All Eyes On Cannabis: The Budding Opportunity

As more states legalize cannabis, Tobacco Business investigates the profit potential for tobacco stores and smoke shops.

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The Leaf Piece
Of course, the leaf piece is another matter. It will be advantageous for tobacco retailers to keep on top of emerging state policies related to cannabis in the states where they do business or operate lounges.

Tobacco companies that start early and “make some sort of transition right away—it will be beneficial for them,” agrees Jeffrey Zucker, co-founder and president of Green Lion Partners, a Denver-based business strategy firm focused on early stage development among firms in the cannabis industry. Recognizing that they’ll “have to see what really merges with their skill set, there are some synergies and many opportunities,” he says. Like Bishop, Zucker is quick to point out the states that recently legalized marijuana as those with the most opportunity for tobacco retailers. “People might overlook Maine, Massachusetts, Vermont—New England still has plenty of opportunity for the industry right now,” he says.

The bottom line for tobacco shops considering the cannabis market might be viewed from the point of consumer usage moving forward, according to Zucker. “Tobacco use is going to continue to decline, while simultaneously we will see a growth in cannabis,” he relays. “Tobacco retailers need to keep that in mind.”

Good Neighbors
From a reverse perspective, what does the dispensary community think of tobacco retailers and smoke shops selling cannabis accessories and possibly more? Do they see them as formidable competition?

“We don’t even see them as competitors at all,” says Derek Peterson, CEO and founder of Terra Tech, the first publicly traded marijuana company in the U.S., with medical dispensaries in California and Nevada. “We certainly sell merchandise like vaporizers, but it’s less than a couple percent of sales. We merchandise them as convenience items. And with the current rules and regulations, smoke shops and such are not licensed to distribute cannabis. So, we’re not really eating from each other’s tables.”

As Peterson puts it, the tobacco shop/dispensary store relationship is a complementary and synergistic one—akin to good neighbors.

“In fact, when I opened in Vegas, soon after, a few doors down, a smoke shop [opened] up. If I’m a smoke shop entrepreneur, I want to open up near a dispensary, with all our traffic going in and out on a daily basis. Cannabis-wise, they might have a couple dozen products, whereas I have hundreds, so I’ll win that piece of business. They can’t play in our world unless they go through the permit process. But right now, it’s complementary because they drive traffic to us, too.”

Story by Renée M. Covino

This story first appeared in the September/October 2017 issue of Tobacco Business magazine. Members of the tobacco industry are eligible for a complimentary subscription to our magazine. Click here for details.