Edible Weed May Be Half of the $5.4 Billion Pot Business

Cannabis-infused edibles are about far more than peace, love, and higher consciousness.

Peggy Noonan knows a thing or two about marijuana. She was a drug runner between Mexico and the U.S., before earning her living as a dealer in Arizona. Both stints ended badly, with Noonan serving time in a Mexican jail and slapped with federal probation in Arizona. All that feels like ancient history, says Noonan, who’s among the thousands of “ganjapreneurs” in the burgeoning market for edible marijuana products. “It was pretty wild, life coming full circle,” she says.

Noonan’s Cornucopia Health and Wellness in Tucson sells 40 products including Weedish Fish gummies, extra-large German chocolate brownies, and Serenity Tincture—all infused with varying degrees of pot—to about 60 so-called dispensaries in Arizona for medicinal use. The company, which opened for business in April 2014, employs eight people and has seen sales double over the past three months, says Noonan, who’s not to be confused with the columnist and Ronald Reagan speechwriter of the same name.

Photographer: Patrick Driscoll for Bloomberg Businessweek

Marijuana is legal for adult recreational use in Alaska, Colorado, Oregon, Washington, and the District of Columbia and for medical purposes in 23 states, the District of Columbia, and Guam. U.S. sales of legal cannabis reached $5.4 billion in 2015, up from $4.6 billion the year before, according to ArcView Market Research. Edibles and other infused products—defined as anything other than the bud itself—make up at least half of the total, dispensary owners say.

“It’s probably the most exciting segment of the marijuana industry,” says Christian Hageseth, founder and chairman of American Cannabis Partners, a holding company for marijuana-related businesses. “We still haven’t identified who’s going to be the Apple computers or the McDonald’s hamburger or the Coca-Cola” of edibles.

Many people have heard of rapper Snoop Dogg’s Leafs brand of pot edibles, but there are scores of companies popping up across the country, with names like Dixie Elixirs, Incredibles, and BlueKudu, adding new items to the marijuana menu. Keef Cola, a soft-drink line owned by CanCore Concepts, is expanding this year from Colorado to Oregon and Nevada, according to the brand’s co-founder Erik Knutson. Its Colorado licensee, Denver Packaging, sells Keef Cola in more than 380 dispensaries and turned a profit last year.

Despite the recent momentum on legalization, the industry faces plenty of hurdles, not the least of which is convincing lawmakers and the public that edible marijuana products are safe. One concern is the obvious appeal of pot-infused candies, cookies, and soda pop to children.

In the past couple of years, several states have taken action, some spurred by reports of an increase in emergency-room admissions. Most require marijuana edibles to be sold in child-resistant packaging that’s opaque, so the contents aren’t visible, and free of cartoons or other images that may appeal to children. The American Association of Poison Control Centers fielded 352 calls in 2013 and 456 in 2014 about accidental exposure to THC, the psychoactive chemical compound in marijuana, in children under 12. In 2014, by contrast, there were 17,563 reports of children ingesting deodorants and 28,009 incidents involving diaper cream.

Noonan , who grew up in an affluent family on Central Park West in Manhattan, began smuggling marijuana into the U.S. from Mexico after graduating from Arizona State University in the late ’60s. The weed was supplied by “farmers coming down the mountains on donkeys with bales,” she recalls. “It wasn’t any kind of syndicate. It wasn’t like cartels.”

Photographer: Patrick Driscoll for Bloomberg Businessweek

Noonan was arrested in 1969 and spent three months in a Mexican jail. After serving her time, she returned to the U.S. and started dealing. The feds caught up with her in 1975. Noonan’s ex-husband was sent to prison for two and a half years while Noonan, pregnant at the time, got probation.

After her marriage broke up, she moved back to New York, worked as a drug counselor, then enrolled at Parsons School of Design. She started her own company as a designer, developer, and contractor in the high-end residential market. She relocated the business to Tucson in the late 1990s, changing its focus to restaurants, and began laying the groundwork for Cornucopia after Arizona legalized medical marijuana in November 2010.

The edibles are baked at a commercial kitchen, part of a 13,000-square-foot “grow” site where Noonan cultivates and harvests marijuana. “We are constantly tasting,” she says, explaining that the company first makes uninfused versions of its products for sampling. Once she’s satisfied with each batch, her two-person sales staff loads the goods into unmarked vans (to avoid attention) and delivers them to dispensaries across the state. What Cornucopia bills as “The World’s Best Brownie” can fetch as much as $12.50 retail. It contains 40 milligrams of THC. Globe Farmacy, an Arizona dispensary that sells the brownie, recommends customers start with 10-milligram increments.

Noonan has ambitions to expand to California, Colorado, and Washington state dispensaries through licensing agreements to comply with state laws. “Going national is ultimately the goal,” she says. In the meantime, she’s using Facebook and Instagram to bring attention to her brand and collect customer feedback. “We like that, getting comments, even if it’s negative. It all helps.”

The bottom line: Sales of marijuana edibles rose in 2015 as more “ganjapreneurs” piled into the fledgling industry.