'INTERESTED PARTIES' AWAIT OUTCOME OF A MARIJUANA MEASURE

Leslie Hennessy, owner of Hennessy's Wines & Specialty Foods in San
Francisco, waved his hand over a glass case that sits next to his
cash register, across from the deli section where he sells cheeses,
gourmet salads and olives.

Inside the case were colorful boxes of Macanudo and Romeo y Julieta
cigars. But Mr. Hennessy imagines that the case will soon contain
another smokable product - marijuana, packaged attractively because
"a rolled up joint in a baggy isn't going to do it," he said.

"It would be very similar to the way we sell cigars, where it's
humidity controlled, where it's under lock and key and there are
certain times when it would be sold," said Mr. Hennessy, 63, who
markets his own wine and once led the California Retail Liquor
Dealers Association.

Mr. Hennessy said that he had even begun to negotiate prices with
marijuana suppliers.

A week before Californians vote on Proposition 19, which would
legalize marijuana for recreational use, businesses are preparing to
enter what is expected to be a robust retail market if the measure
passes. The activity is particularly intense in the Bay Area, where
cities like Oakland, San Francisco, Berkeley and Richmond are
positioning themselves to take advantage of the burgeoning industry.

In Oakland, nearly 300 individuals and businesses have listed
themselves as "interested parties" to obtain business permits to sell
or grow marijuana. The city's largest medical marijuana dispensary is
considering a 7,000-square-foot expansion if it is allowed to sell to
recreational users.

Cafe owners are exploring plans for Amsterdam-like coffee shops where
marijuana could be sold and consumed. The California State Package
Store and Tavern Owners Association, which represents black liquor
store owners, is holding discussions about how to position itself if
the measure passes.

"We want to be in the ballgame if it's going to happen," said Andre
Isler, the owner of Isler's Liquors in Oakland and a long-time member
of the association.

A state report puts the value of California's marijuana crop at $14
billion, dwarfing even the wine industry. Robert Jacob, who operates
the Peace in Medicine medical marijuana dispensary in Sebastopol,
said that entrepreneurs of all types were jostling to get a piece of
the action.

"So many people want to get into the business, and even aside from
actually selling it you have packaging needs, management needs,
bookkeeping needs," Mr. Jacob said. "You have every single industry
gearing up for the next dot-com boom."

However, even if Proposition 19 passes - polls show that the vote
will be close - it will take a while to gauge the full impact of the
law. The measure would allow Californians 21 and older to grow up to
25 square feet of marijuana and possess up to an ounce for personal
use. How and where it would be sold commercially would be left up to
individual cities and counties.

At the same time, Tom Ammiano, a Democratic state assemblyman from
San Francisco, is sponsoring a bill that would place California's
Department of Alcoholic Beverage Control in charge of regulating
marijuana. Mr. Ammiano's bill would also allow any store to sell
marijuana as long as it has liquor license. That would include liquor
stores, most convenience stores and even supermarkets.

Complicating matters is last week's announcement by Eric H. Holder
Jr., the United States attorney general, that the Justice Department
will "vigorously enforce" federal drug laws even if Proposition 19
passes. That legal uncertainty appears to be making many businesses cautious.

"There are lots of people that say this will be in the courts for a
long time," said Libba Letton, a spokeswoman for Whole Foods Market,
which has several Bay Area stores. "It's not something we're
interested in getting into now."

Oakland, San Francisco and Berkeley are waiting until after the
election to adopt rules for retail sales, officials in those cities
said. In interviews this week, the officials said they were inclined
to allow existing medical marijuana dispensaries or similar types of
businesses to sell to recreational users if Proposition 19 passed.
Customers who are not buying marijuana for medical reasons would be
required to present a California identification card instead of a
medical cannabis card to be admitted, and they would be permitted to
buy only fixed quantities of marijuana.

"I think we would want to stick with the dispensary idea," said
Laurie Capitelli, a Berkeley City Council member. "I can't imagine
the beer guy driving around with all that marijuana in his Miller
High Life truck."

Oakland's Harborside Health Center, clean and well-lighted, could be
mistaken for a retail outlet - except for the significant presence of
private security and the abundance of marijuana sold from behind a
long glass counter. The dispensary, off Interstate 880, has more than
58,000 patients, and it sold more than $21 million worth of marijuana
last year, according to Stephen DeAngelo, Harborside's executive director.

Mr. DeAngelo said that his operation would be a good candidate for
retail sales.

"My hope is that they would look to the existing licensees to handle
this new activity," Mr. DeAngelo said. He calculated that Harborside
would need to rent an additional 7,000 feet of adjacent office space
to accommodate the new business.

The man behind Proposition 19, Richard Lee, founded Oaksterdam
University and operates Coffeeshop Blue Sky, which doubles as a
medical marijuana dispensary, in downtown Oakland. Mr. Lee said he
envisioned marijuana cafes flourishing if the measure passed,
although the state's tough antismoking laws would be difficult to get around.

Mr. Capitelli, the Berkeley City Council member, said that the
existing dispensaries had an obvious financial interest in
controlling the retail market. But he added that their expertise,
especially on security matters, could be helpful as cities transition
from medical to recreational sales.

Jane Brunner, president of the Oakland City Council, said her city
would most likely look to the dispensaries for retail sales if
Proposition 19 passed - not liquor stores. "We have enough problems
with those stores as it is," Ms. Brunner said. "With the dispensaries
we have a lot of control. They pay fees, they allow us in to do inspections."

But other business interests, backed by legislators, are likely to
push for opportunities to sell marijuana - many already are. Mr.
Ammiano, who is sponsoring the bill to put marijuana sales under the
control of the Alcoholic Beverage Control Department, said in an
interview that liquor stores would be a good option.

"Depending on the community and the location, why not?" he said.

Mr. Hennessy, the owner of the wine and specialty foods store in San
Francisco, said he intended to proceed very carefully given the legal
uncertainty. But he agreed that liquor store owners like him have the
most experience to handle the new market.

"We've always hoped that the bill would pass and give us another tool
to make money," Mr. Hennessy said. "We've all been fingerprinted; we
have city and state licensing. We've just become real experts in
dispensing controlled substances."