Sunday, March 1, 2015
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

Peace and patience: Quilters gear up for show

By Amy Maginnis-Honey | From Page: C1Comments are off for this post

 
School bands compete in Pageantry on Parade

By Susan Hiland | From Page: A1 | Gallery

 
Calling someone a ‘smoker’ is hilarious

By Brad Stanhope | From Page: A2

Police seek suspect in armed robbery

By Bill Hicks | From Page: A3

 
4-H Presentation Day brings fun, education to Fairfield

By Susan Hiland | From Page: A3 | Gallery

 
Conservancy plans next Quail Ridge Reserve walk

By Susan Hiland | From Page: A3

 
What you eat can affect your medications

By Marilyn Ranson | From Page: C4

 
Tri-City NAACP honors community members at gala event

By Bill Hicks | From Page: A5 | Gallery

 
CAASC 18th Annual Chinese New Year and Scholarship Celebration

By Steve Reczkowski | From Page: A5 | Gallery

Rollover in Suisun City

By Aaron Rosenblatt | From Page: A5, 1 Comment | Gallery

 
State schedules ramp closure at freeway project site

By Kevin W. Green | From Page: A5

Vigil doesn’t pan out amid concerns

By Bill Hicks | From Page: A5

 
Appointments on tap for Board of Supervisors meet

By Kevin W. Green | From Page: A5

Parker Road restaurant does brisk business

By Susan Hiland | From Page: B7

 
NY, SF town house prices through the roof

By Bud Stevenson | From Page: B7

 
Fairfield police log: Feb. 27, 2015

By Susan Hiland | From Page: A9

Suisun City police log: Feb. 27, 2015

By Susan Hiland | From Page: A9

 
Airmen with local ties finish basic training

By Nick DeCicco | From Page: B10

Force draws many from South, middle class

By Tom Philpott | From Page: B10

 
.

US / World

Christie to Calif. Republicans: No rush to pick 2016 nominee

By The Associated Press | From Page: A1

 
US missionary abducted in Nigeria is courageous, friends say

By The Associated Press | From Page: C3

Dress that ‘greatly resembles’ stolen Nyong’o gown found

By The Associated Press | From Page: A5

 
Weekend storm drops snow, rain, hail in California

By The Associated Press | From Page: A5

Churches, synagogues, mosques bear tough New England winter

By The Associated Press | From Page: A6

 
Mother charged in death of infant found in California swamp

By The Associated Press | From Page: A6

Blind dog rescued after being lost for 2 weeks in the cold

By The Associated Press | From Page: A10

 
Details about proposed national monuments in California

By The Associated Press | From Page: A10

National monument supporters in California get antsy

By The Associated Press | From Page: A10

 
Hyundai recalls 263,000 cars due to power-steering problem

By The Associated Press | From Page: A10

US drone strike in Yemen kills 3 suspected al-Qaida fighters

By The Associated Press | From Page: A11

 
Greece will not seek another bailout, prime minister says

By The Associated Press | From Page: A11

Attacks kill 37 people in and north of Iraq’s capital

By The Associated Press | From Page: A11

 
Nemtsov a possible ‘sacrificial victim,’ investigators say

By The Associated Press | From Page: A12

.

Opinion

Even Gruber deserves a break sometimes

By Megan Mcardle | From Page: A8

 
I might just vote for a Democrat next time around

By Letter to the Editor | From Page: A8, 1 Comment

Aging Fairfield housing agency faltering

By Letter to the Editor | From Page: A8

 
Editorial Cartoon: March 1, 2015

By Daily Republic Syndicated Content | From Page: A8

Sound off for March 1, 2015

By Daily Republic | From Page: A8

 
New school funding plan remains on bumpy path

By Dan Walters | From Page: A8

 
.

Living

Today in History: March 1, 2015

By The Associated Press | From Page: A2

 
Community Calendar: March 1, 2015

By Susan Hiland | From Page: A2

With numbers falling, Houston-area nuns’ future uncertain

By The Associated Press | From Page: C3

 
Horoscopes: March 1, 2015

By Holiday Mathis | From Page: C4

Kidney Walk participation helped give me a positive outlook on life

By Kathy Mitchell and Marcy Sugar | From Page: C4

 
.

Entertainment

PUBLISHERS WEEKLY BEST-SELLERS

By The Associated Press | From Page: C2

 
Review: ‘The Girl on the Train’ has realistic plot

By The Associated Press | From Page: C2Comments are off for this post

Take a look – Dr. Seuss has a new book

By The Associated Press | From Page: C2

 
Publisher launches line of Warhol e-books

By The Associated Press | From Page: C2

Q&A: Opera star Deborah Voigt writes of turbulent life

By The Associated Press | From Page: C2Comments are off for this post

 
TVGrid

By Daily Republic Syndicated Content | From Page: B11

.

Sports

Vikings girls looking for first section title

By Paul Farmer | From Page: B1 | Gallery

 
Local Report: Vaca’s Aquino wins Masters wrestling title

By Daily Republic staff | From Page: B1

Phegley hopes his style will catch on in Oakland

By The Associated Press | From Page: B1

 
A year after meeting Tiger, Indian golfer on the rise

By The Associated Press | From Page: B1

Jeff Gordon takes a final spin at track that meant so much

By The Associated Press | From Page: B1

 
Anthony Mason, rugged forward of 1990s Knicks, dies at 48

By The Associated Press | From Page: B2

Warriors center Festus Ezeli suspended for a game

By The Associated Press | From Page: B2

 
Reichelt leads Austrian World Cup downhill sweep

By The Associated Press | From Page: B2

Players’ union head: future spring games in Cuba possible

By The Associated Press | From Page: B2

 
Harrington takes 36-hole lead, then more rain in Florida

By The Associated Press | From Page: B2

Defending champ Federer beats Djokovic to retain Dubai title

By The Associated Press | From Page: B2

 
Safarova beats Azarenka to win the Qatar Open

By The Associated Press | From Page: B2

Environmental activists disrupt meeting by Olympic officials

By The Associated Press | From Page: B2

 
Hamilton hones Mercedes with fastest time at F1 testing

By The Associated Press | From Page: B2

Thunder’s Russell Westbrook has surgery on cheekbone

By The Associated Press | From Page: B2

 
Harvick wins Xfinity race at Atlanta for 3rd year in a row

By The Associated Press | From Page: B4

Stolen No. 44 NASCAR race car found in suburban Atlanta

By The Associated Press | From Page: B4

 
.

Business

Fruits and vegetables get a star-studded marketing push

By The Associated Press | From Page: B7

 
For many in US, cash saved at gas pump is staying in pockets

By The Associated Press | From Page: B7

Historic snows causing headaches for real estate industry

By The Associated Press | From Page: B8

 
Nevada casinos keep $953.7 million in winnings in January

By The Associated Press | From Page: B8

Boy, 13, builds Braille printer with Legos, starts company

By The Associated Press | From Page: B9Comments are off for this post

 
Recalls this week: hand trucks, ceiling fans

By The Associated Press | From Page: B9

Review: Freedom! These smartwatches leave the phone behind

By The Associated Press | From Page: B9

 
Greek prime minister rules out third bailout

By The Associated Press | From Page: B9

AP Exclusive: Fuel-hauling trains could derail at 10 a year

By The Associated Press | From Page: B12 | Gallery

 
.

Obituaries

Leah E. Hoffman

By Nancy Green | From Page: A4

 
Thomas Browning

By Nancy Green | From Page: A4, 1 Comment

Jacqueline Mendes

By Nancy Green | From Page: A4

 
John W. Van Wart

By Nancy Green | From Page: A4

Lester Singer

By Nancy Green | From Page: A4

 
Virgil Albert Hanson

By Susan Hiland | From Page: A4

.

Comics