Is The Weed Business About To Look Like the Coffee Business?
The next gold rush in legalizing cannabis is public consumption. Entrepreneur J.J. Walker is already one step ahead.
Sprawled in a tieless suit and sockless oxfords on a chair just off the lobby of the world’s largest marijuana dispensary, J.J. Walker is swiping at his iPhone, trying to locate a two-month-old video of him enjoying a bong hit here in Las Vegas.
Bong videos are hardly the stuff of riveting entertainment, particularly in Vegas, where pot is legal and plentiful and restraint is in short supply. At whatever moment Walker had been placing lips to bong glass, surely there were a thousand people within two miles of him inhaling and ingesting pot in just about every form imaginable. In addition to the city’s mostly pot-friendly 2 million residents, Vegas pulls in 42 million visitors a year, about a fifth of whom identify as cannabis users, and a substantial portion come from places where recreational pot isn’t yet legal. Weed, in other words, has become part of the Vegas draw, leaving the smell of it wafting reliably at almost all hours outside casinos, hotels, restaurants, and pretty much everywhere in between.
But the video, when Walker finally finds it, proves momentous, even for Vegas standards. For one thing, the bong he’s toking is two stories tall. Its bowl holds a quarter-pound of pot, requiring the assistance of a vacuum cleaner to pull the smoke through the 100 gallons of water in the bong’s reservoir. It also happens to be inside the world’s first and only commercial space designed specifically to be a public place in which to get high. “I just had to try that bong, man,” beams Walker, who commissioned its creation.
These new laws would create a legal future in which enjoying weed is as simple as walking into a bar or restaurant and enjoying a glass of chardonnay.
Yet firing up that bong — or any marijuana-ingesting device — in any commercial or public space is currently illegal in Vegas. The same reality has been true just about everywhere in the United States, despite the growing legality and acceptance of pot itself. But that picture is about to change, with several states and cities already cautiously opening the door to the so-called social consumption of marijuana. These new laws would permit any adult who purchases cannabis in a specially licensed business to also consume the products right there. In other words, a legal future in which enjoying weed is as simple as walking into a bar or restaurant and enjoying a glass of chardonnay.
Currently there are no credible projections of the size of the social-consumption market, but there’s enough relevant math to suggest it will likely be massive. Last year, Americans spent about $100 billion on alcohol in bars and restaurants. They already purchase about $10 billion a year on legal pot, a number that’s expected to triple within three years, given that the legal recreation market is still in only 11 states. (Illegal sales of pot currently account for another $50 billion or so in sales.) Those numbers don’t reflect what will happen to a market that is likely to explode once there are suddenly legal public places to consume it.
At the ready are entrepreneurs waiting to pounce. Will the winning retail formula look like a Starbucks, where friends can meet for a toke over lattes and easy listening, or a more boozy atmosphere that has the vibe of an Ace Hotel lounge? Walker, a serial cannabis entrepreneur, is convinced it’s neither. He believes the cerebral, perception-bending nature of the marijuana high calls for a space that’s more like a mind-tweaking, Alice in Wonderland playground for the baked. “Pot is incredibly sensitive to context,” he says. “I see opportunity in that.”
Walker’s first crack at this — the one that housed that larger-than-life bong — shut down in July. He and his partner decided to close it so they can double down on a more ambitious version that would place it at the center of a new Vegas retail hub catering to the stoned consumer. On the surface, the whole venture feels slightly too Vegas — all novelty, a paean to mischievous excess. But Walker’s plan for cannabis domination has whiffs of Shultzian ambition — retail environments queued up inside shipping containers, stationed next to a giant loading dock at the side of that pot super-emporium just next to the Vegas Strip, ready to scale as laws change, state by state. “National and local barriers to social consumption are starting to fall,” says Walker, an entrepreneur comfortable surfing ahead of the law. “And we’re going to be ready to pop these up quick wherever that happens.”
When people imagine smoking pot in a public establishment, they immediately think of Amsterdam. For decades, American and European backpackers flocked to the Dutch city for the chance to order Northern Lights or Orange Bud or one of the other dozens of strains at one of the city’s 200 or so weed-purveying “coffee shops.” It turns out, however, that for more than four decades, weed has been illegal there, including smoking or eating it in any kind of retail environment. The Amsterdam police have simply tolerated it, looking the other way in return for the cafés’ voluntary efforts to keep the pot out of the hands of children and dealers and otherwise tame any sort of abuse.
In the United States, 2016 was the first time laws started addressing social consumption. That year, Colorado voters passed an initiative allowing businesses to apply for consumption permits, and some municipalities in that state even issued permits. But in practice, only a few private clubs have been allowed to let members bring in small amounts of legally purchased weed and consume it there. Massachusetts followed a similar path, while San Francisco permitted a few dispensaries to add on small consumption rooms. In 2018, West Hollywood in Los Angeles pushed the envelope further by passing a law that would, in principle, produce eight permits for marijuana-friendly restaurants. (By late summer 2019, no such restaurant had actually opened, due to a variety of regulatory hurdles.)
Nevada wasn’t among the first states to legalize recreational pot, but when it finally did so, in 2017, Las Vegas made up for lost time, opening 47 dispensaries within a year. Social consumption was a natural next step for the city of excess, with its massive tourist trade. In May, something landmark happened: Las Vegas legalized social-consumption lounges, without restricting these spaces to private clubs or dispensaries. That put Vegas ahead of Denver and San Francisco—and, yes, Amsterdam.
None of this was lost on Walker, who, along with his life and business partner, Ryan Vincent, has spent the past decade spotting early opportunities in pot. Walker was a 25-year-old Denver-based music festival promoter when, in 2007, Colorado courts gave a thumbs-up to open storefront marijuana dispensaries. By that time, Vincent, a graphic artist who suffers from a rare and painful eye disease that eventually left him blind in one eye, had discovered that the only way to get relief from his chronic discomfort was to smoke pot throughout the day, cupping his hand to direct some of the smoke into his eyes. Out of necessity, he had become an expert in cultivating high-quality weed. Why not put that expertise to good business use, figured Walker. In 2009, he and Vincent opened the seventh marijuana storefront dispensary in Colorado.
“The casinos smell the money in consumption. They don’t want it established outside their walls, because that’s money leaving them. They want to bring it inside.”
Walker sold the dispensary for an undisclosed amount two years later, when sales at the shop were hitting $10,000 a day. He sunk his money into what he was convinced would be the next big thing: cannabis-themed experiences. He created My 420 Tours, the first company to put together high-end tours of marijuana farms, producers, and dispensaries, lodging customers in hotels willing to look the other way at in-room consumption and providing each visitor with a vape pen at night. He grew that business to 5,000 tourists a month before selling. Walker also produced the first marijuana-related national convention, called KushCon, an event owned by Kush magazine. But his difficulty in finding places for his cannabis tourists to actually consume the pot they were legally buying had gotten him thinking. Walker became convinced that social consumption was the next frontier for America’s rapidly growing embrace of cannabis—and Vegas was the place to make it happen.
He also believed that conventional bars and other spaces vying for early social-consumption traction weren’t the answer. “Who wants to walk out of a dispensary and into a room to sit and get high?” Walker says. The issue, he contends, is that being high is an extremely variable experience, one in which where you are, who you’re with, and what you’re doing can completely transform how pot makes you feel. “Environment is more important for pot than it is for alcohol,” he explains. “You basically know what booze is going to do for you. But pot can be anything from wonderful to terrifying.” His quest for a social-consumption venue, then, boiled down to: What sort of environment would most reliably lead to a wonderful high?
In 2017, Walker got wind of Area 15, a 120,000-square-foot facility in Las Vegas scheduled to open in 2020. The company describes itself as “an experiential retail and entertainment complex offering live events, immersive activations, art installations, and much more.” The anchor tenant is an “immersive experience” group whose other installations enable visitors to explore enchanted forests, room-sized refrigerators, and giant robots. Walker’s takeaway was all that stimulation would make for a cool place to get stoned. “It immediately just crashed on me how well it would marry with the social experience of cannabis,” he says.
Walker imagined a marijuana-friendly version of Area 15, similar to other new concept “experiums,” like San Francisco’s Color Factory or the now-venture-backed Museum of Ice Cream. Each installation would highlight a different aspect of being high and could be corporate sponsored, depending on the brand messaging of each advertiser. “One room could be a place where you jump in and bounce around, which would be good if you have a high-energy, clarity type of high,” Walker says. “Another would have cool music and gentle light and vibrations so you could Zen out into the moment.”
In 2018, before public consumption was legal, Walker and Vincent opened the original Cannabition, a destination where people could show up high. Walker figured the startup could limp along for a little while strictly on the appeal of its mind-bending installations. The attractions ranged from a slide ride through human lips and smoke rings to a smell lab for the various flavor ingredients in cannabis. And, of course, there was that 24-foot-tall blown-glass Bongzilla, complete with a staircase that ran from bowl to mouthpiece.
But when Las Vegas finally passed its social-consumption law in May, the elation was short-lived. “The casinos can see the potential and smell the money in consumption,” says Tick Segerblom, a former Nevada state senator who now serves as a commissioner of Clark County, which governs Las Vegas. “They don’t want it established outside their walls, because that’s money leaving them. They want to bring it inside.”
Because casinos are federally regulated and pot is still federally illegal, Segerblom explains, they can’t play in social consumption regardless of what happens at a state level. So the influential casino industry quickly pressured the state government to override the new law and impose a two-year moratorium on social-consumption businesses. (The industry is hoping the federal anti-pot stance will drop under a new presidential administration, hence the casinos’ interest in a two-year delay.)
Cannabition had been drawing only 100 or so visitors a day, about a tenth as many as Walker had projected he’d bring in if customers could consume pot there. Clinging to a massive Buddha might be a blast for the stoned, but less so for the straight. Prospects for the venture were starting to seem grim. “We went through a period of despair,” Walker admits.
Then he met Larry Scheffler and Bob Groesbeck. The duo — a former graphics company CEO and a lawyer, respectively — have been the only cannabis entrepreneurs to seize on a loophole in local law that’s allowed them to open a dispensary just off the Strip. When recreational marijuana became legal in Nevada in 2017, local law required dispensaries to be located far from the Strip. Groesbeck happened to specialize in zoning law, and discovered a small patch of real estate exempted from local zoning laws, so they opened their dispensary there, in the epicenter of Vegas.
On Tuesday, Lowell Farms made history by becoming the first retail establishment in the country where the over-21 crowd can order and light up a joint over an upscale meal.
The result is Planet 13, now the world’s largest dispensary—a 40,000-square-foot weed hub one block over from the Strip. In August, just nine months after opening, Planet 13 drew 115,000 visitors, leaving it well along the way to becoming a major Las Vegas attraction. A constant string of Ubers and Lyfts pull up at all hours, with visitors taking selfies in front of the already-iconic planet sculpture. “I wish we could have been around in the 1930s for the legalization of gaming in Nevada and the end of Prohibition,” Scheffler says. “But we’re around for this, and we’re taking advantage of it.”
They’re now building out Planet 13 to become a complete cannabis megaplex with a restaurant, coffee shop, event space, publicly viewable cannabis-product production facility, and, when it’s legal, a consumption lounge. Seven thousand square feet have been set aside for their first official tenant: a new, much-upgraded version of Cannabition, planned to open around May of next year. “J.J.,” Groesbeck says, “is a visionary.”
Lowell Farms Café in West Hollywood is about the size of the check-in area in Planet 13’s lobby. Instead of glittering casinos in the near distance and an acre of lavish pot-product display cases, Lowell Farms is quietly tucked away in a residential L.A. neighborhood, across the street from a synagogue. Arrivals are greeted with a small tile patio shaded by two olive trees. Along with cauliflower banh mi and guanciale, the bougie California-style menu also offers pre-rolled joints and cannabis concentrates.
On Tuesday, Lowell Farms made history by becoming the first retail establishment in the country where the over-21 crowd can order and light up a joint over an upscale meal, with few restrictions. Last year, Lowell landed one of those eight highly coveted permits passed into law by West Hollywood (evidently, there were some 400 applications). It’s the first business to make it to the other side of the tangle of bureaucratic hassles and actually open its doors. “I want to change the narrative on cannabis,” says head chef Andrea Drummer, who has achieved some celebrity for her cannabis-infused cooking at private events in Los Angeles. “For some people, lighting up doesn’t get beyond the couch. But it really can be much more of a social thing.”
Lowell Farms’ CEO is David Elias, a former Wall Street trader who started the cannabis farm Lowell Herb Co. in 2017. The parent company now supplies pre-rolled joints to some 300 dispensaries, and its list of investors includes Miley Cyrus, Chris Rock, pot dispensary giant MedMen Enterprises, as well as venture capital firm Beehouse, which alone has reportedly kicked in $45 million. When guests arrive at Elias’ new café, they are greeted by both a waiter and a budtender, who guides diners through a choice of pre-rolls, vapes, and the massively intense hits from pot ultra-concentrates known as dabs, along with advice on which strains will enhance particular dishes. (Booze is prohibited in the main restaurant, though an attached wine bar is available for anyone who wants to run over for a quick attempt at social cross-fading.)
Drummer, known for her expertise in pairing food with joints, eventually wants to offer cannabis-infused dishes as well. For now, though, California regulators aren’t prepared to inspect and analyze a cooked meal to ensure it meets state standards for cannabis products, which must have precisely labeled types and amounts of ingredients.
CEO Elias believes being the first to crack the model puts him in the best position for ganjapreneurial empire building. “We had a big responsibility to do this right, and now the rest of the country will look toward what we’ve created,” Elias says. “What we’re learned, and what we’re going to learn as an operator, is valuable to share with other local governments trying to figure it out. It only makes sense for us to be in conversations about being in those municipalities.” Drummer puts it more directly: “I think all of us here are looking forward to expansion.”
The gold rush seems to be coalescing once again in California. As it turns out, the second Cannabition could soon spring up right in Lowell Farms’ backyard. That’s because Planet 13’s Scheffler and Groesbeck have already leased 40,000 square feet in Santa Ana, California, the only large lot zoned for a recreational dispensary in Orange County, just south of Los Angeles and home to Disneyland and 50 million tourists a year.
Cannabition is at the ready. Designed with modularity and scalability in mind, the retail concept is being constructed off-site in 12 shipping containers that will be positioned in Planet 13, next to one of the building’s loading docks, ready to make the trek to states one by one as they legalize social consumption. Right now, California, Nevada, Massachusetts, Colorado, and Illinois have begun constructing a legal framework for social consumption. The number of states with legal recreational pot is expected to hit 20 by 2024, with 13 of them on track to be billion-dollar-plus markets by then. Once recreational pot becomes openly and legally sold in most of the United States, it’s only a matter of time until steps are taken to legitimize places to consume it.
What’s actually inside those shipping containers remains a little fuzzy. Walker hasn’t yet pinned down many of the details around what will debut at Cannabition 2.0 when it opens. So far, he’s trying to lock in sponsors from the concept’s first iteration, including rolling paper manufacturer Raw and pot concentrate manufacturers Mary’s Medicinals and the Clear. He also won’t name the several angel investors he says have already agreed to back him, but he insists they include one of the biggest names in the cannabis world. “He’s a legend, and we’re close to securing the deal,” Walker says. “Celebrities are definitely going to be part of what we’re doing.”
As for the mega-bong, Walker doesn’t see it as shipping container–friendly enough for Cannabition 2.0. But he’s hanging on to it, hoping to rent it out for festivals. “A mobile giant bong,” he muses. “Wow.”