Arizona poised to dominate medical marijuana industry


Tim Hacker/Tribune A sign in Chandler advertises a public hearing for a proposed medical marijuana cultivation facility, shown Tuesday, April 5, 2011.

Arizona’s first medical marijuana will sprout from the ground this fall, but the industry around the drug is already yielding lots of something else green: Money.

There’s the $200 fee doctors charge for a medical marijuana recommendation.

And $250 for a luxury motorcoach tour of dispensaries in Los Angeles — champagne included.

Or, potential entrepreneurs could shell out $1,150 for a 92-page market analysis developed for those eager to invest in or operate in the industry.

And once the state allows marijuana growing and use this fall, the industry could generate hundreds of millions a year and suddenly eclipse the size of other industries. Arizona will likely become the third-largest medical marijuana market in the nation by next year, said Ted Rose, editor of the Medical Marijuana Markets 2011 report. Colorado generates $250 million a year from medical pot.

“In a slow economy like this, everybody is excited about a hot, growing industry, whether it’s something really benign and unsexy or something that has a bit of an edge to it, like this,” Rose said. “Having looked across the country, Arizona is positioned to be one of the most dynamic places in the county.”

But just how much medical marijuana will add to the economy is difficult to determine.

It remains to be seen whether the substance will be used largely for medical use or whether recreational use will soar — which would dramatically boost sales. Beyond that, it’s hard to figure out the demand for a substance that is now illegal and to get people in the underground marijuana market to provide reliable information — or any at all.

“That’s what sparked this whole thing, trying to find the numbers,” Rose said.

He produced the report for Maryland-based See Change Strategy, a financial analysis firm. Rose surveyed dispensaries in Colorado, pledging not to reveal their individual information in exchange for detailed financial information.

He surveyed hundreds of retail and wholesale operations to get the number of patients, the amount they buy, sales figures and profits. He used that to project sales in Arizona, which will allow about 124 dispensaries to operate. Rose wouldn’t give a specific figures for Arizona — but they are available to anybody who buys his $1,150 report.

Nationwide, the report estimates $1.7 billion in sales in the 15 states and the District of Columbia, where medical marijuana is permitted. Arizona voters approved medical marijuana in November, allowing doctors to recommend its use. Most sales will occur at dispensaries regulated by the Arizona Department of Health Services. It plans to issue dispensary licenses in mid-August. Patients and caregivers can apply for licenses April 14.

Already, signs of the industry are increasingly easy to spot. City-mandated signs are popping up in some communities where dispensaries are seeking approval. Publications are selling ads for medical marijuana-related businesses. And industry events are taking place, such as the Green Relief Medical Marijuana Convention & Expo at the University of Phoenix Stadium.

The expo was originally scheduled at a hotel but so many vendors signed up that the expansive stadium was needed, said organizer Lisa Wolfe. She previously planned hundreds of conventions for pharmaceutical giant Bristol-Myers Squibb and said whatever misgivings people might have with marijuana, she’s found this event is the same as any other convention.

“You can take out medical marijuana and plug in the latest heart drug or blood pressure medicine, and it’s the same format,” Wolfe said.

The vendors reveal the extent of the industry’s growth potential, she said. She expects thousands of new jobs at dispensaries and grow operations. And the shops will spur other jobs in security, marketing, advertising, business consulting, legal services and more.

The marijuana expo includes 68 workshops and has panels with legal professionals and a law enforcement group featuring Pinal County Sheriff Paul Babeu. She expects 3,000 to 5,000 people at the four-day event that starts April 14.

“We’re trying to focus on the education and taking the fear factor out of it,” she said.

Medical marijuana will bring its own version of higher education. The Colorado-based Greenway University is scouting for a branch in Tempe or Scottsdale to offer classes on business management, growing and more, said founder and CEO Gus Escamilla. Greenway is licensed and regulated by Colorado, the only school of its kind in the nation.

Escamilla expects a huge industry in Arizona, one that will grow for a couple years before leveling off.

“We anticipate a minimum of $200 million to $300 million in annual sales once the market matures,” Escamilla said.

The young industry has its pitfalls, as the operator of the California bus tour found out this week. Ingrid Joiya plans to take a bus of about 50 people on a daylong trip of four Los Angeles dispensaries to observe different business models, but she’s scrambling to find a substitute after the state shut down one of them.

“These are the kinds of things that dispensary owners need to be aware of,” Joiya said.

One tricky part of learning about medical marijuana is if you seek knowledge from a person who has grown the plant for years, you’re dealing somebody who has been part of an illegal subculture. Joiya, of Elements Therapeutic Dispensary, said she expects the industry will become huge but that those involved will have to weed out bad actors to prevent the public from turning on it.

“The watchdogs will be those dispensary owners who are doing it right because they don’t want the problems. They want it to stay clean,” Joiya said. “They recognize that if it does go wrong, it’s easy to repeal this.”