EVERYBODY’S DOING IT, EVERYWHERE, ALL THE TIME! THANKS TO A NEW BREED OF CONSUMER—BRAND/TECH SAVVY and HEALTH-CONSCIOUS— VAPE SALES HAVE HIT $3.5 BILLION. WHAT DOES THIS EXTRAORDINARY PHENOMENON MEAN FOR THE FUTURE OF THE CANNABIS INDUSTRY—AND JUST HOW BIG COULD IT GET?
In June of 2015, a press release went out to the wires that botanical vaporizer manufacturer Pax Labs (formerly Ploom) had received an additional, eye-popping $46.7 million in funding from a group of investors so the company could expand “internationally.” Already a wild success in Canada and the U.S., PAX now has its sights set on the rest of the world. The company celebrated its 500,000th unit sold in February 2015, and, well, it seemed like the right time to go for world domination of a market that has exploded to an almost $4-billion-dollar market in the past 18 months. But then again, PAX has been at the forefront of the vape industry since 2012, when the company launched the original OG PAX. It was a sleek, handsome—featuring a push button—number that had vape enthusiasts gushing. Available in five resplendent colors (collect them all!), it also beguiled the media: “A vaporizer worthy of Batman,” enthused Fast Company; “ A palm-sized, smoke-free rechargeable miracle,” raved GQ; “Should you buy it? Yes, yes, a thousand times yes,” screamed Gizmodo. It was clear, even back then, that PAX had some of the brand mojo possessed by a young Apple. Now the PAX 2 (with a 20-percent deeper oven, 25-percent smaller body, 10 percent lighter, and better battery life) has hearts—and wallets—swooning again. Even the hard-to-win-over fashionista jet set seems to be in. Case in point: As we were going to press, PAX announced a partnership with the upscale Hamptons boutique Tenet Southampton, which will be carrying the PAX 2 in all of its stores. “We’ve seen incredible reception for PAX across the fashion industry, from designers and retailers to consumers and media,” Richard Mumby, chief marketing officer for PAX Labs Inc., said of the partnership. “We’re excited to extend our partnerships with this community to engage with the fashion consumer. We’re thrilled to work with Tenet as they reflect the PAX style and design sensibilities.”
Ploom was dreamed up in 2004 by two Stanford Design graduate students, Adam Bowen and James Monsees, when they both noticed while smoking a cigarette that they were, in fact, a “very flawed delivery system for nicotine.” They designed a new technology to deliver nicotine. After graduation, however, it was not easy to get the money people to buy into their vision of a mainstream tobacco vaporizer. More than fifty venture capital firms and angel investors denied Ploom. At the time, Monsees said, “It’s a frightening thing to take your nice, shiny Stanford MBA or whatever and apply it to a space like tobacco, where you might not be as well viewed by your peers.”
#SARAH SILVERMAN, THE FIREFLY, and AN APPLE iVAPE?
It’s undeniable that America’s draconian attitudes about cannabis are evaporating day by day. “Vapes” are right at the center of this.
“Vaporizer” is a big-tent term that encompasses a range of cannabis devices from tabletop monstrosities that heat marijuana flowers directly into a gaseous state to small, discrete pens that vaporize THC-infused oil; most are nearly indistinguishable from electronic cigarettes. “The devices have helped bring on a sea change in the way consumers think about and experience cannabis,” says Sasha Robinson of Firefly, the portable vaporizer company whose “retro-futuristic” flagship product has been praised by Slate and The New York Times. “It really is a major technology shift in how people consume.”
Today’s vapes offer side effects that are less harmful than those of simply lighting plant matter on fire and inhaling the smoke. They allow consumers to conserve their cannabis by using it in a manner that produces no ash. Their small size and less pungent smell make them more discreet than traditional pipes and papers. “Everyone’s looking for more accessibility,” says Lex Cabral, a dispensary employee in Los Angeles. “If you spark a blunt at a concert, you’re going to get kicked out. Vape pens…not so much.”
Talking to a few twenty-somethings at a recent concert in Los Angeles, it became clear that not only do they see vaping as the better and healthier alternative to smoking, but equally as an accessory to show off and talk about; something that helps define who they are.
Whether it’s Sarah Silverman flashing her vape pen (she prefers the Blackout X) on the red carpet or Snoop Dog talking about his “dope” vapes on Jimmy Kimmel Live, vaping has become almost a personal style or status symbol. Mary Timmons, 24, who lives in West Hollywood, California, and has had her medical marijuana card since 2013, said she spends as much on her vaporizers as she does on her shoes or handbags. “Me and my friends all save up for the next big thing,” she says. “And that’s the PAX 2 right now.”
Yes, the PAX 2.
At first blush, the packaging is clearly Jobs-esque: Framed by a white border, the brushed metal vape is simple, modern, and handsome.
“The PAX 2 is more elegant and fun with more hidden features and fun models for sharing with friends,” Richard Mumby, PAX Labs’ CMO, said from Jamaica. Mumby, the former vice president of marketing for Bonobos, insists the PAX 2 is a very cleverly evolved product that is more optimized than the original and comes in an array of groovy colors: platinum, flare, topaz, and charcoal.
Speaking of Apple… Could an Apple iVape be in development at the company’s top-secret R&D lab in Cupertino? Well, the good news for PAX and others is that as of right now the iTunes store doesn’t even allow cannabis apps, so this seems far-fetched.
As far as sales figures, PAX Labs is a privately held company so it’s hard to know, but Mumby told mg via email that sales have “grown 200 percent over the last few years.”
“Similar to Apple, it’s our intention to understand and serve our customer better than anyone else,” Mumby notes.
Apple may be too late, anyway. PAX recently released the JUUL—”the iPhone of e-cigs,” quipped Men’s Fitness—an equally attractive pocket-sized vape PAX sees as “the evolution of the cigarette” and, of course, very “cool.”
Timmons agrees: “We all saved up for it so we could have it the day it came out.”
#THE BIG O
Even with PAX’s stellar reputation and fervent fans, it’s not the largest vape company. That would be O.penVAPE. Launched in 2012 by six dispensary owners, O.penVAPE is now considered the “biggest cannabis-related brand” in America. The size of a normal writing pen, the bottom half of the device is a battery that screws onto a cartomizer—a heating element and tube of hash oil. Using only pre-filled liquid cartridges, the price tag ranges from $25 to $60 for both pens and cartridges. Due to its sleek but solid design, discreet yet sturdy, O.penVAPE has seen sales rocket over the past few years. Here’s a quick snapshot of the company’s stunning rise:
2010: Heidi and Ralph Morgan launch the extraction company Organa Labs, leveraging supercritical CO2 extraction to create products that can be consumed without combustion.
2012: O.penVAPE launches in Colorado. 2013: O.penVAPE launches in California and Washington. Sales grow 1600 percent year over year.
2014: O.penVAPE merges with Bakked, its largest competitor in Colorado, with Bakked owner Chris McElvany becoming O.penVAPE chief technology officer. Sales hit 200,000 units per month. O.penVAPE products are available in more than 1,000 dispensaries from Portland, Oregon, to Portland, Maine. O.penVAPE sells its 2-millionth cartridge.
2015: Go.Pen Plus launches. O.penVAPE has a record sales month in Colorado: $2.85 million. O.penVAPE signs licensing agreement with Jamaican cannabis company Timeless Herbal Care to create infused products for their newly legal medical cannabis market.
“Our historic partnership in Jamaica has several points of interest,” said Chief Business Development Officer Chris Driessen. “Jamaican regulations allows for reciprocity in license, meaning if you have a valid medical cannabis card or want to self-declare your need for medical cannabis once you arrive, you will be able to acquire cannabis legally on the island. Second, Jamaica is one of three countries in the world that allow for the legal import/export of cannabis.”
O.penVAPE’S CTO, Chris McElvany, recently said in an interview that one of the main reasons the company has grown to be the largest cannabis brand is because of “our philosophy of partnership,” even if they don’t always agree. Someone came up with the idea to emulate the Gillette Razor model in creating their pens, i.e. “strain specific cartridges” that go with the hardware.
Then there’s the clever marketing. There’s now an O.penBUS with a photo-booth that cruises to events like the Denver State Fair, music festivals, and even Denver Bike Night. In August 2015, they partnered with vapRwear—infamous for Papi’s pelican icon with his signature red Mohawk—to create a co-branded lifestyle apparel company.
Driessen, however, sees his consumer as a bit of a hybrid: There’s the 35-plus female consumer and the 21- 34-year-old male.
“Surprisingly, 37 percent of our consumers are female and 25 percent are over 35 years of age. This is uncommon in the cannabis industry and speaks to the wide appeal that our products provide to a diverse and ever-expanding addressable market,” he says.
Because of all this, vapes help create a sense of psychological distance from many of the traditional notions of cannabis users as unkempt or unindustrious. If you ask those in the industry, this is certainly not unintentional. “As cannabis becomes more accepted, we need to transition outside the concept of ‘stoner,’” says Sasha Robinson. Speaking over the phone from his San Francisco home, Robinson says that at its core, Firefly caters to a customer who “wants a taste experience that matches their lifestyle,” one that’s “much more sophisticated” than what traditional smoking devices can offer.” Adds Bud, the self-proclaimed “Vape Critic” for whom reviewing vapes is a full-time business, vaporizers offer “a more professional and up-to-date image for using cannabis.”
Spliffin, which launched just 15 months ago—its cartridges contain solvent-free wax and come in a variety of strains and dosages—has garnered a solid fan base in a short time. “The Spliffin consumers tend to be informed, sophisticated individuals that care about what they put into their body,” Nick Samaniego, Spliffin’s director of communications, said via email. “Beyond taste, aroma, and aesthetics, they demand quality, consistency, and transparency.”
As the cannabis industry expands, the demographic of cannabis consumers—sophisticated, affluent young adults with tastes and needs that fall outside the realm of the time-honored “stoner” trope—will expand with it. Though they still value traditional smoking experiences, their conception of what cannabis is and can do is changing. Danny Davis, an investment partner with Blackout X, saw a gaping hole in this market: branded products.
“We want to be the leader in design, consultation, development and distribution of branded products and accessories for the cannabis and vapor industries,” Davis tells mg. “We want our high-quality devices to own the counter space in the dispensaries, vapeshops, and other retailers, whether they are one of our own brands such as Blackout X / Julian Marley / Jimi Hendrix or some of the third-party products we are working on.”
Davis’s ambition may seem grandiose, but in this climate he may be right. Heck, “vape” was the Oxford English Dictionary’s Word of the Year in 2014.
#M.I.T. AND THE VOLCANO
The rise of the cannabis vape is inextricably tied to that of e-cigarettes. First invented and patented in 1965 by Herbert A. Gilbert, then re-invented and conceptualized in 1979 by Dr. Norman Jacobson and Phil Ray (the inventor of the microprocessor), the e-cigarette as we know it was introduced to the U.S. market in 2007. Sometimes marketed as a smoking alternative and sometimes a smoking cessation device, e-cigarettes can be anything from $7 cigarette lookalikes (cigalikes) to $250 models with boxy, microchip-equipped battery packs that contain variable temperature controls and resemble an iPhone more than a cigarette. Higher-end, customizable e-cigarettes often are compatible with THC oil and can be found in many smoke shops and dispensaries.
Though they often look similar and fall under the same larger category, John Chavez of Lotus Vaping Technologies stresses that e-cigarettes and cannabis vapes are two different territories. “When you talk to hardcore vapers, they don’t like to be categorized with those who are vaping THC or medicated liquid. Then again, a lot of people do partake in both.” Chavez notes that many e-cigarettes and vapes share batteries, and some models such as DaVinci’s Ascent vaporizers are capable of vaporizing both liquids and dry herbs, allowing them to bridge the gap between e-cigarettes and cannabis vaporizers.
However, where the goal with e-cigarettes was always to mimic the look and feel of an actual cigarette as a way to help offset addiction, cannabis vaporizers are meant to deliver the positive effects of marijuana while minimizing the negative ones, regardless of the form the device takes. “Long before the term ‘vape,’ we were debating how such a machine might work,” says Allen St. Pierre, who’s worked with the marijuana advocacy group NORML since 1991 and has served as executive director since 2005. For years, he explains, NORML has grappled with the question “Are there ways to deliver the effects of cannabis in a safe and desirable manner for the consumer?” In the early-2000s, he says, a group of M.I.T. students found a potential solution to the problem in the form of a device that would eventually be known as The Volcano, a tabletop vaporizer that is still one of the most popular products on the market.
It’s important to note that for many devices, the term “vaporizer” is a misnomer, Robinson says: “Vaporization is the transition from a liquid into a gas. Sublimation is what happens when a solid converts to gas.” Still, he says, “There’s a lot going on with these devices, and you need a simple word to talk about it. You have to pick words that aren’t exact.” (Robinson and his partner Mark Williams each have a background in product design.Robinson was with Moto Group, which played a hand in designing the Flip Cam, while Williams worked on Mac OS collaboration software at a little company called Apple.)
Vaporizers that process dry plant materials are, in many ways, a continuation of the time-tested method of smoking a joint. Says Robinson, “A lot of people who smoke joints don’t realize they’re actually using a vaporizer. When you’ve got the cherry at the end, the hot air’s being drawn over the plant material.”
#INDIEGOGO GETS IN ON THE ACTION
The crowd-funding world has taken notice of the vape phenomenon, too. Graham Gibson, a serial entrepreneur who has started dozens of companies, is the founder, CEO and president of KandyPens. In 2014, he turned to Indiegogo to raise both money and awareness for his company. In short order, he raised more than $65,000, which translated into more than $150,000 wholesale pre-orders which then led to two further capital injections: one from Duchess Capitol and one from Just Develop It. Needless to say, his sales have reached a fever pitch: Both the SkyCloud and Black Edition were voted “Top Vapor Pens of 2015” by High Times.
“Our sales have grown over 500 percent in the last twelve months,” Gibson tells mg via phone from Arizona.
He’s also created a heightened awareness of the brand by integrating his pens into music videos, including Chris Brown/Tyga’s “[email protected]#es & Marijuana,” Paloma Ford’s “Jada, K” and Camp/Fetty Wap’s “1hunnid.” This all goes to his master plan of positioning KandyPens as a lifestyle brand rather than just a vape or electronics company. “We currently have eight product lines…and have many rods in the fire at the moment,” he says.
Gibson’s ambition doesn’t stop there. He sees KandyPens growing into a sort of one-stop-shop for recreational, dispensary, and traditional smoke shop customers. He wants the brand to be known for being fun, loud, and brash. “2016 is going to be a very exciting year for KandyPens,” he says.
Likewise, Loto Labs used Indiegogo to raise $228,000 to fund their high-end, magnetic-powered vape, Evoke. Ironically marketed as “the future of vaping,” the Evoke takes a nod from the past in its design: it mimics an old-school, hefty wooden pipe but eschews the common “wick and coil” system which can be very hard on the lungs. It also uses state-of-the-art temperature control. Neeraj Bhardwaj, the founder of Loto Labs and a veteran of Silicon Valley, believes strongly that “vaporizers that have temperature control and different sensors will inform the future of cannabis.”
Who is the ideal Evoke consumer? “Our customers are going to be the connoisseurs of the space,” he states.
#THE CHINA SYNDROME
Dana E. Shoched is the president and CEO of O2Vape, which manufactures what she bills as “the original buttonless vape pen.” One of the challenges Shoched’s business faces is knockoffs. O2Vape is technically a vape distributor rather than a vape manufacturer: Shoched purchases her pens from a manufacturer in China, where patent laws are such that manufacturers can sell more or less the same product to multiple distributors.
Explains Lotus’ Chavez, “95 percent of the products in this industry are made in China. We have our own manufacturers that we work with and items with our own brand.” Lotus, for the most part, is no different. For example, he says, “We’ll order these generic batteries and say, ‘OK, put our logo on them.’”
Many stores order from companies such as Lotus or O2Vape rather than directly from the manufacturers overseas because the many vape pens carry with them prohibitively high minimum order quantities, meaning a store might have to order hundreds of the same item to justify its low wholesale price. However, many manufacturers are cutting distributors out of the equation by lowering these MOQs.
Another challenge for distributors is product cloning. Chavez notes, “[Rival companies] will find a nice, authentic product and then knock it off. It happens a lot.”
Schoched says the knockoff industry has hurt her business, as well. Her product is often negatively associated with its cheaper, lower-quality imitators, which can leak oil or improperly vaporize it. The only thing she can do, she says, is offer “superior customer service”—she offers a lifetime, no-questions-asked warranty on her product’s battery—and make sure O2Vape’s products are “better than the competition.”
Driessen believes O.penVAPE is the poster child for knockoff victims. Although they are fortunate enough to have become a household brand in the vape world, when you go online you will see things referenced as an “O.penVAPE product” when they aren’t.
“We have full-time employees in China that oversee our manufacturing facility and the quality control measures that make our products the most reliable in the industry,” Driessen notes. “This supervision allows us to provide a lifetime warranty on everything that we make. So, unless you are buying O.penVAPE products from us or one of our licensees, they are likely not legitimate.”
The Vape Critic says of the whole situation, “I have mixed thoughts. It’s strange that all these companies are getting these very cheaply made parts. They work, but they’re the same thing, just branded differently.”
The issues facing the vape industry will become more and more important in the future as concentrates become more and more popular. Even now concentrates are seeing an expanded role in states where marijuana can be purchased legally. St. Pierre claims there’s a 50-50 split between concentrates and traditional flower sales in states with legal marijuana.
“You don’t want to carry around a bag of weed when you could have a little capsule with some concentrate that does the same job,” says Bhardwaj.
Another person very bullish on vape, Tony Van Pelt, who has been selling vaporizers and vape accessories for twenty years in his very popular California shop, Smoke Shop Etc., recently told Business Insider magazine, “I’ve been doing this for a long, long time and I’ve never seen anything like this. This is the moment I have been waiting for. This vaporizing thing has changed the whole world.”
Not everyone shares this view. John Wenzel of the Denver Post recently penned an article for the paper’s The Cannabist blog, titled “Why Vaping Is the Dumbest Thing Ever.” Over email, he says, “It’s a trend, and people who love trying new technology, or who are generally susceptible to marketing campaigns, seem to be flocking to vaping like pigeons to dirty parks. If you don’t have a medical or therapeutic reason for doing it, it just seems hollow and mindless. It removes the experience from the experience. You’re putting a wall up between yourself and the thing you purport to enjoy doing.”
What about the increasingly important “health factor?” Joel Nitzkin, a public health physician who is a member of the Tobacco Control Task Force, estimates smokeless products pose “less than 1 percent the risk posed by cigarettes, etc.”
It’s here, at the crossroads where cool meets safety, that the vape industry finds its oh-so-sweet spot. Spliffin’s Samaniego sees many factors that will continue to drive sales higher and higher. “Convenience, value, variety, advances in technology—just some of the many reasons why our industry is experiencing such incredible growth,” he says. “Not only is vaping providing a safer and cleaner alternative to smoking, it’s helping to mitigate the stigmas and stereotypes often linked to cannabis.”
Robinson feels Firefly is positioned well for the future. “When you love products,” he says, “you just can’t help it. It’s like having a child, to a certain extent.”
He pauses for a moment and continues. “You have to be passionate about what you’re doing,” he says, inadvertently summing up a key tenet behind the new generation of fast-moving vapers. “That’s really the only way you’re going to understand the users and get them to understand the product, as well.”
How big could it all get? Well, you only have to ask Driessen of O.penVAPE that. He’s clearly given it a lot of thought.
“The sky is the limit,” he says. “We grew 1600 percent in 2013, another 450 percent in 2014, and are on pace to more than double again in 2015. Currently, we sell a product somewhere in the U.S. every ten seconds. We have negotiations moving forward in several countries currently and expect to continue on our path of becoming the world’s first global cannabis brand with a billion-dollar valuation.”