Cannabis industry targets New York’s luxury consumers

Marijuana consumption has reached a tipping point, and now it’s making its way onto 5th Avenue.

Shoppers walking through New York’s iconic retail strip can now buy jewelry from Cartier, new clothes from Saks and even pre-rolled marijuana joints grown in New York State at a new dispensary.

Three and a half years after New York state legalized marijuana for adults, licensed cannabis sales have soared, topping $100 million last year, and now legal ways to consume cannabis are catching on in the luxury market.

As New York authorities crack down on hundreds of illegal shops across the city, 166 licensed dispensaries remain open to shoppers across the state, including more than 50 in New York City and one just across the street. Lululemon And Ted Baker.

The Travel Agency on Fifth Avenue is an adult-only recreational marijuana dispensary with white décor, glass cabinets, numerous “budtenders” and copious amounts of marijuana.

The retailer’s exterior blends in with the chic storefronts of its neighbors and sister locations in Union Square and Downtown Brooklyn. All three locations have opened within the past year and a half, and founder Paul Yau said a fourth location is planned to open soon in SoHo, another high-end shopping district in New York.

The average purchase includes two main products — gummies, marijuana flower and pre-rolls — with an average price of $80 to $90 per ticket, according to The Travel Agency’s Yau. Products range from $3.50 for THC seltzer to flower selling for $150 an ounce, with accessories at an even higher price point.

Housing Works Cannabis, the first licensed dispensary in New York City, sells products at similar prices, but shoppers spend more there, sometimes paying up to $240 for an ounce of marijuana. All of Housing Works Cannabis’s profits go to the New York City nonprofit Housing Works.

The Travel Agency’s Union Square store donates 51% of its profits to the Doe Fund, which supports former inmates transitioning to life outside of prison, and the Fifth Avenue and Brooklyn store is run by an owner with experience working in the legal system related to cannabis.

While the upscale interiors draw old and new customers, Yau said, it’s the ethical mission that keeps them coming back. “It’s a big thing, it gives it a nice glow,” he added.

New York has always had a “legacy” customer base in the industry — customers who used marijuana before it was legalized.

Today, The Travel Agency is located in high-traffic, high-consumption areas, reaching a “cannabis-curious” demographic with curated products and architecturally-inspired spaces, making it easier for them to enter the legal market, Yau said.

“The 40-year-old female shopper is a very strong demographic that’s just emerging in New York,” Yau said, adding that the stores were designed with the new demographic in mind. “When they come in, they know right away that this isn’t an illegal store.”

One such frequent customer, Katie, a 37-year-old advertising executive in New York who declined to give her last name, said the store’s atmosphere and the staff’s expertise are what keep her coming back. “It makes you feel like you’re in a boutique,” she said.

THC seltzer company Cann also hopes to appeal to curious consumers, especially those who have had bad experiences with marijuana in the past. Yau and Cann founder Jake Block told CNBC that marketing will be key to overcoming headwinds in attracting people interested in marijuana.

“One of the reasons we made the cans small and pink and pastel colors is because we wanted to communicate to consumers that it’s drinkable — you can drink the whole thing. Don’t worry, it’s only two milligrams,” Block said.

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

A premium marijuana experience isn’t limited to THC products.

Luxury home designer Jonathan Adler sells marijuana home decor items, including pot storage containers and bowls, for nearly $300 a piece, and lifestyle brand Eddie Parker sells everything from smokers’ handbags to rolling papers to giant, colorful glass pipes and $450 table lighters, many of which can be found in boutiques and legal dispensaries like The Travel Agency and Housing Works Cannabis Co.

Actor Seth Rogen’s lifestyle and home decor brand, Houseplant, also offers products for high-end cannabis users: marble rolling trays and ashtrays cost well over $200, and the company recently collaborated with luxury clothing retailer Kiss.

Such collaborations are likely to continue, as Yau sees dispensaries like Travel Agency as promising partners for fashion brands looking to tap into the “coolness” of the burgeoning cannabis industry.

Cann, the THC soda maker that has backers among luxury types like actress and lifestyle entrepreneur Gwyneth Paltrow and two-time NBA All-Star Baron Davis, is looking to capture customers where they’re willing to spend their money.

At New York’s Montauk Surf Lodge, guests who pay a minimum of $3,000 for a table overnight can now purchase a hemp-derived version of Kang’s seltzer, along with local rosé and premium spirits.

Can co-founder Jake Block said the brand’s target customer is primarily millennial premium shoppers and that it competes with alcoholic beverages. Block and co-founder Luke Anderson see the Surf Lodge partnership as an ideal way to tap into that demographic through the Hamptons’ affluent, high-spending demographic who are already indulging in luxury.

“Luke and I think the brand fits into their lives and we have a very typical customer base,” he said.

Yau, speaking to CNBC while working remotely from nearby the Hamptons, recognizes that target audience: “We believe that New York state is just at the beginning of marijuana legalization,” he said.