{"id":2490,"date":"2019-08-20T09:40:16","date_gmt":"2019-08-20T13:40:16","guid":{"rendered":"http:\/\/news.colgate.edu\/magazine\/?p=2490"},"modified":"2019-08-20T11:26:17","modified_gmt":"2019-08-20T15:26:17","slug":"a-budding-industry","status":"publish","type":"post","link":"https:\/\/news.colgate.edu\/magazine\/2019\/08\/20\/a-budding-industry\/","title":{"rendered":"A Budding Industry"},"content":{"rendered":"

Illustrations by Oliver Weiss<\/em><\/p>\n

\n

The growing cannabis business has created entrepreneurial opportunities for some alumni, while others address the potential consequences.<\/span><\/p>\n

 <\/p>\n

Up until a couple of years ago, Ernie and Callie (Rice) Craumer, both Class of \u201977, were leading suburban lives in Greenwich, Conn. Ernie worked in finance, and Callie ran her flower shop when she wasn\u2019t shuttling the kids between schools and sports. Fast forward to 2019 and things have changed: the Craumers and their daughter Caitlin \u201905 now live in Colorado, where they sell marijuana from a pair of cannabis dispensaries.<\/p>\n

Their store in Niwot, an affluent community near Boulder, has an astonishing number of products. There are, of course, several strains of marijuana buds and the usual accessories. But there is also an array of edibles and other cannabis-infused products: 15 types of gummies, 78 vaping cartridges, a dozen drinks, 24 different mints and hard candies, 15 topicals (salves, bath oils, soaps, and massage oils), and 32 kinds of chocolate.<\/p>\n

\u201cIf someone predicted that I would end up selling weed, I would have called them crazy,\u201d says Caitlin, who captained Colgate\u2019s swim team and previously worked at an advertising agency in Manhattan.<\/p>\n

The other surprise is the customers. Yes, there are some young men and women who could be described as \u201cstoners,\u201d but they\u2019re the exceptions. The Craumers say the average age of their customers is 48. \u201cThey don\u2019t come here because they want to get messed up,\u201d Callie says. \u201cThey come because they want to take the edge off, to feel better, or to do something about pain, sleeping, stress, or anxiety.\u201d<\/p>\n

Whether you think the legalization of marijuana is a godsend or an epic disaster in the making, it\u2019s a movement that\u2019s taken on tremendous, possibly unstoppable, momentum now that 10 states permit its recreational use. Legalization has also set off a frenzy of entrepreneurship \u2014 and Colgate alumni are playing an outsized role.<\/p>\n

\"a<\/a><\/p>\n

Some of the Craumers\u2019 best-selling chocolates are made by a company called 1906, which was founded by Peter Barsoom \u201992. After spending 20 years working for several financial services companies, he decided to set out on his own in 2014. Barsoom thought about ventures involved in health care and cryptocurrency but settled on legalized cannabis because of its growth potential. \u201cGoing from prohibition to regulated markets is a historic opportunity,\u201d he says. Barsoom named his company for the year when a federal law was enacted that ushered in the era of cannabis prohibition.<\/p>\n

Barsoom\u2019s specific strategy is centered on solving what he believes to be the three biggest problems with most edibles: \u201cThey taste terrible, you don\u2019t know how they\u2019re going to make you feel, and you don\u2019t know when they\u2019re going to make you feel that way.\u201d By selecting particular strains of marijuana as well as other plants (some of them herbs used in Chinese medicines) for each of his products, Barsoom says, all of them are fast acting and each one has a singular benefit: \u201cMidnight\u201d helps people sleep, \u201cGo\u201d enhances energy, \u201cLove\u201d leads to sexual arousal, \u201cChill\u201d promotes relaxation, and \u201cBliss\u201d just makes you happy. A box of six chocolates costs $24 \u2014 more than most edibles, but Barsoom says that\u2019s not a problem because his main target markets are women and seniors. \u201cWe see our competition as being a bottle of wine,\u201d he says.<\/p>\n

Barsoom has raised $16 million in investment capital, and 1906 has become one of Colorado\u2019s fastest growing edibles companies. He\u2019s now working to expand into several other states and broaden his product line to include beverages, baked goods, and tablets. \u201cOver the next five to ten years, there are going to be billion-dollar brands in the cannabis industry,\u201d he says, \u201cand we expect to be one of them.\u201d<\/p>\n

More than 80 percent of 1906\u2019s sales take place by way of LeafLink, an online marketplace founded by Ryan G. Smith \u201913 that sells 44,000 different cannabis products to more than 3,000 retailers. The Craumers buy a substantial majority of their products through the company. \u201cI don\u2019t know how we could operate without LeafLink,\u201d says Callie, who didn\u2019t know about the firm\u2019s Colgate connection until she was interviewed for this article. With 62 employees, LeafLink facilitates more than $1 billion in transactions on an annualized basis \u2014 about 16 percent of legal wholesale cannabis transactions nationwide.<\/p>\n

Smith\u2019s entrepreneurial career began early. Growing up in Manhattan, he used eBay to sell everything from preowned cell phones and ski clothes to, on one occasion, a single sneaker. If his parents couldn\u2019t find something at home, they assumed Ryan had sold it. As a first-year at Colgate, he joined Thought Into Action (TIA)<\/a>, the alumni-led incubator program that coaches student entrepreneurs, and he founded several ventures, starting with one that sold eco-friendly paper made from tropical plants. He also launched a real estate information service, which he continued to run after graduation. After Smith sold the business in 2014, he was in the market for a new idea.<\/p>\n

\n
\u201cLegalization is happening because of a change in attitudes, not science.\u201d<\/div>\n
\u2014 Professor Scott Kraly<\/div>\n
\n

LeafLink came together after Wills Hapworth \u201907, a founder of TIA who now works as its alumni executive director, introduced Smith to Zach Silverman, another young entrepreneur who had recently sold a company. When Smith and Silverman met for coffee at Grand Central Station, they spoke in the shorthand that\u2019s commonplace among the city\u2019s bustling community of young entrepreneurs. \u201cI want to do a marketplace for an industry that\u2019s totally underserved,\u201d Smith said. It was clear to Silverman that Smith was talking about a web-based system for facilitating business-to-business transactions. When Silverman suggested a marketplace for cannabis, Smith pounded a fist on the table and declared, \u201cThat\u2019s perfect.\u201d<\/p>\n

With Smith as CEO and Silverman in charge of technology, they formed a company and started spending time in Colorado, where recreational use had recently been legalized. Business dealings between dispensaries and their suppliers were even more inefficient than the partners had imagined, mostly conducted via phone calls and texts. \u201cWhen we asked if they\u2019d like to have a simple way to do business,\u201d Smith says, \u201cthey reacted enthusiastically.\u201d<\/p>\n

LeafLink is based in Lower Manhattan and Los Angeles, where employees sit in open spaces, at long tables with large monitors. The offices are usually as quiet as a library because of the work involved with building and maintaining the company\u2019s website. A display case in the Manhattan office contains a selection of cannabis products, but all of the boxes are empty because none of them are legal in New York. In fact, marijuana itself does not play a role in LeafLink\u2019s office culture. Smith says it\u2019s not a cannabis company as much as it\u2019s a technology company and that employees are no more likely to consume marijuana than those at other tech firms.<\/p>\n

LeafLink has raised $14 million from investors and has expanded into new states as quickly as they legalize. The legal patchwork is a mixed blessing. Because products can\u2019t be shipped across state lines, the Craumers can only buy and sell Colorado-created products, Barsoom needs to set up a manufacturing facility in each of the states where he sells 1906 products, and LeafLink can\u2019t function as a single marketplace. On the other hand, the extra burdens have hindered tobacco and liquor companies and other large firms from entering cannabis businesses. But Smith says it\u2019s only a matter of time before major players jump into every corner of the industry, including LeafLink\u2019s, so he says he\u2019s in an all-consuming race. \u201cThe industry is growing fast, but we have to grow even faster to make sure our market penetration grows.\u201d<\/p>\n

\"a<\/a><\/p>\n

Blunt Truths<\/h2>\n

Of course, not everyone believes a rapidly expanding cannabis industry \u2014 or legalization itself \u2014 is a good idea. Colgate\u2019s Charles A. Dana Professor of Psychology and Neuroscience Scott Kraly<\/a>, who studies how psychiatric medications and recreational drugs affect human behavior and the brain, is among the skeptics. He says legalization should not have been even considered without far more research into the risks of cannabis use.<\/p>\n

\u201cLegalization is happening because of a change in attitudes, not science,\u201d Kraly says. \u201cPeople are saying, we\u2019ve legalized alcohol even though we know it\u2019s harmful, and tobacco is legal even though we know it\u2019s harmful. Marijuana isn\u2019t as harmful as either of them, so why not? Let\u2019s go with it.\u201d<\/p>\n

Kraly says marijuana is relatively safe in terms of addictiveness and that it may well have altogether less significant dangers than either alcohol or tobacco but, he says, it was a mistake to base legalization on impressions of relative risks. And while there has been surprisingly little research on the medical impacts of recreational marijuana, he says, some risks are known. \u201cPeople pooh pooh the notion that pot is a gateway drug, but there is some evidence that it actually does play that role,\u201d Kraly says. \u201cSay a fifteen-year-old tries pot and he likes it. If he gets away with it, he\u2019s going to be more willing to take further risks\u201d with more dangerous substances. The impact on adolescents is a particular concern because legalization will inevitably increase their access to marijuana, especially edibles, and research shows that significant cannabis use can permanently damage still-developing brains. \u201cWhat\u2019s happening in Colorado is a grand social experiment,\u201d Kraly says. \u201cWhat ends up happening there will tell us whether legalization was a good idea or a bad one.\u201d<\/p>\n

\n
\u201cWe jumped into the deep end with all our clothes on when we should have tried putting a toe in first.\u201d<\/div>\n
\u2014 An alumnus (who declined to be named for this article) who is a police officer in a state where recreational marijuana is legal<\/div>\n
\n

In addition to potential health risks, there are other dangers to consider. A Colgate alumnus who is a police officer in a state where recreational marijuana is allowed says the evidence is already mounting \u2014 starting with dangerous driving. \u201cPeople are getting into their cars after smoking pot and driving their kids to preschool, and they think that\u2019s OK,\u201d he says. In fact, driving while impaired is illegal, but enforcement is difficult. \u201cWe don\u2019t have a breathalyzer for pot,\u201d the officer says.<\/p>\n

A policeman for almost 20 years, this alumnus declined to be named. \u201cI work for a police department in an incredibly liberal city,\u201d he explains, adding that he could lose his job for sharing his views about legalization. That reflects another problem, he says: There\u2019s been such a rush to legalize that voters and legislators haven\u2019t paid enough attention to voices like his. As a result, he says, there is insufficient appreciation for how legalization constrains law enforcement. \u201cI can\u2019t tell you how many times a marijuana investigation led to the detection of other crimes \u2014burglaries, firearm violations, and major drug dealings. So now we have one less tool.\u201d Like Kraly, this alumnus says legalization has come far too quickly: \u201cWe jumped into the deep end with all our clothes on when we should have tried putting a toe in first.\u201d<\/p>\n

Debbie Rush \u201986 has also considered the ramifications of changing cannabis laws. For the last 30 years, she\u2019s been working in the Bronx as a lawyer for the Legal Aid Society, the nation\u2019s largest provider of legal services to indigent defendants. She says the aggressive policing and mandatory sentencing laws that resulted from the \u201cWar on Drugs\u201d have had a catastrophic impact, particularly on minority groups.<\/p>\n

\u201cMarijuana laws have had a hugely disproportionate impact on blacks and Hispanics because they are arrested at much higher rates,\u201d she says. \u201cIf you\u2019re a white male smoking pot in Central Park, you\u2019re not going to be arrested. If you\u2019re a black guy in the Bronx, there\u2019s a good chance that you\u2019ll end up in handcuffs.\u201d<\/p>\n

At every stage, she says, people of color have been dealt with more harshly. In addition to being searched and arrested more frequently, they are more likely to be sent to prison, and their sentences are longer. And for anyone who has been found guilty of marijuana possession, the collateral damage can be profound. \u201cSince marijuana is a drug under federal law, you have a drug offense,\u201d she notes. \u201cThat makes it difficult to get a job, and if you want to go to college, you can\u2019t get federal student loan money. For someone to be unable to go to college because they\u2019ve had a single joint is insane, but that\u2019s the law.\u201d In recent years, the New York Police Department has changed its approach. First-time offenders are generally not prosecuted. But Rush says a second offense can still lead to a criminal record.<\/p>\n

The Complications of Legalization<\/h2>\n

Andrew Livingston \u201912 has been pushing for legalization since he joined the Colgate chapter of Students for Sensible Drug Policy his first year. At the end of his sophomore year, he told his parents that he hoped to turn the campaign for legalization into a career. And he has. Immediately after graduation, he became a full-time activist in Colorado, where voters approved legalization a few months later. He then became the director of economics and research at a new law firm, Vicente Sederberg, which is entirely devoted to serving clients involved with cannabis.<\/p>\n

Today, the firm has 75 employees. Its office just outside of downtown Denver mostly looks like that of other mid-sized law firms, but there are some obvious differences: almost no one is over the age of 45, and you can find marijuana-inspired artwork in many of the offices.<\/p>\n

\"a<\/a>Livingston, who is not a lawyer, assists lobbying groups that are working to influence how laws and regulations are written in states considering legalization. For commercial clients, he develops financial projections showing how various cannabis markets are likely to develop. The legal part of the industry, $8\u201310 billion today, will grow to $40\u201360 billion in the next six years, he predicts. He believes the illegal trade, which he estimates at $30 billion, will eventually disappear. \u201cPeople aren\u2019t going to do business with illicit dealers when they can go to a store where they are more likely to get quality products,\u201d he reasons. (The police officer disagrees, noting that the taxes imposed on legal marijuana give black-market pot a substantial price advantage.)<\/p>\n

While Livingston is pleased by the move toward legalization, he isn\u2019t completely satisfied. Why, he asks, are there bars for consumers of alcohol but nothing similar for pot users? Answering his own question, he points out that while most of the legislators who legalized alcohol after Prohibition did, or wanted to, drink, pot legislation has been mostly written by nonusers. \u201cSixty percent of Americans are in favor of legalizing cannabis, but only ten percent are users,\u201d he says. And because lawmakers are motivated less by enhancing user happiness than the pursuit of tax revenue, no one is talking about creating pub-like options for marijuana consumption. As a result, he says, \u201cThe culture of cannabis use hasn\u2019t really changed. It\u2019s no longer underground, but it\u2019s not really above ground either.\u201d<\/p>\n

Laws are also complicated by the division between marijuana and hemp. Marijuana contains tetrahydrocannabinol (THC), which is what causes psychotic highs. Hemp contains cannabidiol (CBD), which does not have a psychoactive effect, but is said to alleviate pain, insomnia, anxiety, and depression, among other problems. Although there is little scientific research to support any of the claimed benefits, CBD products are proliferating. The legality of CBD is also murky. Unlike products that have THC, those with CBD are now permitted under federal law, but they are still restricted by some states and municipalities.<\/p>\n

Jonathan and Leah (Werner) Schultz, both Class of \u201996, are developing CBD-infused soft drinks. After Colgate, they spent 14 years living in Cleveland where Jonathan worked for a bank before the couple started a small software company. Because they could run that business from anywhere, they moved to Denver in 2012. Two years later, they purchased Backyard Soda, a producer of carbonated drinks that were sold only in Denver. With Jonathan responsible for product management and production, and Leah handling the bookkeeping and social media, Backyard Soda products are now sold in more than 100 retail locations throughout Colorado and in several other states.<\/p>\n

\n
\u201cWhether you think the legalization of marijuana is a godsend or an epic disaster in the making, it\u2019s a movement that\u2019s taken on tremendous, possibly unstoppable, momentum.\u201d<\/div>\n
<\/div>\n
\n

Now they\u2019re working to create CBD-infused sodas with three flavors that are designed, in part, to overcome the \u201chempy\u201d taste that is characteristic of CBD extracts: ginger lime, mango jalapeno, and pomegranate orange blossom. \u201cI think infusing soda with CBD is a potentially huge opportunity,\u201d Jonathan says.<\/p>\n

As it happens, Jonathan\u2019s Colgate roommate, Reed Lewis \u201996, is already making CBD products. Lewis moved to Snowmass, Colo., shortly after graduation. Thanks to the Colgate sweatshirt he frequently wore, he met Dick Kelley \u201968, the owner of a popular liquor store, and after working in the store for a few years, Lewis ended up buying it. He later added a specialty food shop, and that\u2019s where he sells his own creations: CBD-infused teas and chocolates.<\/p>\n

All of Colgate\u2019s cannabis entrepreneurs are eager to expand, but the Craumers warn that their industry is more difficult than it may appear, in part because of challenges unique to the industry. For example, after they bought a building in Niwot\u2019s main retail district in 2014, it took a stressful three years to secure the permits they needed to operate a dispensary. More than 1,000 letters were written in opposition. While a substantial majority of Coloradoans are in favor of legalization, the Craumers learned that no one wants the commercial consequences to be located nearby. Once the dispensary opened in 2017, marketing efforts were complicated by regulations that allow advertising only in publications that can be shown to have predominately adult readerships.<\/p>\n

Their pair of dispensaries now has more than $5 million in annual sales, and they\u2019re profitable. Within a few years, the Craumers hope to add at least three more dispensaries. But they, too, have reservations about cannabis use, at least when it comes to themselves. None of them is a regular user. \u201cI tried it in high school and college, but I didn\u2019t like it that much,\u201d says Callie. \u201cI still don\u2019t. I prefer chardonnay.\u201d<\/p>\n

\n

G. Bruce Knecht \u201980 is a former senior writer and foreign correspondent for <\/em>The Wall Street Journal. Author of <\/em>The Proving Ground: The Inside Story of the 1998 Sydney to Hobart Race and <\/em>Hooked: Pirates, Poaching and the Perfect Fish, he has also written for the <\/em>Atlantic Monthly, the <\/em>New York Times Magazine, and <\/em>Cond\u00e9 Nast Traveler. He lives in New York City.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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