Oakland’s Pot Biz: Mapping the Landscape of the Cannabis Economy

cannabis plant

Cannabis plant at Oaksterdam University

This is the first of my 6-part series on the cannabis business in Oakland published on Oakland Local and funded on Spot.us.

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 city—Harborside 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).

The six-part series examines some of the businesses and entrepreneurs fueling the cannabis 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, including some of the major players such as the insurance industry and contractors.

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.

Variety of product to choose from at Harborside Health Center

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 marijuana dispensaries.

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 slices—but 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 services—our 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.

This story was funded with the help of Spot.us, a crowd-funding non-profit that has helped raise money to support many OL stories. For more information on Spot.us visit their site, where you can support quality journalism. Thanks, Dave–and everyone who donated!


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s