Cannabis industry targets luxury consumers in New York

Cannabis consumption has taken a turn – and now it has arrived on Fifth Avenue.

Those strolling along New York's famous shopping street should purchase jewelry from Cartier, recent fashion from Saks, and pre-rolled marijuana joints grown in New York State from a brand new dispensary.

In the three and a half years since New York State legalized marijuana for recreational use, licensed cannabis sales have skyrocketed, surpassing $100 million last 12 months. And now legal ways to devour cannabis are gaining traction in the posh market as well.

While New York authorities crack down on a whole lot of illegal businesses across the town, 166 licensed dispensaries across the state are open to buyers, including over 50 in New York City – and one directly across from Lululemon and Ted Baker.

The Travel Agency on Fifth Avenue is an adult-accessible marijuana dispensary with a white interior, glass display cases, loads of budtenders, and numerous marijuana.

The retailer's exterior matches the chic storefronts of its neighbors and its sister stores in Union Square and Downtown Brooklyn. All three stores opened up to now 12 months and a half, and founder Paul Yau said a fourth store will soon open in certainly one of the town's other high-end shopping districts, SoHo.

At The Travel Agency, Yau said the common purchase includes two products, mainly gummy bears, marijuana flower or pre-rolled joints, at a mean price of $80 to $90 per ticket. Products range from THC sparkling water for $3.50 to flower selling for $150 an oz, and accessories are sold at even higher prices.

New York City's first licensed dispensary, Housing Works Cannabis Co., sells products at similar prices, but a buyer there can spend much more, paying as much as $240 for an oz of marijuana. All proceeds from Housing Works Cannabis Co. profit the nonprofit Housing Works of New York.

The travel agency's Union Square location donates 51% of its proceeds to the Doe Fund, which helps former inmates transition to life outside of prison. The Fifth Avenue and Brooklyn stores are run by owners who’ve previous cannabis-related criminal convictions.

While the upscale interiors attract long-standing and recent customers, the moral mission keeps customers coming back, Yau said. “It's huge and just has such an aura,” he added.

New York has all the time had what the industry calls “legacy” customers, individuals who used marijuana before it was legalized.

Now, with The Travel Agency's branches in high-traffic and high-volume areas, Yau says he's reaching the “canna-curious” with curated product offerings and architecturally inspired spaces to make it easier to enter the legal market.

“The 40-year-old female shopper is a really strong demographic, and that demographic is just emerging in New York,” Yau said, adding that the stores were designed for this sort of recent shopper. “When people came into our store, they knew immediately that it was not an illegal store.”

One of those customers, Katie, a 37-year-old promoting executive from New York who asked not to provide her last name, said the atmosphere and the competence of the staff keep her coming back. “It feels like a boutique,” she said.

THC soda maker Cann can be hoping to appeal to curious consumers, especially those that have had negative experiences with marijuana up to now. Both Yau and Cann founder Jake Bullock told CNBC that marketing is vital to overcoming this headwind in attracting cannabis-curious consumers.

“One reason we made these cans, small and pink and pastel, is because we want to convey accessibility to the consumer, as if they could drink the whole thing. Don't worry, it's only 2 milligrams,” Bullock said.

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

The upscale marijuana experience just isn’t limited to THC products.

Luxury interior designer Jonathan Adler sells marijuana home accessories like marijuana storage jars and bowls for nearly $300 a chunk. Lifestyle brand Edie Parker sells every part from smoke-friendly handbags to rolling papers, giant colourful glass pipes and $450 table lighters. Much of it is on the market at boutiques and legal dispensaries like The Travel Agency and Housing Works Cannabis Co.

Actor Seth Rogen's lifestyle and decor brand Houseplant also targets the posh cannabis consumer. Marbled rolling trays and ashtrays cost well over $200 and the corporate recently collaborated with luxury clothing retailer Kith.

The collaborations are prone to proceed. Yau said he believes dispensaries like The Travel Agency offer promising partnerships for fashion brands seeking to capitalize on the “coolness” of the burgeoning cannabis industry.

THC soda maker Cann has its own high-end backers, including actress and lifestyle entrepreneur Gwyneth Paltrow and two-time NBA All-Star Baron Davis. The beverage maker is trying to succeed in consumers where they’re willing to spend money.

At New York's Montauk Surf Lodge, where guests pay at the least $3,000 for an evening's stay, they’ll now purchase a hemp-derived version of Canns Seltzer alongside local rosé and premium spirits.

Cann co-founder Jake Bullock said his brand's audience is a premium consumer, largely millennials, and its competition is alcohol. Bullock and his co-founder Luke Anderson see the partnership with Surf Lodge as a super method to get into that audience – via the rich Hamptons residents who already indulge and spend big.

“It’s a very classic customer and Luke and I thought the brand would fit into their lives,” he said.

Yau, who spoke to CNBC while working near the Hamptons, can be aware of this audience. “We believe we are still in the first inning of cannabis legalization in New York,” he said.