Medbox: Dawn of the Marijuana Vending Machine“We are in the right place at the right time,†says Bruce Bedrick, a 44-year-old chiropractor, occasional pot user, and chief executive officer of Medbox (MDBX), maker of one of the world’s first marijuana vending machines. “We are planning to literally dominate the industry.â€
The two investors Bedrick is addressing at the offices of NewGate Capital Partners in Winter Park, Fla., smile politely. NewGate partner Joe Alvarez Jr. says he likes Medbox’s product but has concerns about the company’s roller coaster stock, which zoomed from about $3 a share to $215 in November and has recently bounced between $20 and $30. Alvarez doesn’t use the phrase “pump-and-dump,†but it hangs there like a cloud of smoke. Either way, Bedrick takes umbrage. “This is all crazy talk,†he nearly shouts. “Wall Street plays games with our stock all the time. We’re a retailer’s wet dream. We’re the leading player in an industry that’s ready to explode.†Alvarez says he meant no offense.
Medbox’s core product resembles a Redbox DVD dispenser, only it’s black, refrigerated, and armored. Bedrick avoids the term vending machine because you can’t just saunter up to a Medbox, put in a few bills, and walk away with a stash of weed. The devices sit behind sales counters at state-licensed marijuana dispensaries. Biometric technology identifies the fingerprints of patients carrying state-issued medical marijuana cards. Clerks hand over plastic vials of cannabis leaf or, depending on the machine, cannabis-infused brownies, lozenges, or other “medibles.†A database tracks everything so that patients can’t buy more than their legal allotment, clerks can’t pilfer the merch, and states can collect taxes.
It’s a conventional business model—which is the point. Medbox’s $50,000 machines are intended to allay fears that pot means “druggies standing on street corners and grabbing little kids and stuffing drugs down their throats,†Bedrick says. As he sees it, for marijuana to become as mainstream as Miller Lite it needs to endure the same PowerPoints and conference calls as other businesses. “If you’re going to allow people to have marijuana, then let’s organize it, regulate it, tax it,†Bedrick says. “It has to work for everybody.†He adds, “I’m a Libra—always seeking balance.â€
After the meeting, he steers his rented Chrysler into downtown Winter Park for lunch. He parks curbside on busy Park Avenue and starts to strip off his charcoal suit, blue dress shirt, and banana-yellow tie. Shoppers strolling past don’t seem to notice the hairy-chested man in boxer shorts jabbering on his phone. Bedrick doesn’t care. He slips into jeans and a T-shirt. “I’m very thankful for everything that has happened to me,†he says, “but I never thought I’d be wearing a suit.â€
Bedrick and his 34-year-old partner, Medbox inventor P. Vincent Mehdizadeh, are two of many entrepreneurs seeking to cash in on the prospect of legalized marijuana. Eighteen states and Washington, D.C., have legalized the drug for medicinal purposes, and others are moving in that direction. Washington State is writing rules for recreational use; Colorado just passed legislation regulating retail sales. With a Pew Research Center poll finding broad support for legalization, entrepreneurs hope the feds will rescind, or at least not enforce, its decades-old ban on marijuana. The market is potentially huge: IBISWorld estimates legal sales this year will be $1.7 billion, rising to $5 billion by 2018. Then there are the picks and shovels of this gold rush: vaporizers to inhale marijuana, hydroponic gear to grow it, software to tally taxes, and so on.
Some new shops look as bland as doctors’ offices, with clerks in white smocks and labeled plastic containers like the ones behind the counter at CVS (CVS). Leafly, a sort of Yelp (YELP) for dope, wants “no puns, no pictures of pot leaves or giant joints, none of the negative stereotypes,†says Brendan Kennedy, co-founder and CEO of Privateer Holdings, a private equity firm that owns Leafly. Only medibles are visible in Medboxes, not the weed; “You don’t see pharmacies with Vicodin on display,†Mehdizadeh says. He has no title at Medbox but helps Bedrick run the business as a consultant.
Bedrick, Mehdizadeh, and other aspiring marijuana moguls are urging states to levy taxes, set hefty registration fees, and establish detailed regulations such as mandates for fungus testing. Washington State estimates marijuana taxes and fees could generate $2 billion in revenue over five years. “What state … forget it, what country can afford not to give that a serious look?†says Tripp Keber, managing director of Dixie Elixirs & Edibles, which sells marijuana-infused sodas, candies, bath salts, and tinctures.
For now, the feds still loom. Banks shun marijuana businesses. Cities worried about crime are erecting legal obstacles. Most of the dozen or so public pot companies, including Cannabis Science and Medical Marijuana, remain pink sheet stocks, which don’t have to report financials as fully as companies on major exchanges. Medbox, based in West Hollywood, Calif., saw its market cap soar to more than $2 billion in November after the votes in Colorado and Washington. On Nov. 15 the stock closed at $205 a share; the next day it fell to $20 after Medbox said the price spike was “not based upon present business economics.†It blamed the increase on a tiny “floatâ€â€”publicly available shares—that meant trades of a few thousand shares could push the price way up or down. “The key to these investments?†Jay Leno quipped on The Tonight Show. “Buy low, sell really, really high.â€
http://www.businessweek.com/articles/2013-05-09/medbox-dawn-of-the-marijuana-vending-machine#r=lr-fst