Cannabusiness in Washington D.C.

Abstract

The cannabusiness case study focuses on entrepreneur Corey Barnette, owner of cultivation center District Growers and dispensary Metropolitan Wellness Center, two partially vertically integrated cannabis businesses. The case study examines the challenges facing a business owner in a new and highly regulated market, including finding access to capital, making compliance investments, and building political connections. The case also explores the history of cannabis in the United States, and how the “War on Drugs” gave rise to an uneven playing ground for minorities wishing to be a part of the legal cannabis industry – one of the fastest growing industries in the country. Barnette, an African-American, was able to overcome many of the barriers to entry facing minorities due to his MBA degree and background as an investment banker. As Barnette considers his growth strategy, he must evaluate how to leverage his influence as a visible figure in the DC community, whether vertical integration is advantageous and which segments of his businesses are value drivers, and how to more effectively compete within DC and beyond.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Exhibit A: U.S. Cannabis Market Revenue Growth and Projections (Illustrative)

Figure

Source: Author interviews

Exhibit B: D.C. Patient Registration Count

Figure

Source: District of Columbia Department of Health

Exhibit C: Corey Barnette’s Professional Profile

Figure

Source: Corey Barnette

Exhibit D: Drug Schedule Classifications

Controlled Substance Act (CSA) Schedules and Definitions

Definition

Drug Examples

Schedule I

Drugs, substances, or chemicals with no currently accepted medical use and a high potential for abuse. Schedule I drugs are the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence

Heroin, LSD, marijuana (cannabis), ecstasy, peyote

Schedule II

Drugs, substances, or chemicals with a high potential for abuse, less abuse potential than Schedule I drugs, with use potentially leading to severe psychological or physical dependence

Vicodin, cocaine, methamphetamine, Demerol, OxyContin, Dexedrine, Adderall, Ritalin

Schedule III

Drugs, substances, or chemicals are defined as drugs with moderate to low potential for physical or psychological dependence. Schedule III drugs abuse potential is less than Schedule I and Schedule II drugs but more than Schedule IV drugs

Tylenol with codeine, ketamine, anabolic steroids, testosterone

Schedule IV

Drugs, substances, or chemicals are defined as drugs with low potential for abuse and low risk of dependence.

Xanax, Soma, Valium, Ativan, Ambien

Schedule V

Drugs, substances, or chemicals with lower potential for abuse than Schedule IV and consist of preparations containing limited quantities of certain narcotics. Schedule V drugs are generally used for antidiarrheal, antitussive, and analgesic purposes

Robitussin AC, Lomotil, Lyrica

Source: DEA.gov

Exhibit E: Marijuana Legalization in the U.S.

Figure

Source: Author interviews

Exhibit F: Cannabis Industry Value Chain

Figure

Source: Corey Barnette

Exhibit G: Estimated Margins by Category (for illustrative purposes only)

Figure

Source: Author interviews

Exhibit H: Qualifying Conditions in Select States

Figure

Source: Colorado Dept. of Public Health and Environment, Oregon Health Authority

Exhibit I: D.C. Dispensaries and Cultivation Centers

Figure

Source: Google Maps, NeighborhoodInfo DC

Exhibit J: The Legal Cannabis Market Landscape

Figure

Source: Author interviews and literature review

Exhibit K: Edibles Produced by DG

Figure

Source: Corey Barnette

Exhibit L: Metropolitan Wellness Center

Figure

Source: Corey Barnette

Exhibit M: Dispensary Differentiation Table

Figure

Source: Author interviews and dispensary websites

Glossary

THC: tetrahydrocannabinol; the chemical compound responsible for cannabis’ psychoactive effects. It increases dopamine levels and affects the method of memories processing.

CBD: cannabidiol; the second main compound in cannabis known for its medical benefits and ability to counter the psychoactive effects of THC. Because it does not create a “stoned” feeling, it is extracted for medical use by children

Sativa: sativa is a strain of cannabis with a tall and skinny plant structure known to produce an energetic, uplifting high. It primarily affects the mind.

Indica: indica is the second strain of cannabis with a short and dense plant structure known to produce a relaxing, heavy body high. It primarily affects the body.

Hybrid: hybrids are made from a combination of sativa and indica plants. Depending on the ratio of sativa to indica, a hybrid can produce a head high, body high, or both equally.

Dispensary: a location permitted to sell legal cannabis and cannabis products, so long as the buyer meets qualifying conditions as outlined by his or her state.

Wholesaler: an intermediary entity in the supply chain that buys large quantities of product from cultivation centers and sells primarily to resellers and large-volume customers.

Grower: an entity in the supply chain that acquires cannabis plants, grows them, and prepares them into a usable cannabis form (i.e., dried flowers, stem).

Processor: a facility that collaborates with growers and other suppliers and partners to manufacture cannabis products such as tinctures, oils, and edibles.

Tinctures: an alcoholic extract of cannabis. It only contains CBD, and thus does not produce psychoactive effects.

Edibles: food products made with cannabis, such as brownies, cookies, chocolate, and juices. They contain THC and are gaining strong popularity as an alternative to smoking.

Waxes: a cannabis concentrate in a thick, opaque form.

Oils: a highly-potent cannabis concentrate.

Third-party recruitment: agencies that specialize in assisting customers through the process of obtaining a medical marijuana card by connecting customers to qualifying physicians and other resources. Patients are then referred to dispensaries that have partnered with the agency.

Aeroponics: the process of growing plants in an air or mist environment, without the use of soils. It provides the grower with minute control over vitamins and minerals the plant uptakes

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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