Wednesday, July 23, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Marijuana boom spawns ancillary businesses

Business relating to medical marijuana

Ben Wu is CEO of Kush Bottles in Santa Ana, which provides child-resistant plastic containers designed to hold marijuana. With the number of states approving use of medical marijuana going up Wu's business is increasing as well. (Don Bartletti/Los Angeles Times/MCT)

By
From page B11 | May 16, 2014 |

Ben Wu took a six-figure pay cut when he left a career in private equity for a shot at the marijuana boom.

Trained to spot small businesses with big potential, he started this year as chief executive of Kush Bottles, a Santa Ana company that sells child-resistant plastic cannabis containers.

It took some persuading to get his parents and girlfriend to embrace the move. But Wu insists it was a sound business decision. As the pot industry blossoms, he reasoned, a robust supply chain is needed to help grow, package and market legal marijuana.

“The sky’s the limit,” said Wu, 35, a New York University business school graduate and former vice president at Wedbush Capital Partners. “As long as states continue to adopt, we’re going to double growth each and every year.”

Container brands like Kush Bottles are among a slew of ancillary companies joining what many are calling the green rush. Where there’s weed, there’s also a growing need for everything from greenhouses and fertilizer to pipes and vaporizers.

“The annual revenue is easily in the hundreds of millions, and likely much more,” said Chris Walsh, editor of website Marijuana Business Daily.

Demand for pot-related products and services is expected to grow sharply as more states loosen marijuana laws. Already, 21 states and Washington, D.C., allow the sale of some form of pot.

Entrepreneurs are attracted by the industry’s open field, with few established players and many untapped markets. Some say the marijuana boom reminds them of the Gold Rush a century and a half ago.

“We’re selling shovels in a gold rush is all we’re doing,” said Rich Nagle, a former electrical engineer who now peddles an automated indoor marijuana growing system, designed to be managed remotely with a smartphone.

No one has been able to estimate the potential market for ancillary products and services. But legal cannabis sales are expected to grow to $2.57 billion this year, up from $1.53 billion a year ago, according to ArcView Group, a San Francisco investment network and market research firm focused on legal cannabis.

In addition to product suppliers, marijuana retailers and dispensaries are also increasingly seeking lawyers, accountants and security consultants, said Troy Dayton, CEO and co-founder of ArcView. But many of those professional firms still avoid the pot business.

“The reason there’s so much opportunity in ancillary businesses is because the industry is being underserved by traditional players,” Dayton said. “In part, it’s because they fear the reputational risk and they fear the market is too small. But it’s growing fast.”

Growers and dispensaries offer some of the quickest returns on investments and fattest profit margins. But they also are exposed to risks that don’t affect supply chain companies.

The federal government still classifies marijuana as a Schedule 1 drug, on par with heroin and ecstasy. That means any enterprise that handles pot faces the threat of closure or prosecution, no matter what state laws say. Because it’s a cash-only business, companies that sell pot are also at higher risk of being robbed or burglarized: Most banks are prohibited from taking deposits from marijuana sellers.

“Any time you’re literally touching marijuana, you’re subject to a different set of laws,” said Justin Hartfield, founder of Weedmaps, a review website that is similar to Yelp but for pot dispensaries. “We don’t touch the product itself, and that’s how we’re able to get a bank account.”

Hartfield’s site is one of the most recognized brands to emerge out of the recent rise of legalized pot. Founded in 2007, shortly after Hartfield received his first medical marijuana card, Weedmaps grossed about $25 million in revenue last year.

Dispensaries post their menu of marijuana plants and prices for a monthly fee of $420.

Hartfield is building an empire around legalized marijuana. The Weedmaps site is one of a constellation of ventures, including the recently redesigned Marijuana.com, a news and forum site, and MMJ Menu, a point-of-sales software for tracking marijuana sales, inventory and patients.

Hartfield, who grew up in Hawthorne, is betting the federal government will relax marijuana laws, fueling the growth of his brands. His treasure trove of data on usage and pricing, as well as an expanding network of sellers, helps his business stand out.

“I think we’ve grown a business and brand that would be either ripe for acquisition or something we could build out long term. I think we have a lot of value. So we’re begging for legalization,” Hartfield, 30, said as he sat inside his sprawling new headquarters at an office park in Irvine.

Wu, of Kush Bottles, is closely following state-level legalization efforts. As more states permit pot, regulators will be looking at child safety requirements for plastic pharmaceutical containers that typically carry much of the nation’s medical marijuana.

Unlike child-resistant twist-off containers, Kush Bottles opens only when squeezed with enough strength. That’s intended to stop children 5 and younger from opening them.

“This is pharmaceutical packaging,” Wu said. “We didn’t reinvent the wheel. This industry is really great at adapting what’s already out there and using it for their products.”

Part of Wu’s business strategy is having his sales team call or visit dispensaries to educate them about the laws for containers. Several states require child-resistant bottles. California has no such rules, but about half of Kush Bottles’ sales come from the Golden State.

Wu said the company’s focus on safety alleviated some of his girlfriend’s reservations about his job change. She initially feared that Wu would become the next Walter White, the chemistry teacher turned meth cook in the hit TV drama “Breaking Bad.”

The new job took some adjusting. Wu put away his business suits and learned how to convert grams to ounces. To boost his cred, he schooled himself on the lingo for different strains of marijuana such as OG Kush and Sour Diesel.

Still, when strangers ask him what he does for a living, he simply says he’s in pharmaceutical packaging.

“I go to sleep very easily knowing the DEA is not going to kick down my door,” Wu said.

Los Angeles Times

LEAVE A COMMENT

Discussion | 1 comment

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

  • Rich GiddensMay 15, 2014 - 4:10 pm

    Some smart guy needs to invent a contraption to get rid of that awful marijuana stench that smells like a cross between a dead skunk and a pile of excrement! An ionizer or something. PU! Another invention would be a self cleaning bong (patent number 00000420) or an automatic hash maker or something. Automatic joint rollers? Leave it to American ingenuity.

    Reply | Report abusive comment
.

Solano News

Fairfield labor pact wins City Council OK

By Ryan McCarthy | From Page: A1, 11 Comments | Gallery

 
 
 
Solano leaders feel left out of Delta decision-making

By Barry Eberling | From Page: A3

Polk first to file for Fairfield council

By Ryan McCarthy | From Page: A4, 2 Comments

 
 
Carpenters training center set to expand in Fairfield

By Barry Eberling | From Page: A5, 6 Comments | Gallery

Governor signs 2 bills by Frazier into law

By Ryan McCarthy | From Page: A5

 
Dally seeks to retain seat on Vacaville school board

By Amy Maginnis-Honey | From Page: A5

2 Vacaville homes hit by gunfire

By Barry Eberling | From Page: A6, 2 Comments

 
Library friends set spring book sale

By Ryan McCarthy | From Page: A6

 
Video chair exercise class returns to senior center

By Amy Maginnis-Honey | From Page: A6

 
Man, woman, comic and dance contest primed for box office

By Amy Maginnis-Honey | From Page: A7

Rockville Trails hike on August calendar

By Barry Eberling | From Page: A8 | Gallery

 
 
Mayor’s Commission on Crime hears from community

By Amy Maginnis-Honey | From Page: A12, 12 Comments | Gallery

.

US / World

Dueling rulings: Courts split on health law clash

By The Associated Press | From Page: A1

 
Assailants sought in fatal train platform beating

By The Associated Press | From Page: A9

Senate, House on collision course on border money

By The Associated Press | From Page: B9

 
ACLU may fight for California migrant shelter

By The Associated Press | From Page: B9, 1 Comment

IRS employee charged with identity theft

By The Associated Press | From Page: A9

 
Gaza blockade key to any Israel-Hamas truce deal

By The Associated Press | From Page: B10

 
Mexican-born professor eyed for state high court

By The Associated Press | From Page: A10 | Gallery

Airlines ban flights to Israel after rocket strike

By The Associated Press | From Page: B10

 
Board puts soda tax before San Francisco voters

By The Associated Press | From Page: A10

George Harrison memorial tree killed by beetles

By The Associated Press | From Page: A10, 2 Comments

 
AP source: Thieves got into 1K StubHub accounts

By The Associated Press | From Page: A12

Obama nominee McDonald pledges to ‘transform’ VA

By The Associated Press | From Page: A12

 
Body of missing S. Korean shipping tycoon found

By The Associated Press | From Page: A12

Crews make gains on massive Washington wildfire

By The Associated Press | From Page: A12

 
11 parents of Nigeria’s abducted girls die

By The Associated Press | From Page: A12

Lax security at crash site hampers investigations

By The Associated Press | From Page: A13

 
Plane crash bodies removed from war zone

By The Associated Press | From Page: A13

.

Opinion

 
 
Walmart donation benefits Meals on Wheels

By Letter to the Editor | From Page: A11, 2 Comments

Batson’s column on Mideast peace is wrong

By Letter to the Editor | From Page: A11, 5 Comments

 
Fix our problems first

By Letter to the Editor | From Page: A11, 7 Comments

.

Living

Today in History for July 23, 2014

By The Associated Press | From Page: A2

 
Community Calendar: July 23, 2014

By Susan Hiland | From Page: A2

How to argue appropriately with your mate

By Barton Goldsmith | From Page: A2

 
10 Things: 10 fresh ways to use fresh blueberries

By J.M. Hirsch | From Page: B6

Horoscopes for July 23, 2014

By Holiday Mathis | From Page: B6

 
Bulking up the classic BLT without adding fat

By Sara Moulton | From Page: B6

I’m tired of my parents judging me because of who I date

By Kathy Mitchell and Marcy Sugar | From Page: B6

 
A summer sausage roll with a triple dose of fennel

By The Associated Press | From Page: B6

.

Entertainment

‘Downton Abbey’ back on Jan. 4 for season 5

By The Associated Press | From Page: A7

 
‘X-Men’ VR experience coming to Comic-Con

By The Associated Press | From Page: A7

TVGrid

By Daily Republic Syndicated Content | From Page: B8

 
.

Sports

49ers start fresh after forgettable offseason

By The Associated Press | From Page: B1

 
Giants beat Phillies 9-6 in 14 innings

By The Associated Press | From Page: B1 | Gallery

 
A’s agree to 10-year lease to stay in Oakland

By The Associated Press | From Page: B1

Raiders enter camp with ‘chip’ on shoulders

By The Associated Press | From Page: B1

 
AP source: Cavs to sign Andrew Wiggins to contract

By The Associated Press | From Page: B3

Paterno son, other former assistant sue Penn State

By The Associated Press | From Page: B3

 
Pyrenees please Nibali, Rogers in Tour Stage 16

By The Associated Press | From Page: B3 | Gallery

Warriors announce Brandon Rush’s signing

By The Associated Press | From Page: B3

 
CEO: Rivers to quit Clippers if Sterling stays

By The Associated Press | From Page: B3

Racehorse owned by Britain’s queen fails dope test

By The Associated Press | From Page: B3

 
Mudcats score early, get 7-3 win over South Bay Storm

By Daily Republic staff | From Page: B3

Seahawks start atop AP Pro32 rankings

By The Associated Press | From Page: B3

 
Selig still waiting on Tommy John report

By The Associated Press | From Page: B3

.

Business

Ackman goes after Herbalife’s nutrition clubs

By The Associated Press | From Page: B8, 1 Comment

 
China meat scandal hits Starbucks, Burger King

By The Associated Press | From Page: B8

Solid earnings drive more gains in US stocks

By The Associated Press | From Page: B8

 
Microsoft 4Q earnings hurt by Nokia acquisition

By The Associated Press | From Page: B8

Apple post biggest earnings gain in nearly 2 years

By The Associated Press | From Page: B8

 
One in every 25 New Yorkers is a millionaire, study says

By Los Angeles Times | From Page: B8

California firm issues nationwide fruit recall

By The Associated Press | From Page: A10

 
.

Obituaries

John Klefstad

By Nancy Green | From Page: A4

 
.

Comics

Blondie

By Daily Republic Syndicated Content | From Page: B5

 
Frank and Ernest

By Daily Republic Syndicated Content | From Page: B5

Garfield

By Daily Republic Syndicated Content | From Page: B5

 
Rose is Rose

By Daily Republic Syndicated Content | From Page: B5

Sally Forth

By Daily Republic Syndicated Content | From Page: B5

 
Beetle Bailey

By Daily Republic Syndicated Content | From Page: B5

B.C.

By Daily Republic Syndicated Content | From Page: B5

 
Baldo

By Daily Republic Syndicated Content | From Page: B5

Wizard of Id

By Daily Republic Syndicated Content | From Page: B5

 
Baby Blues

By Daily Republic Syndicated Content | From Page: B5

Peanuts

By Daily Republic Syndicated Content | From Page: B5

 
Zits

By Daily Republic Syndicated Content | From Page: B5

Pickles

By Daily Republic Syndicated Content | From Page: B5

 
For Better or Worse

By Daily Republic Syndicated Content | From Page: B5

Get Fuzzy

By Daily Republic Syndicated Content | From Page: B5

 
Dilbert

By Daily Republic Syndicated Content | From Page: B5

Word Sleuth

By Daily Republic Syndicated Content | From Page: B6

 
Cryptoquote

By Daily Republic Syndicated Content | From Page: B6

Bridge

By Daily Republic Syndicated Content | From Page: B6

 
Sudoku

By Daily Republic Syndicated Content | From Page: B6