The Richards Reefer – why shouldn’t Britain get in on the cannabis trade?
There is no reason the UK should not be a big player in the legal cannabis trade, says Matthew Lynn.
It's hard to imagine that Bob Marley would have had much time for the private-equity industry. He wouldn't have thought much of spreadsheets and pie charts, and the only options he was interested in involved having a good time. But that hasn't stopped the private-equity boys taking an interest in the greatest of all reggae singers.
This month we learned that the Marley estate has teamed up with Privateer Holdings, an American buy-out firm, to launch Marley Natural, which it aims to turn into the first global cannabis company. The power of the Marley name he was, after all, virtually synonymous with the weed, and campaigned for its legalisation will, they believe, resonate powerfully with smokers everywhere.
The deal reflects the way that the movement to legalise cannabis is steadily progressing in the US. So far, it has been legalised in Washington and Colorado, and other states now permit it for medicinal purposes (which can, of course, be fairly widely interpreted, especially late on a Friday night).
What used to be an entirely underground, illegal industry is starting to go mainstream, with plenty of legal cannabis companies being set up to supply the market. Marley Natural aims to be the first global brand, with big money behind it, but no doubt it will be joined by many others in time.
Buy British for your bong
The UN estimates the global cannabis market, both legal and illegal, to be worth about $150bn a year. In the US, Privateer sees it as ultimately being worth in the region of$50bn a year. The figures are not terribly accurate at this stage the dealers and consumers are not yet very keen on filling in forms or reporting output statistics. But any way you look at it, it is going to be a lot of money.
Whether cannabis is eventually legalised everywhere remains to be seen. But trends that start in the US usually go global. What we view as acceptable or not can change a lot over time. Fifty years ago, homosexuality was illegal, but it was fine to drink a bottle of wine and then drive home. Now we have gay marriage, but drink driving is unacceptable. So there is no particular reason why attitudes to the drug shouldn't continue to change radically as well.
If they do, the industry is completely up for grabs. The companies that have been set up are tiny. Many of them don't even have bank accounts, because while US law allows you to sell the drug in some states, it doesn't always allow you to bank the profits. But over a few years, legal cannabis will probably evolve into a standard consumer goods industry, with a few global giants establishing dominant brands, in the way Budweiseror Heineken have in beer, or Marlboro in tobacco. That will take time, money and expertise, but it will certainly be rewarding for the people who get it right.
Britain likes to think of itself as at the forefront of growing industries, and this is the kind of thing we are good at.From Diageo in spirits to BAT in tobacco, the UK has a record of building global consumer-goods giants in products that are often addictive and not especially good for you. And it's not as if we are exactly short on singers of our own.
If the Marley brand can go global, how about the Pink Floyd brand? Or theKeith Richards brand? Either wouldseem just as powerful.
From ethics to economics
So long as it is banned, legitimate companies can't be started. Right now, whether it should be allowed or not is viewed as simply an ethical or medical issue, which is fair enough. But as it gradually becomes legal elsewhere, then it becomes an economic question as well.
After all, the government gives plenty of support to industries that are morally questionable. The arms exporters, in which the UK is a leading player, are not obviously superior to cannabis distributors. Neither are alcohol or tobacco manufacturers. It is hard to argue that our bankers have really made the world a better place, but the government gives them plenty of support.
Even if you disapprove of pot personally, that is no reason why the UK should not be a player in the industry.
The legal cannabis trade could generate lots of jobs, and plenty of wealth for shareholders, as well as taxes. Colorado just gave its citizens a tax rebate because it was collecting so much money from the industry. David Cameron has already promised tax cuts in this country without having much idea of how to pay for them this might well be the solution.
But having the first mover's advantage will be crucial. If the UK got in early, it could create some major companies. If it doesn't, the US and other countries will. Do we want to miss that opportunity?