Navy Capital founder Sean Stiefel says for the burgeoning marijuana industry, the profit isn't in the plant — it's in the end product.
"We're talking about vapes, oils, edibles, topicals, sprays -- all of that stuff is coming, and as science catches up to marijuana, you'll see more and more of those end products," Stiefel said on CNBC's "Closing Bell."
Stiefel founded New York-based investment firm Navy Capital in 2014. In 2017, the firm launched Navy Capital Green Fund, which invests in public equities in the global legal cannabis industry.
In Denver, where recreational marijuana has been legal since 2014, Stiefel said sales of the cannabis plant don't dominate the market, so much as products derived from the plant. And that's where the big money is.
"Look on the other side of it, the cosmetics and some of the more luxury items -- you can't keep them on the shelves," he said.
As for the future of the burgeoning industry, Stiefel thinks marijuana will look a lot more like the alcohol industry than big tobacco, but will likely share traits with both.
Insofar as the alcohol industry has distinctive branding, different product lines and product-based margins, the marijuana industry could be quite similar. And while Steifel does not consider cannabis purely a commodity, like tobacco, he does hope the cost of the actual plant will decline considerably.
"We actually would like for the price of raw marijuana to come down, because we are believers that the margin, like alcohol, is going to be captured in the end product," Steifel said. "You don't necessarily know the price of grain or potatoes going in the vodka or beer, but you know the price of the beer, and there's tremendous margins to be captured when you make products for the end user."
In the short-term, however, Steifel anticipates Canada's impending nationwide legalization will drive marijuana prices way up.