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do business or operate lounges. “Colorado, for instance, is
coming out with cannabis lounges that don’t really exist in
other states yet,” Meltzer tells
TB
. “So, somebody who has
a cigar lounge might be more equipped to understand how
that side works, more than someone who has been a grow-
er. It’s dependent on the state and the business, where the
opportunity lies.”
For states that are just coming on to legalizing recreation-
al marijuana, there are opportunities in “first mover advan-
tage,” according to Bishop. “For people already selling
tobacco, we see [a] lucrative commercial opportunity where
they can become known as that go-to source; they could
potentially win. I’m thinking of aggressive smoke shops or
tobacco outlets in states like California or Massachusetts.”
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 can-
nabis 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 marijua-
na 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 can-
nabis market might be viewed from the point of consum-
er 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.”
On the Side?
One way that tobacco retailers may consider a side canna-
bis business is to literally operate it on the side—with a sep-
arate door. “It would help them manage the image issue and
would be similar to how some states require stores to oper-
ate with separate doors to sell alcohol,” says Stuart. Still, he
doesn’t quite see it. “Multi-unit ownership is inevitable in
marijuana, and it’s the American way. There will be a lot
of people getting into the business, and there will be a lot
of fallout. It might be the corner shop initially, but expecta-
tions for more consistent retail experiences will grow stron-
ger as the industry grows.” And again, Stuart envisions that
need being fulfilled by dispensaries that grow to chain status.
A fully segregated side business “may be somewhat
extreme,” according to Gomez. She envisions cannabis acces-
sories and cannabis products being sold in “display cases that
are somewhat separate, rather than having them dispersed
around cigars. I don’t think it needs to be a full-on special
room or space, but I wouldn’t put them side-by-side with
cigars,” she states.
To get a feel for the cannabis business, Bishop thinks it’s
important for tobacco retailers to observe newly opened
dispensaries, particularly in states that have just legalized
recreational use of marijuana, like Nevada. When Bishop
was attending the IPCPR show in Las Vegas this July, he
stopped into two dispensaries that were “quite interesting,”
and that “could have modeled their operations off of a real-
ly good tobacco shop and vice versa,” he says. Both shops
had a modern edge but with different twists. “One was more
clinical white with glass, but bright,” he explains. “The oth-
er was more techy with neon.”
Bishop further describes the first as having a “doctor
office format,” whereby sales associates come out with clip-
boards to personally escort adult customers from a waiting
area to a buying area. There were digital menu boards in
the lobby. The second was like an Apple store: “very engag-
ing, very casual and very high-tech,” he says.
What he and tobacco retailers picked up upon
observation—“I definitely learned about salesmanship
there,” he says. “It’s similar to cigars—everyone is very
passionate about what they’re selling. They all have a rea-
son to be there.”
Furthermore, “It frankly impressed me how quickly
these operators became adapted merchants and retailers,”
Bishop says. “And the entrepreneurial approach from sig-
nage to displays to customer service to layout is very inter-
esting; you could make a parallel to Apple in that there
is sparse merchandising, nice display cases and celebrated
product—it’s all about the star, and everything else is min-
imized. There’s not a lot of clutter or signage anywhere.
It’s very engaging, dynamic—it’s all very contemporary.”
Good Neighbors
From a reverse perspective, what does the dispensary com-
munity 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 Der-
ek Peterson, CEO and founder of Terra Tech, the first pub-
licly 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 per-
cent 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. Canna-
bis-wise, they might have a couple dozen products, where-
as 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.”
TB
It’s similar
to cigars—
everyone is
very passion-
ate about what
they’re selling.
They all have
a reason to
be there.