Mile high city: Inside Denver's billion-dollar marijuana industry

The grow room is modest – maybe 600 sq ft – but it’s one of many at this marijuana farming facility on the outskirts of Denver, Colorado. Apart from a narrow path to let the grower get to his crop, every inch of floor-space is filled with plants. I can’t tell my indicas from my sativas, but I know cannabis well enough from the clichés: the thick, earthy scent; the unmistakably-shaped leaves. Peering closer, I can see fat buds encrusted with the potent THC crystals that make pot pot.

Even if my nose and eyes failed me, I could guess the crop’s identity using my ears, because the stereo on the shelf in the corner is blasting “Insane in the Brain”, a classic stoner anthem by the hip-hop group Cypress Hill. The grower is a young guy in a backwards baseball cap, bobbing his head to the beat as he prunes. But standing in the doorway is his boss, to whom few of the clichés apply. Norton Arbelaez is a former medical lawyer, clean-shaven and wearing a crisp, collared Oxford shirt. “Some of the growers listen to classical music,” he says, not entirely convincingly.

Arbelaez, aged 33, is the co-owner of River Rock Wellness, a medical marijuana emporium that in less than six months’ time will be one of the first businesses in the world to legally cultivate, manufacture and retail marijuana to anybody who’s buying, regardless of their medical status. His is the face of the new weed industry: presentable, professional, and completely above-board.

At the November 2012 election, Colorado voters passed constitutional amendment 64, legalising recreational marijuana in their state. In May, Democrat governor John Hickenlooper reluctantly bowed to the will of the people and signed a series of measures to create the world’s first fully taxed and regulated recreational marijuana market. Pot – yes, Americans still call it that – remains illegal at a federal level, but the Obama administration has so far shown little interest in disrupting Colorado’s grand experiment.

Medical marijuana is already permitted in 18 US states, as well as Washington DC. At least four more are poised to enact similar legislation within the year. Washington state has also passed a law legalising recreational weed. Before long, the drug will likely be allowed in some form across more than half of the country. But Colorado, which approved medical marijuana in 2000, was the first to adopt a for-profit model. It remains the most advanced medical marijuana market in the US, catering to well over 100,000 patients. Next year, it will become a test-bed for broad legalisation, and every sensible government would do well to take notes.

From January 2014, anyone in Colorado aged 21 and over will be allowed to buy an ounce of weed for recreational use from a licensed retailer. The Mexican cartels who currently supply up to 70 per cent of America’s pot will be displaced by transparent and accountable businesses. Thanks to professionalised growing practices, their product is orders-of-magnitude better than anything you ever smoked in college, or Camden – or Amsterdam, for that matter. Their advertisements already fill the back pages of Denver’s local freesheet, Westword, promising ‘$25 grams of earwax’ or ‘Peanut butter hash: only $12 per gram’.

Stocks in pot and pot-related businesses are booming: Seattle-based Privateer Holdings, the first private-equity firm with a remit to invest in the ‘cannabis space’, recently raised $7m in its initial funding round. Former Microsoft executive Jamen Shively held a news conference in May, to lay out his plans for a national chain of weed shops – a ‘Starbucks of pot’ – for which he hopes to attract start-up cash to the tune of $10m. “We’re going to mint more millionaires than Microsoft with this business,” Shively boasted, and he may not be far off: medical marijuana is now a $1.5bn industry. Some estimate that federally legal, recreational marijuana could be worth $110bn.

Which is why accountants, bankers and management consultants are all descending on Denver to join the so-called ‘Green Rush’. Mark Koenig, a 32-year-old former finance professional who now works as a weed industry consultant in the Mile High City, says many of his old colleagues are desperate to invest. “A couple of years back I wanted to make a decision about my future,” Koenig says. “I was looking at the economy, talking to my friends on Wall Street who analyse other industries. A couple of hedge fund manager friends told me: ‘Almost every industry is screwed right now. We don’t see a true growth industry anywhere’. But cannabis is a growth industry.”

That industry now directly employs some 10,000 people in Colorado, and the Green Rush came at just the right moment to rescue the state from the worst of the recession, providing peripheral jobs to construction workers, to advertisers, to lawyers, to graphic designers.

Of the approximately one million sq ft of real estate that Colorado’s marijuana businesses now occupy, the most visible are on a section of Broadway, south of downtown Denver. Known locally as ‘Broadsterdam’ or ‘The Green Mile’, this mile-long stretch contains at least nine pot dispensaries, most of them housed in former car dealerships left empty by the economic crisis. Without marijuana, the neighbourhood might have ended up looking like post-crash Detroit. Instead, by this time next year, it could be Denver’s pot Disneyland.

The city’s more conservative weed enterprises are several miles from the Green Mile, in an industrial northern suburb. Zoning regulations dictate that no marijuana dispensary can be located within 1,000 yards of a school, so River Rock is in the most sensible spot that its owners could find: next to a metal-works, and opposite the country’s only manufacturer of the anthrax vaccine. (Liquor stores, incidentally, can be as close as 500 yards to a school.)

Arbelaez was born in California to Colombian parents. His father was an engineer on the assembly line at General Motors. He studied law at Tulane University in New Orleans, but in 2009, after five years working as a medical malpractice defender in Louisiana, he decided to try his luck in the marijuana trade, and relocated to Denver.

When he first arrived, he recalls, “I looked around and said, ‘Wow, there’s a lot of bozos in this business’. At that point it was like the Wild West: people from California, Texas, all over the country, were just showing up and saying, ‘I once grew a couple of plants in my basement, I can do this’. But we were professional about it. We wanted to operate to a certain standard that Colorado hadn’t previously experienced.”

Along with some other like-minded entrepreneurs, Arbelaez founded the Medical Marijuana Industry Group (MMIG), a lobbying outfit that partnered with the authorities in 2010 to devise Colorado House Bill 1284, which banned some of the less savoury aspects of the business, such as bikini girls peddling discount pot, or recently convicted felons opening their own dispensaries. The Bill’s regulations weren’t popular with some of River Rock’s competition, but they helped the industry to appear legitimate to a sceptical outside world.

It is increasingly clear that the people succeeding in the pot business are those with previous experience of business, not just previous experience of pot. Arbelaez and his two partners employ around 70 staff, but expect to have 100 by the end of this year. They’re in the process of adding several new greenhouses to their grow facility. Under state regulations, dispensaries must cultivate at least 70 per cent of their own products. River Rock produces all of its own marijuana, and sells the surplus to other dispensaries.

The facility’s master grower, Earnie Blackman, trained in horticulture at Johns Hopkins University. He’s assisted in his endeavours by costly technology that brings nature indoors: the lighting in each grow room replicates the 24-hour cycle, providing the soil-grown plants with a day and night. If the temperature fluctuates above or below optimum levels, a computer sends the grower a warning text. Specialist agricultural software allows the firm to track every last gram of cannabis from seed to sale, and a $110,000 system of security cameras and motion detectors monitors it throughout.

The dispensary itself is like an old-fashioned sweetshop, with row upon row of jars lined up behind a glass counter, each containing a different strain of fresh bud. Cheerful ‘bud-tenders’ in waist-aprons serve a steady stream of customers. Though the law requires that each product be properly labelled with a recommended serving size and information on potency, the strains retain the street-sounding names they acquired during prohibition: Girl Scout Cookie; Sour Tsunami; Buddha’s Sister; Tangerine Haze; Jedi Kush; Golden Goat; Facewreck.

Some are named for their noses: Cheese has a stiff French pong; Cherry Kush carries an odour not unlike cherries. Others are labelled according to their heritage – hybrids derived from a strain called Chernobyl also take on Cold War nomenclature: Agent Orange, Doctor Strangelove. And then there’s hash, or ‘dabs’, a popular variety of solidified hash oil – not to mention an array of non-smokeable cannabis products, not all of which have psychotropic properties: pain-relief rubs; oils; tinctures; butters; crunchy snacks; hard candies; teas; smoothie mixes; raw cannabis juices.

Historically, leading weed breeders created THC-heavy strains for their potency, flavour and high. Now that medical marijuana is a profitable industry, many growers are reversing that process to breed strains laced with large amounts of cannabidiol, the chemical in cannabis that alleviates medical complaints including MS and cancer.

Some of River Rock’s medical marijuana customers are what you’d expect: twentysomethings in board shorts and basketball jerseys, many of whom doubtless have dubious claims to medical necessity: anxiety, or ‘pain’. But one elderly lady is being prescribed a range of cannabis pills, oils and bath soaps to treat the burns over 90 per cent of her body. Another man, who walks with a stick, tells me he has a rare degenerative condition that attacks his connective tissues, causing him to dislocate his limbs several times a week. After years of aggressive pharmaceuticals, he found the only thing that numbed the pain and eased the swelling without side-effects was cannabis. He uses it in various forms, including the vaporiser pen that he puffs on every few seconds.

Travis Howard is the chief executive of the marijuana watchdog website, kindreviews.com, and also owns a dispensary 45 minutes’ drive away in Boulder. There is no “normal” pot-smoker, he says. “Every type of individual that exists on this planet smokes pot. I’ve seen the IBM executive who looks over his shoulder to make sure none of his employees are in the dispensary before he makes a purchase. I’ve got the ad agency creatives who are stuck on a client project and need to smoke for their creativity. The cowboy redneck you think would never touch a joint? He stomps the mud off his boots outside and walks in just like the rest of them.”

The man often credited with making weed legal in Colorado is Mason Tvert, executive director of the campaign group Safer (Safer Alternative For Enjoyable Recreation). Tvert is 31 but still seems too young to be wearing a tie, which may explain why he was underestimated by the state’s anti-pot forces. He works in a tiny ground-floor office at the back of a red-brick townhouse in Denver’s legislative district, a block or so from the State Capitol. The same building contains a leading medical marijuana law firm, Vicente Sederberg; the medical marijuana advocacy group Sensible Colorado; and the deputy director of the National Cannabis Industry Association.

Two incidents inspired Tvert to take up the fight for legal pot: one involving drugs, the other alcohol. As a college freshman in Virginia with a moderate fondness for weed, he was investigated by a drugs task force and subpoenaed to testify before a grand jury. “And all for just smoking marijuana, one of the least dangerous social activities I engaged in as a college student,” he says.

“When I was an 18-year-old senior in high school, I was taken to hospital in an ambulance with alcohol poisoning. When I woke up they said, ‘I hope you have enough money for a cab fare’. There was absolutely no interest shown in why I, as an 18 year old, had been able to get hold of enough alcohol to almost kill myself. Yet all these law enforcement agencies were spending time and resources worrying about me in my dorm room watching The Wizard of Oz with Dark Side of the Moon playing. It was ridiculous.”

Backed by the DC-based Marijuana Policy Project, in 2005 Tvert moved to Denver to launch Safer, a campaign group based solely on the message that marijuana is safer than alcohol. There had been two recent, high-profile cases of Colorado students dying from alcohol poisoning, and Tvert took his campaign to college campuses first. He found he had a talent for low-budget, high-impact stunts that grabbed the media’s attention – like the time he accused Hickenlooper, then the mayor of Denver, of being a drug dealer, because he’d founded a pub and microbrewery.

Tvert led a series of unexpectedly successful ballot initiatives at the city level and later statewide, which gradually reduced the penalties for pot use and possession in Denver and across Colorado, culminating in Amendment 64. Now that his work there is all but done, Tvert has turned his attention to legalisation elsewhere in the US.

So how is it that a purple state – equal parts Democrat and Republican – managed to legalise marijuana before, say, California? More than 55 per cent of Colorado voters were in favour of Amendment 64. As Tvert is fond of saying, “Marijuana outperformed Obama at the last election”.

He and his supporters offer several explanations. Beyond progressive Denver, much of the state may be red, but Colorado conservatives are their own special shade: mostly libertarian, more concerned with states’ rights and personal freedoms than with cultural conservatism. Colorado has an entrepreneurial, small business economy; a thriving craft beer community; a longstanding organic movement. People here appreciate specialist products, made with love.

There’s a more straightforward reason for weed’s electoral success, however: between them, Colorado and Washington state expect to collect around $600m in marijuana taxes every year – money destined for schools, roads and other public projects. Recreational pot purchases will be taxed significantly more heavily than medical ones, and the Colorado authorities could divert as much as $60m in resources from drug law enforcement to more pressing matters.

If Norton Arbelaez is from a new breed of pot baron, then Adam Dunn represents the old school. Dunn was 19 when, in 1989, he left Woodstock, New York, and moved to The Netherlands with nothing but a bag of T-shirts to sell. In Amsterdam, he became an award-winning weed breeder, best known for creating the popular strain Sage, or ‘Sativa-Afghani Genetic Equilibrium’. He established a marijuana seed company, TH Seeds, and Hemp Works, a store selling hemp products. Hemp Hoodlamb, his hemp apparel company, created a jacket with a built-in rolling-paper dispenser, which has been worn by Woody Harrelson and Snoop Dogg.

In recent years, however, the Dutch authorities have been cracking down on ‘coffee shops’ selling pot. The drug was traditionally tolerated in The Netherlands, but never truly legal. In 2009, disillusioned with Amsterdam, and seeing weed flower in Colorado, Dunn decided to come home, bringing with him his mother and his Swedish wife CiCi. Hoodlab, their new Denver HQ, is a multi-purpose warehouse space that acts as an art gallery, a clothing store, an events venue and a hangout for the city’s cannabis community.

Dunn, a voluble 44-year-old with a thick black beard and eye-catching ear-piercings, says the state has taken “a huge leap” by acknowledging that marijuana’s benefits are not merely medical, and allowing people to be open about their preferences. “I was lucky enough to see that it could happen here early,” he says. “I met the people involved, saw how far they’d already come, and thought, ‘If anywhere’s going to go legal, it’s going to be Colorado’. And I liked the size of the city: it reminded me of Amsterdam. This is a tender industry, but because the Denver community is small, we protect each other.”

On 4 July, Independence Day, an American flag made from Colorado hemp by Dunn’s mother flew over the Capitol in Washington DC, as part of a national campaign to legalise the cultivation of industrial hemp – a non-psychoactive marijuana variant. But the chances of Washington endorsing federal pot legalisation in the near future remain slim, and face staunch resistance from the existing War on Drugs establishment. Almost half of American prison inmates have drug convictions; where would the prison-industrial complex be without prohibition?

By the time he left Amsterdam, Dunn’s companies – which are still going concerns – were making more than $3m in annual retail sales, and he’s doubtless doing better than most Denver dispensary owners. Though the state of Colorado allows them to operate, they have a hard time getting credit from banks. They can’t claim deductions for most business expenses on their federal tax returns. Judges refuse to enforce their contractual agreements if they come to court.

But if and when the federal government ends its war on weed, the rest of the country could look a lot like Colorado – and Colorado looks fantastic: rolling plains, big skies, snow-capped mountain peaks. Smells pretty good, too.