CANNAINVESTOR Magazine October / November 2016 - Page 94

The most well-known products derived from concentrates or extracts are edible products. For recreational purposes, edibles provide a surreptitious way for users to travel interstate or be used in public. For medical purposes edibles are a user-friendly delivery method. They provide the patient with the ability to obtain the medical benefits slowly.

Dispensaries and Retail Stores

Dispensaries and retail stores are the public faces of the state-licensed cannabis industry. Dispensaries generally specialize in selling cannabis for medical purposes while retail stores sell cannabis for recreational use.

Colorado is a state that has separate licensing regulations for medical and recreational cannabis. Of note by many industry participants, is that approximately 30% of recreational sales in retail stores are for medical purposes and the recreational stores find that about 30% of their sales are for medical use.

In Colorado, it is important to understand that the sales tax on medical cannabis is substantially less than the sales tax on recreational cannabis, and the cannabis products themselves are usually significant less expensive. Many regular recreational users go through the state process to obtain a state-issued “red card” to purchase medical cannabis. If the product is substantially less costly, it’s logical to ask why anyone desiring to use cannabis recreationally would not seek to obtain a “red-card” since it reduces the cost significantly. The reason is the immediate availability and instant gratification of walking into a retail store and purchasing the product. In the state, anyone over the age of 21 can buy the cannabis without having to make an appointment, visit a doctor, and wait for the state to issue a red card, which can takes weeks to arrive by mail.

Service Businesses

Described as “pick and shovel” models, numerous businesses have cropped up to provide services to state-licensed cannabis businesses. These include software solutions; testing, laboratory and security services; packaging suppliers; the sale or leasing of equipment including extraction systems, grow lights, greenhouses and hydroponic systems; and the providing of consulting and marketing services.

Many of these service businesses have business models that have more potential for profitability and scalability than growing, processing or selling the plant. But, they’re often not viewed by entrepreneurs as being as “sexy” as businesses that “touch the plant.”