Cannabis Industry Targets New York's Luxury Consumers

Cannabis consumption has been on the rise — and now it's on Fifth Avenue.

Shoppers strolling along New York's famed retail strip can pick up jewelry from Cartier and new threads from Saks, as well as New York-grown marijuana cigarettes from a new dispensary.

In the three and a half years since New York legalized marijuana for adults, sales of licensed cannabis have soared, surpassing $100 million last year. Now, legal ways to consume cannabis are gaining momentum in the luxury goods market.

As New York officials crack down on hundreds of illicit stores across the city, there are 166 licensed pharmacies open to shoppers across the state, including more than 50 in New York City — and one across the street from lululemon And Ted Baker.

The Fifth Avenue Travel Agency is an adult-use recreational marijuana dispensary, complete with white interiors, glass cabinets, a line of “bud vendors” and lots of marijuana.

The store’s exterior design matches the sleek storefronts of its neighbors, and its sister stores in Union Square and downtown Brooklyn. All three stores have opened in the past year and a half, and founder Paul Yao said a fourth will open soon in another of the city’s upscale shopping districts, SoHo.

At the travel agency, Yao said the average purchase includes two products, mostly gummy bears, marijuana flowers or marijuana wraps, with an average ticket price of $80 to $90. Products range from $3.50 THC-infused sodas to $150-per-ounce flowers, with accessories selling for even higher prices.

Housing Works Cannabis Co., New York City’s first licensed dispensary, sells products at similar prices, but shoppers can spend more there, paying 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 Union Square travel agency donates 51% of its proceeds to the Doe Fund, which supports formerly incarcerated people transitioning to life outside of prison. The Fifth Avenue and Brooklyn stores are run by owners with a history of dealing with the criminal justice system involving cannabis.

While the soaring interiors attract old and new shoppers, Yau said the ethical mission keeps customers coming back. “It’s huge, and it gives off a sense of joy,” he said.

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

Now, with The Travel Agency locations in high-traffic, high-spending areas, Yao said he is reaching “the cannabis-curious” with curated product offerings and an architecturally inspired space to facilitate entry into the legal market.

“40-something women are a really strong demographic, and that demographic is just starting to emerge in New York,” Yao said, adding that the stores were designed with this new type of shopper in mind. “When people walked into our store, they knew right away that it wasn’t a thrift store.”

One of those customers, Katie, a 37-year-old advertising executive in New York who declined to give her last name, says the atmosphere and the staff’s expertise keep her coming back. “It feels like a boutique,” ​​she says.

Cann, which makes THC-infused soft drinks, also hopes to attract curious consumers, especially those who have had negative experiences with marijuana in the past. Both Yao and Cann founder Jake Pollock told CNBC that marketing is key to overcoming these headwinds in attracting marijuana-curious consumers.

“Part of the reason we make these little, pink, pastel cans is we’re trying to get the idea across to the consumer that it’s easy to access, like you can drink the whole thing. Don’t worry, it’s only 2 milligrams,” Bullock said.

A 12-pack of 8-ounce seltzer cans containing 2 milligrams of THC costs $49.95. By comparison, shoppers can find a 12-pack of White Claw seltzer for less than $20.

The high-end marijuana experience isn't limited to THC products.

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

Actor Seth Rogen’s lifestyle and decor brand Houseplant also caters to high-end cannabis users. Its marble-topped tumblers and ashtrays sell for more than $200, and the company recently collaborated with high-end clothing retailer Kith.

Such partnerships are likely to continue. Yao said he believes pharmacies like The Travel Agency offer promising partnerships for fashion brands hoping to capitalize on the “wonder” of the emerging cannabis industry.

Cann, a THC-infused soft drink company, has a high-profile backing, including actress and lifestyle entrepreneur Gwyneth Paltrow and two-time NBA star Baron Davis. The beverage company is trying to attract consumers to where they want to spend their money.

At the Montauk Surf Lodge in New York, where guests pay at least $3,000 for a table a night, they can now buy a cannabis-derived version of Cann's sodas alongside local rosé wine and premium liquors.

Cann co-founder Jake Bullock said his brand’s target audience is the high-end, millennial consumer, and his competition is alcohol. Bullock and co-founder Luke Anderson see the Surf Lodge partnership as a perfect introduction to that audience — a wealthy Hamptons crowd who are already indulging in big-time spending.

“It has a very classic type of customer that Luke and I thought the brand would fit their lives,” he said.

Yao, who spoke to CNBC while working remotely near the Hamptons, also understands this target audience. “We think we’re still in the first innings of legal cannabis in New York,” he said.