POT SALES: Colorado Business Sees Huge Sales Spike
(CNN) — In a far corner of downtown Denver, the Andrews family runs an old-fashioned mom and pop (and daughter) shop, selling the biggest novelty of a new era: marijuana.
Their cozy store is fraught with risk. Although Colorado’s landmark law makes it legal to sell marijuana to those 21 or older, the feds still classify it as illegal. The Obama administration says it won’t prosecute buyers and sellers under the state’s law, which went into effect January 1.
Nonetheless, banks won’t service recreational pot stores out of fear of being prosecuted for money laundering. So, the Andrews’ shop operates as an all-cash business.
For all the talk about how weed is recreational, the reality is it’s financial. In fact, the expected boon is Colorado’s “green rush” — new taxes for government and untold millions to be made by growers and merchants. And if opening week is any indication, there’s clearly gold in them thar buds.
The Andrews thrive on derring-do. About 30 years ago, they bought a building in the once-forsaken Lower Downtown. Donald Andrews remembers how a newspaper cast it as folly then for paying the highest price-per-foot in “LoDo” (pronounced “low-dough”).
But the gamble paid off big — LoDo now shines as a historic district — and this week, the Andrews were sensing good fortune again.
Their LoDo Wellness Center in the building’s basement overflowed with customers this week, with a steady line of as many as 100 people waiting for hours.
Andrews, 62, calls himself the “Wal-Mart greeter” at the seven-employee store. Irrepressibly charismatic, he’s the energetic jokester — entertaining clientele, keeping them in line, assigning numbers, and urging them to keep the staircase clear.
“I never waited this long for herb either, and I used to go to the deal that never went down!” he shouts to customers, making a reference to a Cheech & Chong bit that many of the young adults in line don’t get.
Linda Andrews, owner of the pot shop and wife of Donald, is working downstairs as the attendant to the shop’s inner sanctum — a dispensing room where jars of buds perfume the air with skunky pungency. It’s enough to make your nose run. She allows no more than a handful of customers to enter at one time.
The Andrews’ daughter Haley, 28, is a “budtender” — the person at the end of the line who uses tongs to lift the buds from glass jars to plastic vials.
In the background, Linda Andrews’ cell phone won’t stop ringing, and she wonders if their inventory will last until closing. She and her husband, who’ve been together 40 years, twice cut the limit a customer could buy — from a maximum of an ounce for Colorado residents to a quarter ounce and then finally an eighth of an ounce, all within the first 3½ hours. An eighth is enough to roll three or four standard joints. (Out-of-state buyers are limited to a quarter of an ounce.)
“This may be 10 times what I expected,” Linda Andrews says on opening day. “It looks like it’s going to be lucrative, but it looks like we’re going to have to produce more.”
Her husband agrees. In addition to selling marijuana, the family business is also licensed to grow it. When Donald Andrews shows how a handful of growing rooms are one-third empty in a basement backroom, he predicts a new future:
“We’re anticipating how to grow more marijuana efficiently, and we’re going to expand into more space, but I got to tell you: I think the demand is going to be substantial. It blows me away.”
Those words aren’t spoken by a novice in the government-regulated marijuana business. The Andrews have been running a medical marijuana dispensary in the 6,250-square-foot basement ever since the state approved cannabis for medicinal uses in 2000.
“It’s been four years, 200 grand, and a lot of sweat,” Donald Andrews says, referring to how the family spent $200,000 to start the medicinal pot shop. “The regulations are detailed and time-consuming.”
Now the Andrews are pioneering in America’s green fever, among the first 35 or so pot shops in the nation — all in Colorado — to sell recreational pot.
Sky high sales
Within just the first few hours of opening, the LoDo Wellness Center hits record sales for a single day — $10,000 — and the day was far from over.
At closing, business equals an entire month’s sales of medical marijuana, but Linda Andrews kept the exact figure secret. She did say, however, they served almost 1,000 customers, the vast majority of them buying an eighth of an ounce priced between $40 and $60.
“This is a viable business as opposed to a cause,” she said. The family’s medical marijuana dispensary was largely a break-even venture done out of altruism, they say. The Andrews will continue selling medicinal cannabis, in a separate room as required by law, but the business’ future lies in the recreational stuff.
Indeed, “adult use” pot is projected to be a $208 million industry in Colorado this year — on top of the $250 million projected to be spent on medical marijuana, said Betty Aldworth, deputy director of the National Cannabis Industry Association.
Nationwide, government-regulated marijuana is projected to double this year, to $2.3 billion from about $1 billion last year. That 2013 figure came solely from medical marijuana sales in more than a dozen states.
Several states are creating the growth. Colorado and Washington are the first two states with legalized recreational marijuana, and Illinois, Massachusetts, Nevada and Oregon will allow medical cannabis shops to open in 2014. Washington’s recreational weed will go on sale later this year.
Pot promises to be such big business that advocates are planning voter initiatives for legalizing recreational use in several other states by 2016.
“This is unquestionably a tremendous growth industry,” Aldworth said. “There hasn’t been an opportunity like this in American history in quite some time. The tech boom had an impact on the American economy, but I think this could rival it. We’re not creating a market out of nothing. We are just shifting it from the underground market.”
Several other dispensaries also reported door-buster experiences this week, and now pot shop owners, who must grow most of their marijuana, want to increase their number of plants by several-fold.
For example, Medicine Man dispensary in Denver, the largest in the state, served 650 customers on the first day, tripling its biggest sale day for medicinal marijuana, and now the shop wants to triple its plants to 15,000, the owner said.
Evergreen Apothecary in Denver served 400 customers on opening day and now plans to increase its plants from 2,000 to as many as 24,000.
The Andrews too may seek government approval for more plants. They’re a small business — “a boutique,” the matriarch calls it — with only 192 plants, and they don’t have an expansion figure yet. All plants are grown indoors, and state law limits to six the number of plants grown under each light fixture, putting the business’s number of lamps at 32.
In all, about $1 million in business was done at about 35 pot shops on the first day of marijuana’s legalization in Colorado, Aldworth estimated. She doesn’t expect that pace to continue past the historic first week, when travelers from all the country and even Canada and Australia visited the first legal U.S. pot shops.
Such commerce translates into a bonanza for state tax collectors, who are expected to receive up to $67 million a year initially.
The taxes on recreational pot are considerable: a state excise, or wholesale, tax of 15%, a special state sales tax of 10%, a special Denver sales tax of 3.5% — plus the usual state and city taxes of more than 7%, said spokesman Mason Tvert of the Marijuana Policy Project.
With so much cash flowing at dispensaries, advocates hope the U.S. Treasury and Justice Departments will work out an arrangement with banks to allow accounts with the marijuana merchants, freed from potential federal prosecution.
All in a day’s work
Of the three family members hustling at the LoDo Wellness Center, it’s hard to tell who’s working the hardest.
For all he does, Donald Andrews says he doesn’t get paid; in fact, he builds luxury homes.
Daughter Haley, 28, is endlessly patient, advising customers on strains of cannabis. She’s been on her feet all day behind a counter of jars, and once she dispenses the buds, she walks the black plastic vial to a cashier, who collects the money and bags the herb.
“We don’t have time for breaks,” Haley Andrews says. “But it’s exciting. We’re happy to be here.”
When two officers from the Colorado Marijuana Enforcement Division arrive and flash their badges, it’s the gregarious Donald Andrews who does most of the talking.
The three go to a corner of the dispensing room, and Andrews is working the heat as if he’s dealing with building inspectors. He’s charming and effusive. They ask how the day is going, and he summarizes just how busy they’ve been. Then they leave the room.
Asked later about the surprise inspection, Andrews says the officers provided observations “of what you’re doing right and what you’re doing wrong.”
“They’ve never seen retail sales. They came in as a courtesy,” he explains.
Then, he adds, “I’ve worked guys like that before.”
If anyone may be out of place in the wall-to-wall pandemonium for legalized pot, it would be Linda Andrews.
Soft-spoken and measured in her words, she’s a Colorado native who’s never smoked pot and in fact prefers champagne or Prosecco, she says. She’s been a full-time mother to two daughters for most of her life, though she holds a psychology degree and once worked in cancer research. She entered the medical pot business partly because the family couldn’t find a tenant for the basement of their two-story building, built in 1888.
“We’re a small shop, but we’re a high-end shop,” she says.
When the highlight of the day comes, though, Linda Andrews is at the center of it.
She’s calling out the numbers for customers to enter the sanctum sanctorum — at last! — and buy legalized weed for the first time ever.
“Four hundred eighteen, 419 … 420,” she shouts to a waiting room packed with clients standing, sitting, and lying on the floor.
“Yay!” the crowd roars.
The number “420” is code for the cannabis culture and all those who love it.
The room demands the holder of No. 420 get a prize.
Linda Andrews agrees.
The owner of ticket 420 is a robust young man who identifies himself as Jake Goldman, 24. He’s originally from Washington, D.C., but now lives in Denver.
But the cashier rings up a bill that’s too high: $97.
What about the free extra cannabis as his prize?
Oh, yeah, the cashier remembers. The tab is now $67.
That’s more like it, Goldman says.
“It’s gonna be a great business,” Goldman declares as he heads for the door. “I feel it’s my duty as an American to buy weed on the first day.”