Cannabis industry targets high-end consumers in New York

Cannabis consumption has taken a turn and is now reaching Fifth Avenue.

Shoppers strolling down the iconic New York street can pick up jewelry from Cartier and new clothes from Saks, as well as pre-rolled marijuana joints grown in upstate New York at a new dispensary.

In the three and a half years since New York State legalized marijuana for adult use, licensed cannabis sales have taken off, surpassing $100 million last year. And now, legal avenues for cannabis consumption are gaining ground in the luxury market.

As New York officials crack down on hundreds of illicit shops across the city, 166 licensed dispensaries are open to buyers across the state, including more than 50 in New York City — and one across the street. Lululemon and Ted Baker.

The Travel Agency on Fifth Avenue is an adult-use recreational marijuana dispensary outfitted with white interiors, glass display cases, a slew of budtenders, and plenty of weed.

The store’s exterior matches the sleek facades of its neighbors and its sister locations in Union Square and Downtown Brooklyn. All three stores have opened in the past year and a half, and founder Paul Yau said he will soon open a fourth in one of the city’s other upmarket shopping districts, SoHo.

At The Travel Agency, Yau said the average purchase includes two products, primarily gummies, marijuana flowers or pre-rolled joints, at an average price of $80 to $90 per ticket. Products range from THC-infused sodas at $3.50 to flowers that sell for $150 an ounce, and accessories are priced even higher.

New York City's first licensed dispensary, Housing Works Cannabis Co., sells products at similar prices, but buyers can spend even more there, up to $240 for an ounce of marijuana. All proceeds from Housing Works Cannabis Co. support the nonprofit Housing Works in New York City.

The travel agency’s Union Square location donates 51 percent of its profits to the Doe Fund, which supports former inmates transitioning to life outside of prison. The Fifth Avenue and Brooklyn stores are run by owners with a history in the cannabis-related justice system.

While the lofty interiors convey heritage and attract new buyers, Yau said the ethical mission keeps customers coming back. “It’s huge, it just gives a halo,” he added.

New York has always had what the industry calls the “legacy” customer base, or those who used marijuana before it was legalized.

Now, with The Travel Agency locations in high-traffic, high-spending areas, Yau said he is reaching out to the “cannabis curious” with curated product offerings and an architecturally inspired space to make it easier to enter the legal market.

“Women in their 40s are a very strong demographic and that demographic is just emerging in New York,” Yau said, adding that the stores were designed with that new type of shopper in mind. “When people walked into our store, they knew immediately that it was not an illegal store.”

One such customer, Katie, a 37-year-old advertising executive based in New York who declined to give her last name, said the atmosphere and employee experience keep her coming back. “You feel like you’re in a boutique,” ​​she said.

THC seltzer company Cann is also hoping to attract curious consumers, particularly those who have had a negative experience with marijuana in the past. Both Yau and Cann founder Jake Bullock told CNBC that marketing is key to getting around that hurdle when it comes to attracting the marijuana-curious.

“Part of the reason we made these cans, tiny, little, pink and pastel, is because we're trying to communicate a sense of accessibility to the consumer, like you can drink the whole can. Don't worry, it's only 2 milligrams,” Bullock said.

A 12-pack of 8-ounce Cann seltzers with 2 milligrams of THC costs $49.95. By comparison, shoppers can find a 12-pack of White Claw alcoholic seltzers for well under $20.

The luxury marijuana experience is not limited to THC products.

Luxury home designer Jonathan Adler sells marijuana-themed home decor items like canisters and storage bowls for nearly $300 each. Lifestyle brand Edie Parker sells everything from smoker-friendly bags to rolling papers, giant colored glass pipes and tabletop lighters for $450, many of which can be found at boutiques and legal dispensaries like The Travel Agency and Housing Works Cannabis Co.

Actor Seth Rogen’s lifestyle and decor brand, Houseplant, is also aimed at high-end cannabis consumers. Rolling trays and marble ashtrays cost upwards of $200, and the company recently collaborated with high-end clothing retailer Kith.

Collaborations are likely to continue to emerge. Yau said he believes dispensaries like The Travel Agency offer promising partnerships for fashion brands hoping to tap into the “hipness” of the burgeoning cannabis industry.

THC-infused soda company Cann boasts high-profile endorsers including actress and lifestyle entrepreneur Gwyneth Paltrow and two-time NBA All-Star Baron Davis. The beverage company is trying to appeal to consumers at levels they are willing to spend.

At New York’s Montauk Surf Lodge, where guests pay a minimum of $3,000 for a table for the night, they can now buy a hemp-derived version of Cann’s seltzers alongside local rosé and high-end liquor.

Cann co-founder Jake Bullock said his brand’s target audience is a luxury consumer, mostly millennials, and its competition is alcohol. Bullock and his co-founder Luke Anderson see the partnership with Surf Lodge as an ideal introduction to that audience, through the affluent Hamptons crowd that is already indulging and spending big.

“It's a very classic type of customer that Luke and I think fits the life of the brand,” he said.

Yau, who spoke to CNBC while working remotely near the Hamptons, is also aware of that target audience. “We think we’re still in the early stages of legal cannabis in New York,” he said.