On a recent Tuesday afternoon, around the time most people wind down their day, a man in a cream Ralph Lauren suit and narrow-brimmed fedora set out from his Manhattan apartment with a black, zippered bag over his shoulder. A slight figure in his mid-30s, he knew where he was going but not where he would end up. As often happens in the course of a marijuana dealer’s day, clients place orders at the last minute.
At his first stop, Zach—who, like other dealers in this story, agreed to be interviewed only under a pseudonym—bartered $120 in weed for a deep-tissue massage from a Brooklyn Heights masseuse. Around 6:30 p.m., in Morningside Heights, he sold an academic an eighth of an ounce of premium Super Silver Haze for $80 and two cannabis-infused peanut-*butter pretzel sandwiches for $20. Three 1-train stops and a five-block walk north, a Harlem restaurant worker bought the same combination. (The pretzel sandwiches, drizzled with semisweet chocolate, are a top seller.)
At about 8 p.m., a client in Boerum Hill texted Zach’s prepaid burner phone, which sent him back on the subway to Brooklyn. This time, he reached deep into that large black bag, which he carries everywhere, like a traveling apothecary. The goods he pulled out make him a harbinger of the next phase in New York’s marijuana industry.
More from Crain's: A buyers club won't let New York's new medical marijuana dispensaries put them out
Beyond the usual varieties of quality “flower”—the term these days for weed—Zach carries vape pens filled with CO2-processed cannabis oil (the gold standard for extract *production); medicinal-grade “honey oil” concentrate in four different flavors, or strains; cannabis tincture for curing hangovers; organic cannabidiol, or CBD, a medicinal extract used for pain and anxiety that does not produce a high; cannabis-infused personal lubricant; and an inhaler-shaped vaporizer packed with wax.
While other dealers might carry cannabis-infused candies or cookies, Zach’s edibles include buckeye brownies, granola bites, *cereal bars, fruit roll-ups and Cheeba Chews—*candies from Boulder, Colo. (He is trying to build a sideline catering business that extends the marijuana menu to lobster rolls, cremini mushroom quesadillas and Irish pound cake with berries and whipped cream. The cannabis adds $500 to $1,000 to the bill.)
The city is full of high-end pot-delivery services in addition to solo dealers who make house calls. But with its gourmet edibles and pharmacy-like range of products, Zach’s business illustrates what the legalization wave nationwide is doing to the black market in New York.
Zach collaborates with a professional pastry chef on the edibles but gets most of his inventory from California, where a lax medical-*marijuana program going back two decades has fueled a bustling gray market. Colorado, which has legalized recreational use, is another source. A network of local wholesalers saves him the trip out West.
Buck Ennis Onetime restaurant owner Zach launched his cannabis enterprise Psy City last May.
A fan of the more exotic products in Zach’s bag, the Boerum Hill client chose the faux *asthma inhaler ($125, and good for 200 puffs), the vape pen ($200 for about 500 puffs) and $80 worth of edibles. By 10 o’clock Zach was headed home. It had been a profitable evening—and a pleasant one.
“It’s like the best part of every relationship,” he said of his house calls. “Everybody’s excited, and then it’s ‘See you in a week or so.’ ”
A onetime restaurant owner and occasional counterculture journalist, Zach launched his cannabis enterprise last May after spending three months as a runner for a Manhattan-based pot-delivery service. The “traveling shaman” branded his business Psy City and printed up bright yellow business cards (“Healing the mind, body & soul”) and fridge magnets decorated with a quaintly psychedelic Lady Liberty logo. It appears on all his packaging, including the prescription bottles with heat-sealed caps that hold his weed.
Zach exemplifies the tradition of innovation in the local cannabis scene. While New York state’s medical-marijuana program launching this month has regulations so strict that they threaten its success, the city has long been a place where underground entrepreneurs could thrive. Its estimated $2 billion-a-year black market is a magnet for quality marijuana, which can be ordered as easily as pizza. Delivery services that emerged as beepers did in the 1980s are so mainstream now that they serve as fallback employers for college students.
The popularity of the outlaw market could pose a challenge for New York’s program, which tightly restricts the ailments that qualify for treatment and is opening just four dispensaries in the city. Some black-market customers will stick with what they know. “There are a lot of patients who may not go through the mandated avenues,” said Derek Peterson, chief executive of Terra Tech, an Irvine, Calif.-based medical-marijuana provider that chose not to bid for a New York license. He cited the ease of delivering illegal weed in the city and the fact that the medical program can provide only cannabis extracts and not flower, which some patients prefer.
The legalization wave is bringing new energy to the city’s illicit market, but also unsettling it. Dealers are offering more cannabis strains and products than ever before. Lower wholesale prices, driven by a glut in California—where growers are producing more marijuana than medical dispensaries can buy—have put some middlemen out of business. And in some neighborhoods, retail prices are falling so fast that the future is uncertain for some sellers.
“A lot of old-time dealers I know can’t command the same high prices they used to because there’s so much competition from guys who’ve got the same high-quality [product],” said Ric Curtis, an anthropology professor at John Jay College of Criminal Justice who has studied New York’s black market. He sees California weed even pushing out the lower-quality Mexican product in poorer parts of the city. “It’s hard to say how the market is going to play out, but it’s becoming saturated,” he said.
Zach’s response to growing competition has been to employ traditional small-business strategies: Develop multiple revenue streams and focus on branding and service. He sees Psy City meeting the higher standards for the cannabis customer experience set by the states that have lifted prohibition.
“Legalization creates awareness,” he said. “There’s more variety of product out there, and I have to cater to the client.”
He is not alone in recognizing how forces beyond New York are shaping local tastes and purchasing decisions.
“The impact has been huge,” a dealer named Eric said of the legalization of recreational use in four states and the District of Columbia, and of medicinal use in 23 states plus D.C. A Bushwick resident in his mid-30s who hails from Portland, Ore., and wears Stan Smith sneakers and a black watch cap, he has been riding that momentum since the early 2000s. That was when he started “moving weight” as a middleman to supplement dry spells in the bar and restaurant business. A couple of years ago he jumped to the retail side as a dealer, and last June co-founded a “serve”—a delivery service—with 75 clients. Six months later, it has 500.
Odd men out: Downsides of dealing
Running an illegal marijuana business leads to some odd habits, as Crain’s reporter Matthew Flamm learned when he sat down with four dealers. (No real names have been used.)
What do you tell strangers you do for a living?
Zach: “I run a catering business.” It’s not far from the truth, and it’s in my background, so I can talk about it. And I strategically steer a lot of conversations away from work.
Callacious Jones: Jones has a day job in construction. To explain his after-work activities, he says, “I’m a bar-hopper.”
Eric: “I own an audio consulting company.” It’s obscure enough. And I used to do audio engineering.
Mel: I’m retired. This is a hobby. It pays for the ounce a week that I smoke.
Does it bother you to have to conceal what you do?
Eric: My parents are cool and probably wouldn’t care, as long as I’m happy, which I am. But I don’t want to incriminate them. That’s the hardest part: not being able to share my success honestly with the ones I care about most.
Zach: It bothers my girlfriend more than it bothers me. I enjoy being mysterious.
Jones: This isn’t how I’d want [my family] to view me. I will keep it quiet forever.
Mel: I was a big cocaine trafficker in the ’70s. I was brilliant at it. It bothered me nobody knew how exceptional I was.
How do you deal with the fear of getting caught?
Eric: I never do two illegal things at the same time. So I’m very respectful of all laws and rules. But I do worry, and try not to let it drive me crazy.
Zach: Recently I was in the [Brooklyn] Borough Hall subway station, and the police were checking bags. My view is: They’re looking for terrorists [not dealers], and they can only search your bag if you give them permission. I stayed relaxed and walked through. If you spend that much time thinking about the “what if,” you shouldn’t be doing this.
Mel: I only ever have a few ounces at a time.
Jones: I don’t show fear, and I don’t make eye contact [with police]. And I would never pull out all of my phones.
How many phones do you have?
Jones: Three. One for friends and family, one for business, one for women, which I turn off when I don’t want interruptions.
Eric: Six. Two for the [delivery] service. One that’s for reference—it’s just data. A fourth to contact runners when they’re out. A fifth for my partner and me to contact each other. And a sixth that’s just a phone.
Zach: Two. One dumb, for work. One smart, for personal. I’m working to get clients onto an encrypted text-message service to eliminate the dumb phone.
Mel: One cellphone, and my home phone [landline]. And everyone on my cellphone is respectable.
Among the changes he attributes to the erosion of prohibition are local dealers using more professional packaging, in line with that of legal shops, and a feeling among law-enforcement agencies that they have bigger fish to fry than small-time purveyors like him. (New York City downgraded possession of less than an ounce to a violation from a misdemeanor in November 2014.)
Best of all, California growers and wholesalers, facing depressed prices in their own state, are vying for his business. “New York is a huge market, and they can get rid of stuff for more money here than they can get rid of it at home,” Eric said.
Though he hasn’t felt pressure on his pricing, he has had to adjust his footing. As a middleman a decade ago, he could flip a few pounds a week that friends mailed him from California and clear $1,000 per pound. That number kept shrinking. About three years ago, as a flood of marijuana hit New York, bargaining power shifted dramatically to the dealers. Eric was lucky to clear $100.
“Everybody’s got a friend who can mail them something now,” he said.
The mode of transport for weed moving from California to New York has also shifted. A decade ago, big operators used trucks. Now growers or wholesalers ship a few pounds by mail or maybe 100 pounds by car.
Rather than go back to managing restaurants, Eric started dealing and eventually teamed up with a partner on the delivery service.
Retailing weed in New York is still highly profitable, though not remotely as lucrative as dealing cocaine was in the 1980s. Eric obsesses over customer data—despite smoking two joints a day—and says his profit margins run at 35%. He does not sell extracts, because possession of even small amounts is a felony, compared with a violation or misdemeanor for flower. His business’ distinguishing feature is its selection: from six to 10 strains of weed, which he buys in quantities of about half a pound and rotates in and out of the menu.
“Here’s the rub about owning a serve: You have to keep the inventory fresh,” Eric said. “I like to give everybody what they want, or they think they want, and put in something they don’t know they want—yet.” Prices run from $50 to $80 for an eighth of an ounce, with his wholesale costs starting at $150 an ounce and reaching $230 for the “Triple-A” strain, which is currently U2 Kush (“powerful euphoric buzz, with sedating full-body effects,” according to pot review site Leafly). Overhead includes the 10% in commissions his two bike-riding runners pull in on their daily eight-hour shifts, which begin at 2 p.m. Their takes can add up to $80 to $200 a night.
“I make about what a coffee-shop owner makes,” Eric said. “Or someone who owns a small but busy bar.”
Zach is also doing well. With a roster of 80 clients, of whom about 50 are weekly buyers, he works seven days a week—taking personal days off as needed—making three to 10 deliveries a night. Sales average $100 to $120 per visit, with a minimum order of $60.
“That’s going up to $100,” he said with a touch of weariness over a beer between appointments.
Profit margins vary by product, but he estimates his overall markup at about 100%. Gross sales have been averaging $12,000 a month, with profits going back into the business and toward paying off student debts. (Like other dealers interviewed for this story, he pays taxes through a “legitimate” company, which he declined to describe.) Working in Zach’s favor is the trend that drove Eric out of his old business: The wholesale price of weed, which in New York comes mainly from the “Emerald Triangle” counties in Northern California, keeps falling.
A pound that a decade ago would have cost more than $5,000 by the time it reached New York goes for about $3,000 today, according to Danny Danko, the longtime cultivation editor at High Times magazine. Curtis, at John Jay College, said that with the recent harvest in California, high-quality weed is wholesaling in New York for as low as $2,300 a pound.
One dealer Curtis is in touch with is selling ounces for $250—while Zach and Eric’s sales of top-grade weed add up to $640. “It depends on what market you’re in,” Curtis said.
Not surprisingly, retail prices can be a sensitive topic for dealers. Callacious Jones (his professional name, not his real one), a Caribbean-born dealer in his late 20s based in Bedford-Stuyvesant, charges $60 for an eighth of an ounce of the two strains he carries. Longtime customers might get a deal at $50. But, citing the time he spends making deliveries, he is not open to negotiation. “I meet people from California who tell me what they pay,” Jones said one night at a neighborhood bar. “That falls on deaf ears. This is not California.”
Last year, Mel, a dealer who receives clients inside his tidy Upper East Side studio apartment, cut his price to $80 from $100 for 4 grams, or to $560 an ounce from $700. That was a year or so after the wholesale price for his premium Sour Diesel dropped by 25%, to $300 an ounce. Mel, who is in his late 60s and retired from a straight career in retail sales (and stints as a cocaine trafficker), caters to an older crowd that knows nothing of the wholesale trends. He suspects most of his clients wouldn’t know where to look if they wanted to buy weed for less.
“It was Jewish guilt,” he said of the price cut.
“We are currently lurching from a pretty dumb prohibition to a pretty dumb legalization”
Zach gives a discount on larger orders, but sees weed as a fairly limited revenue stream. His focus is on edibles, which he produces with quality flower, not the leftover bits of plant, or “shake,” that are typically used. Even so, his $20 cereal bar has just 50 cents’ worth of weed, and yet packs enough punch that he recommends eating only a quarter of it at a time.
He estimates his edibles account for about a third of sales but two-thirds of profits—and that’s with the price cuts he gives to move products faster (like any food purveyor, he hates having goods go stale). He believes the snacks and candies will only grow more popular as health-conscious clients look for ways to get high without smoking. “Edibles have unlimited growth potential,” he said.
Though New York is a long way from full legalization, Zach and other dealers can thank the new climate for their ability to move about the city relatively free of paranoia. Arrests for marijuana possession in the city plunged 43% from last January through October, to 14,023, compared with the same period in 2014, according to the New York State Division of Criminal Justice Services. That’s a result of the 2014 decision by Mayor Bill de Blasio making possession of up to 24 grams—slightly less than an ounce—just a violation, which warrants a ticket, not an arrest. Smoking marijuana in public and selling small quantities are still misdemeanors.
Even federal law enforcement finds that the best use of resources is to target major offenders, not small-time dealers.
“We’re really trying to get the high-level violator,” said James Hunt, special agent in charge of the New York Field Division of the Drug Enforcement Administration. That means pursuing Mexican cartel operations that are still sending tractor-trailers with thousands of pounds of Mexican or Colombian marijuana to New York. By contrast, local delivery services and “mom-and-pop” producers “fly under our radar,” Hunt said. “They know they can stay smaller and last a lot longer than if they got bigger.”
The changes in local policing and the focus on big operators help explain how dealers can stroll around with more than enough cannabis to be charged with a felony.
“I’ve seen cops give people back their weed,” said Jones of stop-and-frisks by undercover officers in his neighborhood. “They say, ‘I don’t want that.’ They want the real criminals, the guys with guns.”
Photo: Buck Ennis
Zach's offerings range from Cheeba Chews—candy from Boulder, Colo.—to cannabis tinctures meant to treat hangovers
Still, the current system leaves no one happy—not the police, who are charged with enforcing a law for which political support has waned, and not drug-reform advocates, who has pushed for the change. They point out that young, black and Hispanic males make up nearly 90% of those arrested for possession, despite studies that show higher marijuana use among young whites.
Kassandra Frederique, New York policy manager for the Drug Policy Alliance, would like to see the mayor’s directive put into state law, and provisions made for striking or sealing arrest records for those caught with small quantities. Those provisions can be found in the Fairness and Equity Act that state Sen. Daniel Squadron, a Brooklyn Democrat, co-sponsored in 2014—a bill that was met with “complete silence” from the Republican Senate majority, he said.
State Sen. Liz Krueger, D-Manhattan, is hoping a legalization bill she submitted last year will gain momentum in the session that begins this week in Albany. Her bill would decriminalize possession and small amounts of cultivation for people over 21 and would tax marijuana sales. Proceeds would go toward drug treatment and prevention programs.
The federal government has sent mixed signals on prohibition, starting with Barack Obama’s 2008 campaign pledge that he would leave states’ medical-*marijuana programs alone. That promise, along with the recession and California’s loosely run program, contributed to overproduction in the Emerald Triangle. The Obama administration did crack down on state programs, then backed off. Meanwhile, its director of drug-control policy, Michael Botticelli, says legalization is encouraging teens to think the drug is harmless.
But change is coming nonetheless. California and several other states could have recreational legalization on the ballot in November. Some reformers face a paradox, however: They see states moving too fast to change laws that haven’t worked for some time.
“We are currently lurching from a pretty dumb prohibition to a pretty dumb legalization,” warned Mark Kleiman, a professor of public policy at NYU’s Marron Institute and co-author of Marijuana Legalization: What Everyone Needs to Know. “If I had to choose, I would go for the dumb legalization, but that shouldn’t be the choice.”
As an indication of how badly prohibition has worked, Kleiman points to a Rand Corp. estimate of $40 billion in annual illegal marijuana sales in the U.S. He puts New York City’s share at about $2 billion. He says some states are letting legal pot become too cheap, and cites prices in Colorado and Washington state of as low as $5 to $7 a gram. He would use taxes and other means to keep prices at black-market levels—ideally, $20 a gram, but no lower than $10—to discourage use by teens and make weed prohibitive for people prone to abusing it.
“You don’t want smart people getting rich off someone else’s drug addiction,” Kleiman said, adding that a federal program is needed to keep states from undercutting each other on price.
Dealers interviewed for this story generally favored the kind of legalization that keeps a place for them. Jones, who wears a “Legalize it” bracelet on his wrist, is confident his clients will stay loyal no matter what. Mel would like a decriminalization program that regards dealers as an established network that could save the trouble of creating dispensaries.
Eric—who is sure he could beat any sanctioned cannabis program on price—envisions starting a legal business, most likely a bar. And Zach, who wants the government to stay out of his line of work, is preparing for changes he expects will come sooner than legalization, mainly a growing number of clients who want cannabis in forms other than old-fashioned weed.
“Just selling high-end flower is not going to fly once the East Coast gets 10% closer to catching up with the West,” he said. “The [big dealers and delivery services] will be forced to change. What I’m doing will not be uncommon. And right now, nobody in New York City has the variety of selection every single day that I have. Who else makes Nutri-Grain bars with hemp seed and dried fruit? Nobody.”
Correction: Ric Curtis is an anthropology professor at John Jay College of Criminal Justice. His first name was misspelled in an earlier version of this article originally published online Jan. 3, 2016.
A version of this article appears in the January 4, 2016, print issue of Crain's New York Business as "Drug dealers dilemma".
http://www.crainsnewyork.com/articl...juana-black-market-in-the-era-of-legalization
At his first stop, Zach—who, like other dealers in this story, agreed to be interviewed only under a pseudonym—bartered $120 in weed for a deep-tissue massage from a Brooklyn Heights masseuse. Around 6:30 p.m., in Morningside Heights, he sold an academic an eighth of an ounce of premium Super Silver Haze for $80 and two cannabis-infused peanut-*butter pretzel sandwiches for $20. Three 1-train stops and a five-block walk north, a Harlem restaurant worker bought the same combination. (The pretzel sandwiches, drizzled with semisweet chocolate, are a top seller.)
At about 8 p.m., a client in Boerum Hill texted Zach’s prepaid burner phone, which sent him back on the subway to Brooklyn. This time, he reached deep into that large black bag, which he carries everywhere, like a traveling apothecary. The goods he pulled out make him a harbinger of the next phase in New York’s marijuana industry.
More from Crain's: A buyers club won't let New York's new medical marijuana dispensaries put them out
Beyond the usual varieties of quality “flower”—the term these days for weed—Zach carries vape pens filled with CO2-processed cannabis oil (the gold standard for extract *production); medicinal-grade “honey oil” concentrate in four different flavors, or strains; cannabis tincture for curing hangovers; organic cannabidiol, or CBD, a medicinal extract used for pain and anxiety that does not produce a high; cannabis-infused personal lubricant; and an inhaler-shaped vaporizer packed with wax.
While other dealers might carry cannabis-infused candies or cookies, Zach’s edibles include buckeye brownies, granola bites, *cereal bars, fruit roll-ups and Cheeba Chews—*candies from Boulder, Colo. (He is trying to build a sideline catering business that extends the marijuana menu to lobster rolls, cremini mushroom quesadillas and Irish pound cake with berries and whipped cream. The cannabis adds $500 to $1,000 to the bill.)
The city is full of high-end pot-delivery services in addition to solo dealers who make house calls. But with its gourmet edibles and pharmacy-like range of products, Zach’s business illustrates what the legalization wave nationwide is doing to the black market in New York.
Zach collaborates with a professional pastry chef on the edibles but gets most of his inventory from California, where a lax medical-*marijuana program going back two decades has fueled a bustling gray market. Colorado, which has legalized recreational use, is another source. A network of local wholesalers saves him the trip out West.
Buck Ennis Onetime restaurant owner Zach launched his cannabis enterprise Psy City last May.
A fan of the more exotic products in Zach’s bag, the Boerum Hill client chose the faux *asthma inhaler ($125, and good for 200 puffs), the vape pen ($200 for about 500 puffs) and $80 worth of edibles. By 10 o’clock Zach was headed home. It had been a profitable evening—and a pleasant one.
“It’s like the best part of every relationship,” he said of his house calls. “Everybody’s excited, and then it’s ‘See you in a week or so.’ ”
A onetime restaurant owner and occasional counterculture journalist, Zach launched his cannabis enterprise last May after spending three months as a runner for a Manhattan-based pot-delivery service. The “traveling shaman” branded his business Psy City and printed up bright yellow business cards (“Healing the mind, body & soul”) and fridge magnets decorated with a quaintly psychedelic Lady Liberty logo. It appears on all his packaging, including the prescription bottles with heat-sealed caps that hold his weed.
Zach exemplifies the tradition of innovation in the local cannabis scene. While New York state’s medical-marijuana program launching this month has regulations so strict that they threaten its success, the city has long been a place where underground entrepreneurs could thrive. Its estimated $2 billion-a-year black market is a magnet for quality marijuana, which can be ordered as easily as pizza. Delivery services that emerged as beepers did in the 1980s are so mainstream now that they serve as fallback employers for college students.
The popularity of the outlaw market could pose a challenge for New York’s program, which tightly restricts the ailments that qualify for treatment and is opening just four dispensaries in the city. Some black-market customers will stick with what they know. “There are a lot of patients who may not go through the mandated avenues,” said Derek Peterson, chief executive of Terra Tech, an Irvine, Calif.-based medical-marijuana provider that chose not to bid for a New York license. He cited the ease of delivering illegal weed in the city and the fact that the medical program can provide only cannabis extracts and not flower, which some patients prefer.
The legalization wave is bringing new energy to the city’s illicit market, but also unsettling it. Dealers are offering more cannabis strains and products than ever before. Lower wholesale prices, driven by a glut in California—where growers are producing more marijuana than medical dispensaries can buy—have put some middlemen out of business. And in some neighborhoods, retail prices are falling so fast that the future is uncertain for some sellers.
“A lot of old-time dealers I know can’t command the same high prices they used to because there’s so much competition from guys who’ve got the same high-quality [product],” said Ric Curtis, an anthropology professor at John Jay College of Criminal Justice who has studied New York’s black market. He sees California weed even pushing out the lower-quality Mexican product in poorer parts of the city. “It’s hard to say how the market is going to play out, but it’s becoming saturated,” he said.
Zach’s response to growing competition has been to employ traditional small-business strategies: Develop multiple revenue streams and focus on branding and service. He sees Psy City meeting the higher standards for the cannabis customer experience set by the states that have lifted prohibition.
“Legalization creates awareness,” he said. “There’s more variety of product out there, and I have to cater to the client.”
He is not alone in recognizing how forces beyond New York are shaping local tastes and purchasing decisions.
“The impact has been huge,” a dealer named Eric said of the legalization of recreational use in four states and the District of Columbia, and of medicinal use in 23 states plus D.C. A Bushwick resident in his mid-30s who hails from Portland, Ore., and wears Stan Smith sneakers and a black watch cap, he has been riding that momentum since the early 2000s. That was when he started “moving weight” as a middleman to supplement dry spells in the bar and restaurant business. A couple of years ago he jumped to the retail side as a dealer, and last June co-founded a “serve”—a delivery service—with 75 clients. Six months later, it has 500.
Odd men out: Downsides of dealing
Running an illegal marijuana business leads to some odd habits, as Crain’s reporter Matthew Flamm learned when he sat down with four dealers. (No real names have been used.)
What do you tell strangers you do for a living?
Zach: “I run a catering business.” It’s not far from the truth, and it’s in my background, so I can talk about it. And I strategically steer a lot of conversations away from work.
Callacious Jones: Jones has a day job in construction. To explain his after-work activities, he says, “I’m a bar-hopper.”
Eric: “I own an audio consulting company.” It’s obscure enough. And I used to do audio engineering.
Mel: I’m retired. This is a hobby. It pays for the ounce a week that I smoke.
Does it bother you to have to conceal what you do?
Eric: My parents are cool and probably wouldn’t care, as long as I’m happy, which I am. But I don’t want to incriminate them. That’s the hardest part: not being able to share my success honestly with the ones I care about most.
Zach: It bothers my girlfriend more than it bothers me. I enjoy being mysterious.
Jones: This isn’t how I’d want [my family] to view me. I will keep it quiet forever.
Mel: I was a big cocaine trafficker in the ’70s. I was brilliant at it. It bothered me nobody knew how exceptional I was.
How do you deal with the fear of getting caught?
Eric: I never do two illegal things at the same time. So I’m very respectful of all laws and rules. But I do worry, and try not to let it drive me crazy.
Zach: Recently I was in the [Brooklyn] Borough Hall subway station, and the police were checking bags. My view is: They’re looking for terrorists [not dealers], and they can only search your bag if you give them permission. I stayed relaxed and walked through. If you spend that much time thinking about the “what if,” you shouldn’t be doing this.
Mel: I only ever have a few ounces at a time.
Jones: I don’t show fear, and I don’t make eye contact [with police]. And I would never pull out all of my phones.
How many phones do you have?
Jones: Three. One for friends and family, one for business, one for women, which I turn off when I don’t want interruptions.
Eric: Six. Two for the [delivery] service. One that’s for reference—it’s just data. A fourth to contact runners when they’re out. A fifth for my partner and me to contact each other. And a sixth that’s just a phone.
Zach: Two. One dumb, for work. One smart, for personal. I’m working to get clients onto an encrypted text-message service to eliminate the dumb phone.
Mel: One cellphone, and my home phone [landline]. And everyone on my cellphone is respectable.
Among the changes he attributes to the erosion of prohibition are local dealers using more professional packaging, in line with that of legal shops, and a feeling among law-enforcement agencies that they have bigger fish to fry than small-time purveyors like him. (New York City downgraded possession of less than an ounce to a violation from a misdemeanor in November 2014.)
Best of all, California growers and wholesalers, facing depressed prices in their own state, are vying for his business. “New York is a huge market, and they can get rid of stuff for more money here than they can get rid of it at home,” Eric said.
Though he hasn’t felt pressure on his pricing, he has had to adjust his footing. As a middleman a decade ago, he could flip a few pounds a week that friends mailed him from California and clear $1,000 per pound. That number kept shrinking. About three years ago, as a flood of marijuana hit New York, bargaining power shifted dramatically to the dealers. Eric was lucky to clear $100.
“Everybody’s got a friend who can mail them something now,” he said.
The mode of transport for weed moving from California to New York has also shifted. A decade ago, big operators used trucks. Now growers or wholesalers ship a few pounds by mail or maybe 100 pounds by car.
Rather than go back to managing restaurants, Eric started dealing and eventually teamed up with a partner on the delivery service.
Retailing weed in New York is still highly profitable, though not remotely as lucrative as dealing cocaine was in the 1980s. Eric obsesses over customer data—despite smoking two joints a day—and says his profit margins run at 35%. He does not sell extracts, because possession of even small amounts is a felony, compared with a violation or misdemeanor for flower. His business’ distinguishing feature is its selection: from six to 10 strains of weed, which he buys in quantities of about half a pound and rotates in and out of the menu.
“Here’s the rub about owning a serve: You have to keep the inventory fresh,” Eric said. “I like to give everybody what they want, or they think they want, and put in something they don’t know they want—yet.” Prices run from $50 to $80 for an eighth of an ounce, with his wholesale costs starting at $150 an ounce and reaching $230 for the “Triple-A” strain, which is currently U2 Kush (“powerful euphoric buzz, with sedating full-body effects,” according to pot review site Leafly). Overhead includes the 10% in commissions his two bike-riding runners pull in on their daily eight-hour shifts, which begin at 2 p.m. Their takes can add up to $80 to $200 a night.
“I make about what a coffee-shop owner makes,” Eric said. “Or someone who owns a small but busy bar.”
Zach is also doing well. With a roster of 80 clients, of whom about 50 are weekly buyers, he works seven days a week—taking personal days off as needed—making three to 10 deliveries a night. Sales average $100 to $120 per visit, with a minimum order of $60.
“That’s going up to $100,” he said with a touch of weariness over a beer between appointments.
Profit margins vary by product, but he estimates his overall markup at about 100%. Gross sales have been averaging $12,000 a month, with profits going back into the business and toward paying off student debts. (Like other dealers interviewed for this story, he pays taxes through a “legitimate” company, which he declined to describe.) Working in Zach’s favor is the trend that drove Eric out of his old business: The wholesale price of weed, which in New York comes mainly from the “Emerald Triangle” counties in Northern California, keeps falling.
A pound that a decade ago would have cost more than $5,000 by the time it reached New York goes for about $3,000 today, according to Danny Danko, the longtime cultivation editor at High Times magazine. Curtis, at John Jay College, said that with the recent harvest in California, high-quality weed is wholesaling in New York for as low as $2,300 a pound.
One dealer Curtis is in touch with is selling ounces for $250—while Zach and Eric’s sales of top-grade weed add up to $640. “It depends on what market you’re in,” Curtis said.
Not surprisingly, retail prices can be a sensitive topic for dealers. Callacious Jones (his professional name, not his real one), a Caribbean-born dealer in his late 20s based in Bedford-Stuyvesant, charges $60 for an eighth of an ounce of the two strains he carries. Longtime customers might get a deal at $50. But, citing the time he spends making deliveries, he is not open to negotiation. “I meet people from California who tell me what they pay,” Jones said one night at a neighborhood bar. “That falls on deaf ears. This is not California.”
Last year, Mel, a dealer who receives clients inside his tidy Upper East Side studio apartment, cut his price to $80 from $100 for 4 grams, or to $560 an ounce from $700. That was a year or so after the wholesale price for his premium Sour Diesel dropped by 25%, to $300 an ounce. Mel, who is in his late 60s and retired from a straight career in retail sales (and stints as a cocaine trafficker), caters to an older crowd that knows nothing of the wholesale trends. He suspects most of his clients wouldn’t know where to look if they wanted to buy weed for less.
“It was Jewish guilt,” he said of the price cut.
“We are currently lurching from a pretty dumb prohibition to a pretty dumb legalization”
Zach gives a discount on larger orders, but sees weed as a fairly limited revenue stream. His focus is on edibles, which he produces with quality flower, not the leftover bits of plant, or “shake,” that are typically used. Even so, his $20 cereal bar has just 50 cents’ worth of weed, and yet packs enough punch that he recommends eating only a quarter of it at a time.
He estimates his edibles account for about a third of sales but two-thirds of profits—and that’s with the price cuts he gives to move products faster (like any food purveyor, he hates having goods go stale). He believes the snacks and candies will only grow more popular as health-conscious clients look for ways to get high without smoking. “Edibles have unlimited growth potential,” he said.
Though New York is a long way from full legalization, Zach and other dealers can thank the new climate for their ability to move about the city relatively free of paranoia. Arrests for marijuana possession in the city plunged 43% from last January through October, to 14,023, compared with the same period in 2014, according to the New York State Division of Criminal Justice Services. That’s a result of the 2014 decision by Mayor Bill de Blasio making possession of up to 24 grams—slightly less than an ounce—just a violation, which warrants a ticket, not an arrest. Smoking marijuana in public and selling small quantities are still misdemeanors.
Even federal law enforcement finds that the best use of resources is to target major offenders, not small-time dealers.
“We’re really trying to get the high-level violator,” said James Hunt, special agent in charge of the New York Field Division of the Drug Enforcement Administration. That means pursuing Mexican cartel operations that are still sending tractor-trailers with thousands of pounds of Mexican or Colombian marijuana to New York. By contrast, local delivery services and “mom-and-pop” producers “fly under our radar,” Hunt said. “They know they can stay smaller and last a lot longer than if they got bigger.”
The changes in local policing and the focus on big operators help explain how dealers can stroll around with more than enough cannabis to be charged with a felony.
“I’ve seen cops give people back their weed,” said Jones of stop-and-frisks by undercover officers in his neighborhood. “They say, ‘I don’t want that.’ They want the real criminals, the guys with guns.”
Photo: Buck Ennis
Zach's offerings range from Cheeba Chews—candy from Boulder, Colo.—to cannabis tinctures meant to treat hangovers
Still, the current system leaves no one happy—not the police, who are charged with enforcing a law for which political support has waned, and not drug-reform advocates, who has pushed for the change. They point out that young, black and Hispanic males make up nearly 90% of those arrested for possession, despite studies that show higher marijuana use among young whites.
Kassandra Frederique, New York policy manager for the Drug Policy Alliance, would like to see the mayor’s directive put into state law, and provisions made for striking or sealing arrest records for those caught with small quantities. Those provisions can be found in the Fairness and Equity Act that state Sen. Daniel Squadron, a Brooklyn Democrat, co-sponsored in 2014—a bill that was met with “complete silence” from the Republican Senate majority, he said.
State Sen. Liz Krueger, D-Manhattan, is hoping a legalization bill she submitted last year will gain momentum in the session that begins this week in Albany. Her bill would decriminalize possession and small amounts of cultivation for people over 21 and would tax marijuana sales. Proceeds would go toward drug treatment and prevention programs.
The federal government has sent mixed signals on prohibition, starting with Barack Obama’s 2008 campaign pledge that he would leave states’ medical-*marijuana programs alone. That promise, along with the recession and California’s loosely run program, contributed to overproduction in the Emerald Triangle. The Obama administration did crack down on state programs, then backed off. Meanwhile, its director of drug-control policy, Michael Botticelli, says legalization is encouraging teens to think the drug is harmless.
But change is coming nonetheless. California and several other states could have recreational legalization on the ballot in November. Some reformers face a paradox, however: They see states moving too fast to change laws that haven’t worked for some time.
“We are currently lurching from a pretty dumb prohibition to a pretty dumb legalization,” warned Mark Kleiman, a professor of public policy at NYU’s Marron Institute and co-author of Marijuana Legalization: What Everyone Needs to Know. “If I had to choose, I would go for the dumb legalization, but that shouldn’t be the choice.”
As an indication of how badly prohibition has worked, Kleiman points to a Rand Corp. estimate of $40 billion in annual illegal marijuana sales in the U.S. He puts New York City’s share at about $2 billion. He says some states are letting legal pot become too cheap, and cites prices in Colorado and Washington state of as low as $5 to $7 a gram. He would use taxes and other means to keep prices at black-market levels—ideally, $20 a gram, but no lower than $10—to discourage use by teens and make weed prohibitive for people prone to abusing it.
“You don’t want smart people getting rich off someone else’s drug addiction,” Kleiman said, adding that a federal program is needed to keep states from undercutting each other on price.
Dealers interviewed for this story generally favored the kind of legalization that keeps a place for them. Jones, who wears a “Legalize it” bracelet on his wrist, is confident his clients will stay loyal no matter what. Mel would like a decriminalization program that regards dealers as an established network that could save the trouble of creating dispensaries.
Eric—who is sure he could beat any sanctioned cannabis program on price—envisions starting a legal business, most likely a bar. And Zach, who wants the government to stay out of his line of work, is preparing for changes he expects will come sooner than legalization, mainly a growing number of clients who want cannabis in forms other than old-fashioned weed.
“Just selling high-end flower is not going to fly once the East Coast gets 10% closer to catching up with the West,” he said. “The [big dealers and delivery services] will be forced to change. What I’m doing will not be uncommon. And right now, nobody in New York City has the variety of selection every single day that I have. Who else makes Nutri-Grain bars with hemp seed and dried fruit? Nobody.”
Correction: Ric Curtis is an anthropology professor at John Jay College of Criminal Justice. His first name was misspelled in an earlier version of this article originally published online Jan. 3, 2016.
A version of this article appears in the January 4, 2016, print issue of Crain's New York Business as "Drug dealers dilemma".
http://www.crainsnewyork.com/articl...juana-black-market-in-the-era-of-legalization
but of course I grow it myself
start with a quarter
