America's legal cannabis industry has been clawing its way back to where it was before it became illegal in 1937--a legitimate, hugely profitable provider of clothes, paper, and medicine, and a safe respite from everyday stress. The process of legalization and social acceptance has been slow, starting in 1996 in California. Today, medical marijuana is legal in 23 states (as well as Washington, D.C.) and recreational pot is legal in four.
Colorado's legal cannabis industry, the most robust in the country, is valued at $2 billion. One company in Denver, Dixie Elixirs, is on a mission to further bring marijuana mainstream through sophisticated branding and products like its "elixirs" line of carbonated drinks, a THC oil-infused gourmet chocolate bar called Toasted Rooster, and a range of gum, mints, and tinctures.
But Dixie is also legitimizing the industry by example, with a state-of-the-art extraction lab and manufacturing plant that produces 1,000 bottles of elixirs a day. With its products on the shelves of more than 75 percent of dispensaries in the state, Dixie is serving customers with a different marijuana experience: gum instead of joints, a bottle of soda instead of a bong.
Dixie co-founder and CEO Tripp Keber isn't looking to become the king of the stoners. A former real estate developer, he never grew or sold marijuana until he founded the company in 2009. Now, though, he has bold plans for bringing the company's products to the masses: Dixie just announced its expansion into California's medical market, and expects to move into three to five new markets by the end of 2015. And in perhaps his most audacious undertaking, Keber, who is featured in MSNBC's reality show Pot Barons, is positioning the company to be an attractive acquisition target for established liquor brands.
During BevNet, an alcoholic beverage industry conference in New York City last week, Keber, clad in a suit, skipped the trite jokes about Birkenstocks and Bob Marley and presented Dixie and its carbonated elixirs as a logical player in the liquor business. As the regulatory landscape around cannabis changes, he said, big alcohol conglomerates will step in to buy the successful brands. He believes Dixie is one of those brands.
"I fundamentally believe that it is Big Alcohol and Big Tobacco that will be my future employer," Keber said in his BevNet speech. "At the end of the day, the sale of marijuana is negatively impacting the sale of alcohol in Colorado." He pointed to British beverage giant Diageo as the type of company that could become a suitor as pot becomes a greater threat to its business.
Keber's address in New York was not the first time he's posited that the alcohol industry (as well as, potentially, the tobacco and pharma industries) will start gobbling up pot companies if and when marijuana is legalized nationally. A marriage of the two industries may seem strange, but it's actually not all that far out. There is now a bill in the U.S. House of Representatives that would remove marijuana from the Controlled Substances Act and have it regulated and taxed like alcohol. The bill even suggests after the DEA hands over its regulation of marijuana to the ATF, the agency would be renamed the Bureau of Alcohol, Tobacco, Marijuana, Firearms and Explosives. The Food and Drug Administration would have the same authority over marijuana as it does for alcohol.
While many veterans of the cannabusiness do not wish for the industry to be sold off to international corporations, a growing group of executives see alcohol, tobacco, and pharma companies as the key to a lucrative exit. Meanwhile, those industries are keenly aware of the threats to their continued growth. For example, in Louisville-based spirits distiller Brown-Forman Corp.'s 2014 annual report, the company's executives explain how changes in regulations, consumer tastes, and the economy, and even "the potential legalization of marijuana use on a more widespread basis within the United States" would negatively impact their bottom line. That report marked the first time Big Alcohol publicly acknowledged how legal weed might eat into its profits.
Keber knows an opportunity when he sees one, and says he is now focused on making his company as valuable a prize as possible.
"[Big Alcohol companies] are not interested in giving up market share. And so if you can't beat them, join them," he says. "And when I say join them, I mean buy us."