

Startups Seize Marijuana Opportunities as Big Companies Hold Back - mikek
http://www.nytimes.com/2014/08/07/business/smallbusiness/start-ups-seize-marijuana-opportunities-as-big-companies-hold-back.html

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aestra
>because the stigma associated with the industry has discouraged bigger
companies from getting involved.

I don't believe it is stigma.

Marijuana business is incredibly risky and can be technically illegal. Big
companies tend to be risk adverse and have shareholders to answer to.

I think if the legality was definite a lot of big companies wouldn't be
reluctant to join in.

On another note I think a few of these companies can improve their image to
the mainstream if they get rid of the slang that only current pot smokers
identify with.

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bitJericho
Right. What currently extremely wealthy CEO wants to risk going to jail over a
new product line? It's the startups where people will either be on the street
or making bank that are going to go after an opportunity like this. Those are
the only kind of people that can benefit in the current legal environment.

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bkeroack
When you take the legal complications away, the "marijuana business" is
nothing but farming. Beyond that, it's farming involving a crop that is
(relatively speaking) very cheap and easy to grow.

Once the laws are straightened out, I see no reason why big agribusiness won't
completely crush all the startups entering this space. They have the scale,
resources and experience to produce cannabis vastly cheaper than anybody else
could hope to. A few small boutique farms might be able to eek out an
existence (maybe we'll see "fair trade" marijuana?) but it's not anything I
would ask a VC to put money into.

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YokoZar
Eh it's a bit more complicated than that. Marijuana cultivars vary
tremendously, but not in a way that's particularly amenable to "here try a
bite and see" like when you see strange fruits at a farmer's market. As a
consequence you're going to see a lot of value placed on consumer information
-- many of the startups highlighted in the article are about things like
customer reviews of various strains, for instance.

And more broadly even under a much more lax legal environment marijuana will
still require things like proper packaging (eg the scentless bags produced by
one of the highlighted startups).

It's also unclear how much of the cost is actually production. If 90% of the
cost is stuff like flat taxes on end product, then big agribusiness with low
production costs can't actually get much cheaper.

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brianbreslin
It's going to boil down to this: small businesses will fertilize the industry
and then when laws get standardized across the country the big pocketed
companies will buy their way in. I would bet that tobacco and pharma companies
are stockpiling cash offshore to buy into this market in 3-4 years

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Scoundreller
One business philosophy I have in life is: "Don't compete with Wal-Mart,
you'll get crushed". This segment seems to agree with that philosophy.

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aestra
Target seems to be doing ok.

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SDGT
I don't think they're quite competing with directly with Walmart, but only due
to the targeted demographic.

Walmart targets everyone, which usually results in more of a sway towards the
lowest common denominator. Target's marketing (Target's target marketing?) is
seemingly always geared towards upper middle class, or whatever makes up that
income level now. It even shows in their branding. Take a look at how Target
specific brands are expressed (Archer Farms, Market Pantry, etc) and compare
them to their counterparts over at wally world.

Here's an excellent example of this: Starbucks embedded cafes in Target stores
under the Starbucks brand. They did the exact same thing in Walmart, but ran
under the Seattle's Best marquee in order to provide the lower priced option.

