Al Lewis: America Parties on With Marijuana and Viagra

It's billed as the first credible business analysis of U.S. medical marijuana markets, but I'm not sure that's completely true since I knew some pretty righteous dudes who thought about this in the 1970s.

The report, released Wednesday, predicts the medical marijuana industry will hit $1.7 billion in revenues in 2011, rivaling sales of Viagra.

I got on a conference call with the report's creators to ask the most important question: "Got any data on people who use marijuana and Viagra at the same time?"

"No," answered Ted Rose, editor of the report, as speechless as a guy who just took too big a hit off a bong.

Rose works for See Change Strategy LLC, an independent financial analysis firm based in Washington D.C. You can get his report here. But it costs $1,150. And do you know how much weed and Viagra you can buy for $1,150?

Hey, no worries if you are in the biz, man. See Change expects the market to double in the next five years.

Forget what you've heard about an industry that Arizona, California, Colorado, Maine, Michigan, Montana, New Jersey, New Mexico, Oregon, Rhode Island, Washington and the District of Columbia have legalized.

Most of the information is anecdotal, politically charged, or poorly researched, Rose said. Until now.

See Change sent out more than 1,500 surveys--and about 300 dope peddlers actually answered them.

"Whatever one's opinion about medical marijuana, everyone benefits by understanding how big this market is, who is making money, and how," Rose said.

I am OK with legalized reefer madness, as long as my kid doesn't catch it. I've met people in real pain who benefit from it, including some who are just suffering from the economy. But let's be honest: Medical marijuana is a shameless front for complete legalization.

The proof is that California and Colorado make up 90% of the market, according to See Change. And these are the two states where you can still spot the most Grateful Dead bumper stickers.

In Colorado, where I live, it's as easy to find a dispensary as a Walgreens. A TV reporter friend told me that whenever he walks into a dispensary unannounced to do yet another medical marijuana story, it's difficult to find cancer patients or geriatrics. Mostly, it's kids.

"The 20-somethings would tell me they have back pain while sitting in a chair," he said, "and then I'd watch them walk out of the dispensary just fine, joking with their friends."

That, of course, is anecdotal. The data suggest this highly fragmented industry could evolve from stoner boutiques toward money-grubbing corporations, even though it is currently illegal under federal law.

President Barack Obama has promised to turn a blind eye in states that have legalized medical marijuana--which has ignited the industry's growth, Rose said.

So, for now, medical marijuana entrepreneurs are making astonishing bets that the next president won't be some moralizing yahoo who shuts the whole business down and throws everyone in federal prison.

It's just like banking: Who needs risk management? Be an optimist.

Serial entrepreneur Tripp Keber took me on a tour of his beverage plant on Tuesday. It's called "Dixie Elixirs & Edibles," even though a more obvious name would be "Soda Pot."

Keber, who also develops luxury RV parks, says business at Dixie Elixirs is just bubbling over.

Why smoke when you can sip something that tastes like a popular fruit-flavored soda? The company also sells medicated biscuits, bars, chews, truffles, cakes, lozenges, topicals and tinctures.

The plant is secure, has no signage, and seems to run as smoothly inside as Pepsi Bottling. Keber pays a PhD to maintain product quality. And he talks like any CEO looking for deals.

"I truly believe that there will be an opportunity for a company in the medical marijuana space to go public in the next three to five years," he said. "But within 24 to 30 months .. somebody is going to knock on our door. "It would be a rounding error for a Philip Morris or a U.S. Tobacco," Keber said. "And if you don't think that they are eying this market, you would be foolish."

(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. The column is published each Tuesday and Thursday at 9 a.m. ET. Contact Al at al.lewis@dowjones.com or tellittoal.com)