How Hops and Bud Occupy Space in Colorado

Since marijuana became recreationally legal in Colorado earlier this year, a common fear has emerged among the brewerati: that weed might crowd out what has been up until now a near-insatiable demand for craft beer in the state.

While hops and buds both carry the Cannabaceae family name, the thinking has gone that there isn’t enough room in the Centennial State for both genera. But in reality, brewers and dispensers aren’t too worried about losing business
to one another.

“They’re both different niche markets, if you will,” said Cassandra Ono, wholesale accounts manager with Mountain Medicine and Good Chemistry, twin dispensaries in Denver.

Added Charlie Berger, co-founder of Denver Beer Co., “We’re sort of unconcerned with that storyline.”

The demand for craft in Colorado is unquestionable, as the majority of brewers in the state project growth in excess of 20 percent for 2014, despite the legalization of weed. Conversely, as of May 1st of this year, according to the Marijuana Enforcement Division, there are 200 retail marijuana stores, 54 retail product manufacturers, 260 retail cultivation facilities and seven retail testing facilities in the state. Those figures don’t even include the additional 1,360 medical centers, manufacturers and cultivation facilities that have been present in-state for several years. So demand on both sides seems mighty healthy.

But demand is only part of the equation. The supply side, which includes infrastructure resources, is the other half. And as more businesses look to open across the two industries, the real competition exists in acquiring a very tangible – and finite – resource that both sides require: space.

In October, Denver Beer announced it would purchase a 48,000 sq. ft. warehouse as part of its expansion plans; but Berger said that, due to increased grow operations’ blooming demand for warehouse space, finding that proved more difficult than he’d anticipated.

“From a business perspective, we have seen the real estate market prices increase for warehouse space in Denver as the grow operations are in need of room to operate,” he said. “It was quite a challenge to find a building that would both fit our needs and our budget as a result of the grow operations that are sprouting up everywhere.”

The Denver Post reported in March that the city’s industrial vacancy rate is uncharacteristically low at 3.1 percent, adding, “marijuana cultivation and manufacturing facilities in the city occupy about 4.5 million square feet.” Space is also leasing, the article continues, “for as much as four times the prices paid before medical marijuana sales began to boom in 2009.”

Beer does have the distinct advantage in the race for space in that it’s far less stigmatized and has 80 years on weed in the “being legal” department. Some landlords are reluctant to lease property to pot growers and sellers.

“There are a lot of landlords that don’t want to deal with it,” said Matt Hess, founder of River North Brewery in Denver. “I’ve seen plenty of commercial listings that say ‘no medical marijuana.’”

Banks, too, have been reluctant to give loans to growers as they work to figure out how to properly finance the formerly illicit industry, although, as the Denver Post reported in April, private investors have been generous to the cause.

Dispensaries face other zoning regulations as well. Andrew Livingston, policy analyst with Vicente Sederberg, a marijuana law firm, put it simply: “There’s likely some warehouse space and areas that craft brewers could use that retail marijuana dispensaries could not.”

Ono added that there is currently a lot of red tape surrounding the whole pot industry, which makes securing warehouse space an arduous process for would-be dispensaries. She added, however, that “as the stigma goes down and the popularity goes up” people are “going to want a piece of that pie,” which might, in turn, level the playing field between the two industries as they vie for space.

But regardless of who’s occupying it, that shortage of space is such for everyone.

“Even going back a handful of years, there was a lot of open and empty warehouse space, and almost all of that has been gobbled up,” added Livingston.

It should be noted, physical space isn’t the only resource the two industries have in common, nor is it the only one that a brewer might have a feasible advantage attaining. It takes a lot of carbon dioxide (CO2), for instance, to run a brewery. So too is CO2 integral to the growth of marijuana. And as with warehouses, there are only so many tanks to go around.

Art Waskey, senior vice president of sales at General Air, a Colorado-based air supply company, has clients across both industries and said the demand has increased significantly since weed became legal on January 1. That said, Waskey added that newly legal dispensaries aren’t really what his company chases, due to what he calls a moral dilemma.

“You have all these questions you have to ask yourself about whether you really feel comfortable with it,” he said. “Marijuana has been more of an issue because it’s new.”

But, he added, the company still fills its duty as a supplier, regardless of clientele.