but also the opportunity — there’s thousands of possible combinations,” said Troy Dayton, the chief executive of ArcView. He pointed to the many different problems that cannabis companies are aiming to treat, from anxiety, insomnia and pain to problems with libido and creativity. “It’s just a merchandiser’s dream.”
The growth of Eaze, a cannabis delivery startup operating in the Bay Area and San Diego, underlines the trends shaping the burgeoning industry. When Eaze started in 2014, marijuana “flower” — that is, the green bud you put in your pipe and smoke — made up 85 percent of sales.
Now flower is down to less than a third of sales. In 2017, flower was usurped by vape cartridges — kind of like e-cigarettes, they use an electronic element to heat a cannabis-infused oil. Because it does not burn organic material, vaping cannabis is considered safer than smoking, just as vaping nicotine is safer than smoking cigarettes.
“For a lot of new users, the concept of smoking just feels unhealthy to them,” said Jim Patterson, Eaze’s chief executive.
But vaping has other advantages over smoking. It produces a fraction of the odor, it doesn’t need any real gear, and it’s portable, easily hidden and very easy to use — press a button and inhale. And because cartridges can include flavors and mixes of different cannabis compounds to produce stronger or weaker effects, vapes can be branded and marketed at dozens of customer niches.
Eaze — which had been offering only medicinal sales until this year, and now sells cannabis for both recreational and medical uses — said that thanks in part to vapes, its sales grew 300 percent in 2017. (It declined to disclose a dollar figure.) By the end of last year, it was doing more than 120,000 deliveries per month. Women made up 35 percent of its customer base last year, compared with 25 percent in 2015. And its fastest-growing age group was baby boomers.
“The story here is that the average cannabis consumer is becoming the average American,” Patterson said.
In anticipation of full legalization, Eaze plastered the Bay Area in marketing, with billboards introducing cannabis as a therapy for several specific ailments: “Hello Marijuana, Goodbye Anxiety” and “Hello Marijuana, Goodbye Insomnia.” Patterson said the marketing had been paying off; orders have increased threefold since the start of the year. The company, which has raised nearly $52 million from investors, declined to disclose its valuation.
Another startup, Cura Cannabis Solutions, an Oregon company that makes vape cartridges, reported similarly robust growth. In December 2016, Cura’s sales were $2 million; a year later, revenue had grown to $7 million a month.
Cannabis-related startups have previously reported trouble finding investors to touch their industry, but Nitin Khanna, Cura’s co-founder and chief executive, suggested that investors’ appetites had turned. “We are currently raising money at a $400 million valuation,” he said.
Vivien Azer, an analyst who studies the alcohol and cannabis markets at the financial services firm Cowen, said the rising appeal of cannabis was part of a long-term cultural trend. During the last decade, the social perception of marijuana has rapidly improved, to the point that its rise now poses a plausible threat even to the alcohol business.
“I view alcohol and cannabis as substitutes in the market,” Azer said. She pointed out that since 2008, there had been a steep decline in the number of 18- to 25-year-olds who reported consuming alcohol in the past year but a steep increase in the number who said they had consumed cannabis.
The trend is driven by a shift in risk perception. Young people used to think of smoking pot as riskier than alcohol, but in the last decade that idea has flipped.
“Increasingly young people view alcohol as more risky, and they view cannabis as much less risky,” Azer said. In a note to investors last year, she pointed out that cannabis use was gaining acceptance among all ages, ethnicities and income groups. Legalization also tends to slash the price of cannabis, further increasing its attractiveness.
The upshot in her report: Today’s young people are on the vanguard. Cannabis could be on the way to becoming the drug of choice for tomorrow’s America — a future in which lots of us get high, but no one smokes.
