Mapping the Business of Pot in Oakland
March 26, 2010
by Ryan Van Lenning
A 6-part series on the business of pot
Now that the tax and regulate cannabis initiative is officially on
the November ballot, California may become the first state in the
nation to legalize the recreational use of marijuana by adults.
In Oakland and other parts of Northern California, pot is already
widely accessible, fueled by an explosion of medical marijuana
dispensaries and a grey-market growing system that means medical
marijuana and related businesses are booming.
Marijuana medical dispensaries such as Harborside Health Center and
schools such as Oaksterdam University are not only bringing in a wide
base of customers -- they're creating the models for others to follow
in the growing cannabis economy...
Oakland is considered the epicenter of the regulated cannabis
industry movement. A well-regulated but permissive climate has
allowed the emergence of several major cannabis institutions in the
cityHarborside Health Clinic, Oaksterdam University, and the new
iGrow superstore. The 4 medical marijuana dispensaries and the city
ordinances regulating them have been held up by advocates as models
of how to do it right (as opposed to Richmond or San Jose, CA, where
some fear a lack of regulation is leading to too many dispensaries
opening at once).
Oakland Local's six-part series will take a look at some of the
businesses and entrepreneurs fueling the pot economy in Oakland.
We'll start with the a look at the dispensaries in Oakland that are
the core of this new form of green business. On Monday, we'll examine
Oaksterdam University, where students enroll to become certified to
become growers and dispensary managers. Next, we'll share an
interview with a Bay area tech guy who's gone back to school with the
dream of scrapping the programming biz and opening a medical
marijuana dispensary instead. Finally, we'll explore the ripple
effects making their way across the landscape of the cannabis economy.
1. Pot for Sale: Medical Cannabis Dispensaries Flourish in Oakland
Harborside Health Center, a non-profit medical marijuana collective
and health services provider, is the largest dispensary in Oakland,
both in terms of revenue and physical space.
Harborside has become a major institutional force in the medical
marijuana scene. One of four licensed dispensaries in Oakland, the
center brought in over $20 million in past years and employs 75
full-time people (with benefits). In addition to its full-time
employees, Harborside also hires a handful of part-time health
providers as contractors.
Regardless of one's views on medical marijuana, a visit to the
Harborside clinic demonstrates that the facility is bright, clean,
safe and well-run. And it's really busy. I arrived early on a Friday
morning and discovered a line of eager people already waiting to
enter to purchase their medical marijuana.
Inside the spacious dispensary, a few "budtenders" stood behind
lighted cases that featured several strains of cannabis, hash, and
extracts, including some with exotic-sounding names such as White
Kush, Shiva, Blueberry Soda, Lavendar ATF, Purple Urkel, and perhaps
the most peculiar-sounding, Schnozberry. Vials of each blend were
labeled with their percentage levels of THC, the main chemical
compound in cannabis.
I took a tour of the facility, which included a showroom for vendors
to sell their product and an entry room where new members receive
introductory walk-through of policies and services. Across from the
cannabis counter was an area dedicated to cannabis clones (plant
cuttings) that were for sale.
In the lobby, several receptionists were busy answering phones and
helping customers. A stack of binders lay neatly to one side on a
counter next to forms where members can sign up for any of the
several services, including massage therapy, acupuncture, reiki,
hypnotherapy, and aromatherapy that are available on site--all free
of charge for members. I was shown a therapy room complete with
massage table and candles that was no different than what you'd see
at any nice spa.
In the corner of the lobby was an area deemed the Patient Activist
Resources Center, where members can volunteer for a couple hours of
work on various social and cannabis movement issues and receive a
weekly gift in return. Low-income clients can receive a "care
package" if they show proof of financial hardship.
It was hard to reconcile the busy scene and the fact that over 500
people a day visit with the reality that Harborside has seen a drop
in sales the last two quarters.
"Our sales have dropped 15% since August," said Steve DeAngelo, one
of the managers. Is this due to the recession? According to
DeAngela, the issue is increased competition and more supply, not
lack of money due to an economic downturn.
Dozens of dispensaries have opened in the wider Bay Area since last
summer. Six have opened in Richmond (for a total of 8), one in south
Berkeley (for a total of three), one in Walnut Creek (closed by court
order last week, based on zoning issues), one in Alameda, two in
Hayward (though the city council has voted no to any more), one in
Martinez, several in Marin County. San Jose has over 30 medical
This expansion is what has cut into Harborside's sales. "As patients
have options closer to home, less make the trek to Oakland. One would
expect that our sales would drop further as more dispensaries open
close to us. After all, there is a finite amount of cannabis being
purchased by patients. You can cut that pie into ten, or twenty, or
two hundred slicesbut that will not increase the size of the pie.
Each piece will just be smaller," says DeAngelo. "In our case, we
will have to continue to cover our fixed costs--rent, insurance,
utilities. So if our sales continue to drop, I will have no choice
but to cut patient servicesour testing program, or our holistic care
clinic, or our care package program."
Despite this recent slight dip in sales, DeAngelo estimates the
collective will bring in about $18.5 million in gross receipts in
2010. Harborside has also been identified as model of how to do it
right--provide good customer service and high quality product in a
safe and friendly environment, and management is proud that other
cities look to dispensaries like Harborside for models of how to do it right.
Two smaller scale dispensaries, or cannabis clubs, with different
vibes in Oakland are Blue Sky Café and the Oakland Patient Center,
both near downtown Oakland. Blue Sky, owned by Oaksterdam University
founder Richard Lee, offers 3-4 varieties of cannabis presented in
binders rather than cases. Prices are slightly less than
Harborside. They also sell popular cannabis edibles including pies,
brownies, and salad dressing, and of course, coffee. Another popular
local medical marijuana club in Oakland is Purple Heart Patient
Center near Jack London Square, which carries between ten and twenty
strains and also sells clones.
iGrow Hydroponics Superstore
If you are looking not to buy medical cannabis, but want to grow your
own bud for personal use or for selling it to a collective, iGrow
superstore in East Oakland is the place to shop. Billing itself as a
one-stop-shop for cannabis growing needs, iGrow is housed in a 10,000
square-foot warehouse on Hegenberger Loop near the airport.
iGrow sells everything from fans and grow lights to nutrients and
whole hydroponic grow systems. Even a giant bud-trimmer was
displayed prominently toward the entrance. Just a couple years ago
such a business wasn't possible. Major suppliers wouldn't put their
product in a place so open about being specifically for cannabis
cultivation. General Manager Justin Jurgensen said that vendors have
been arriving nearly every other day to get their products on iGrow's
shelves. Some vendors are setting up whole displays on the warehouse floor.
"We don't so much want to be the Wal-mart of cannabis growing,"
Jurgensen said, referring to the SF Chronicle's headline referring to
iGrow as the 'Wal-mart of Weed', "but we do want to become the Home Depot."
"That is, we want to be the place where people can get what they're
looking for, a competent staff, good customer service, a return
policy, and so on."
To accomplish that mission, iGrow has a 'Grow Squad', staff who are
knowledeable about cultivation techniques and grow room operations
that provide consultation to customers.
While it is too early to tell how the business is doing, the fact
that vendors are calling and customers are buying products and
services is a signal that it might do well its first year.
And having the official support of many in city government doesn't
hurt. Several elected officials showed up to the Grand Opening at the
end of January. City council members Ignacio de La Fuentes, Desley
Brookes, Pat Kernighan, and Rebecca Kaplan all offered their
congratulations to iGrow and founder Dhar Mann.
Customers are also signing up for iGrow's classes in cultivating
marijuana on everything from the History of Hemp to cultivation
techniques. iGrow conducted its first introductory classes the
Friday of their second week in business. Seventy students
came. These classes are free and answer basic questions such as
"What is hydroponics?" and "What are the basic lighting and venting systems?"
Higher-level courses in what is called the University of Cannabis
costing around $50 will soon be added on topics ranging from how to
make edibles to the business and legal aspects of the cannabis industry.
When asked about the need for education, Jergensen said, "Oaksterdam
set the stage." Whereas Oaksterdam has classroom course only,
IGrow's University of Cannabis plans to offer several online courses.
Monday: Find out about Oaksterdam University and why it is setting
the standard for training programs round the state.