While the quality of cannabis may have improved significantly over the last decade, marijuana edibles still “suffer from three major problems,” Peter Barsoom, the CEO of cannabis company 1906, recently told Yahoo Finance’s The Final Round.
“One, they taste bad … strong, hashy flavor, strong ingredients,” Barsoom said. “Second, you have no idea how they’re going to make you feel. And then third is the fact there’s a long delay typically between when you ingest and when you start to feel the effects, so that really creates a market that serves people who really need to or want to get very high.”
The United States’s legal cannabis market is projected to reach $11 billion in consumer spending in 2018 and more than $23 billion by 2022, according to a joint report from Arcview Market Research and BDS Analytics. The cannabis technology industry is booming as entrepreneurs develop far better cultivation techniques and more strains.
‘The East Coast is where a lot of brands are built’
Barsoom asserted that his company’s products have resolved all three of the major problems many edibles have and are “intended to serve high functional adults.”
Even though much of the current growth in cannabis is happening in California, with a market that is expected to exceed $5.1 billion in 2018, Barsoom said his company sees “the greatest opportunity” coming out of the East Coast.
“The East Coast is where a lot of brands are built and this is a market that is far more interesting to us. It doesn’t have the same stoner culture that California and the West Coast markets do,” he said.
However, it’s still illegal to sell cannabis for recreational use in many big markets, including New York. Massachusetts, Vermont, and Maine, along with Washington D.C., are the only East Coast markets where recreational marijuana is currently legal.
“Here is the problem with your product,” Yahoo Finance Editor-in-Chief Andy Serwer told Barsoom while holding one of his company’s edibles. “If I do [eat this], a policeman is going to come right in here arrest me. It’s illegal. I can’t do this right here in New York, right?”
“Technically, no,” Barsoom responded.
Many public weed companies are ‘basically cultivators’
And given that 1906 is not a grower, the company faces some important challenges in competing with others in the space. Some of these companies include Tilray (TLRY), which has a market capitalization of $9.6 billion, Canopy Growth Corp. (CGC), which has a market cap of roughly $11 billion, and Cronos (CRON), which sits at $2.3 billion.
“In almost any other market it’s the brands who get a disproportionate share of the value that’s created. What we have here is that many of these companies that went public, they’re basically cultivators, farmers,” he explained. “And so imagine a world in the alcohol world where it was the Barley farmers that got all the value and the brands were second. That’s the way unfortunately in which the public markets today are valuing cannabis companies, based on how much cultivation they have and what they’re growing and how much they’re growing.”
Barsoom said it also doesn’t help his business that many of 1906’s A-list investors don’t want to discuss their association with the cannabis products.
“There’s still a stigma associated with cannabis,” he said. “When Elon Musk gets in trouble for doing something which is totally legal in the state of California still shows that the public isn’t fully ready yet… We still have a way to go to overcome the stigmas and the ‘just say no’ era of Nancy Reagan.”