NEW YORK (TheStreet) -- Marijuana may still be an illegal drug at the Federal level, but that isn't stopping some companies from building a national presence. "I think people are already positioning themselves for a national cannabis industry," said David Bienenstock, a marijuana consultant. "The people who make a smart move now will be rewarded later."
The opportunity for investors seems obvious. First, there is an established customer base. Granted, most of these consumers have been buying their product in the black market, but many probably prefer to do a legitimate transaction, assuming the price is right. Next, there are no entrenched players. The field is wide open to the budding entrepreneurs to be the first to market.
However, it isn't that simple. The industry is subject to many regulations and restrictions. For instance, the product can't be transported across state lines. This has caused many of these companies with national aspirations to become creative with their corporate structures. Also, the promotional efforts are challenging. It's difficult to build a national brand when your advertising is limited.
Dixie Elixirs is a maker of edibles and beverages using cannabis products. Joe Hodas, chief marketing officer at Dixie said the company can't just follow a mass media platform. "We have restrictions like making sure that 70% of the audience is over 21 and from the state," said Hodas. Instead Dixie prefers to sponsor events like the 420 celebration in Denver. "We knew people from out of town would be there," said Hodas.
The hope is that these marijuana tourists will remember the product and then when their home state is legal, they will be more likely to purchase a familiar product. "Public relations is our best channel from a national perspective," Hodas said.
Another challenge Dixie faces in its national brand quest is that it must make its product in each state where it is sold. In order to accomplish this, Dixie teams up with in state partners. "It's not too dissimilar to a licensing model," said Hodas. This creates a strong local presence and loyalty. Plus, it helps the company maintain standards. Dixie has relationships with many local growers from whom it gets raw materials and because of local ties, the company has been accepted by the marijuana community.
That hasn't been the case for Diego Pellicer. This Washington-based company said from the get go that it wanted to be a national brand. But its brash Wall Street approach didn't sit well with the established marijuana industry. "People didn't like their values," said Bienenstock, "Profit at any cost." Bienenstock said the community has no problem with a big cannabis business. He said many people took huge risks for years and should be rewarded for their hard work. They were just insulted that people assumed they had no idea how to run a big business.