How Marketers Can Capitalize on Cannabis in Canada
With the legalization of recreational use of cannabis in Canada, the $31 billion industry has exploded. Canada is the first G7 country to legalize at the federal level, and this “new” industry presents massive cannabis marketing opportunities for marketers and advertisers across North America.
According to Deloitte, Canadians are on the fast track to spending roughly $7 billion on cannabis products before the end of the year.
Due to the marketing and advertising restrictions of Bill C-45 (the Cannabis Act), branding is a difficult space to navigate for producers, and public-facing advertising is even more challenging for producers and retailers alike. Marketers entering this space will also have to pay close attention to the Canadian legal landscape, the provincial variations of legislation, as well as changes in the competitive environment.
Creativity will be the key to conquering cannabis as a marketer.
Now, let’s investigate this budding conversation, the challenges it presents for marketers and advertisers, and a framework for overcoming them.
Table of Contents
Cannabis in Canada: Context
Legal History
Retail Ownership Structure
Top 7 Cannabis Marketing Opportunities
1. AR/VR Marketing
2. Celebrity Partnerships
3. Organic Social Media Strategy
4. Search Engine Optimization (SEO)
5. Reviews & Listings
6. The Storefront
7. New Entrants
Get Creative!
Cannabis in Canada: Context
In Canada, marijuana has been classified, persecuted, and criminalized as an illegal drug since 1923, but all of this has changed. With legalization, Canada is the first G7 country to legalize the herb at the federal level for recreational use.
Understanding the legal history of cannabis, provincial boundaries, and retail ownership structures will help paint a clearer picture of the Canadian market, and the opportunities therein.
Legal History
As a result of Canada’s oppressive history towards cannabis and cannabis products, there is still a very strong negative connotation held by much of the populus. Here’s a little more context:
Cannabis was added to the Confidential Restricted List in 1923 under the Narcotics Drug Act Amendment Bill. In the same year, this amendment led to the introduction of the Act to Prohibit Improper use of Opium and other Drugs, which included marijuana, and deemed the herb as an illegal substance.
Canadian usage spiked in the 60’s as a result of the “hippie” counterculture, which led to the introduction of The Narcotics Control Act in 1961 which increased maximum punishments for growing, possession, and resale to between 14 years and life imprisonment. During the 1980’s, usage rates began to stabilize, and a more negative mindset was adopted by the masses surrounding consumption of the drug. This period of stabilization lasted until the late 1990’s.
Since the dawn of the 21st century, growth in usage has climbed steadily. In fact, a 2016 poll by Forum suggested that approximately five million Canadians use marijuana at least once per month. In comparison, roughly 22 million Canadians are frequent consumers of alcohol. With legalization, it is estimated that these usage numbers will only continue to grow.
Retail Ownership Structure
Ownership structures vary widely across the provinces and territories. There is a combination of government and private ownership for storefronts and online sellers across the country.
To date, the majority of the provinces and territories have opted for retail models that involve at least some degree of government intervention or involvement. Here is a chart to show which provinces are using each ownership model.
Note: provinces listed under the “Government Only” section are of little interest to third-party marketers and service providers.
As a marketer, you have the opportunity to complete marketing work on behalf of these privately owned retailers who will be fighting for shares of their local markets. You also have the opportunity to offer specialized services to cannabis producers, as we will explore later.
For the provinces and territories listed under the private and government ownership, most will be operating under unique circumstances. For example, in the Northwest Territories, cannabis products are only be purchasable at privately run liquor stores, or via government run online sales. Learn further details here.
Marketing Risk Assessment
Marketing for cannabis products occupies a narrow space, so if you are considering entering the market, it's crucial for you to be aware of the possible challenges, risks and other implications that you may face.
This list is not exhaustive, but does provide insight into some of the major considerations for marketers looking to enter or explore the cannabis industry.
Cannabis Market Valuation
According to the Financial Post, there are now 90 publicly listed marijuana companies in Canada with a combined market valuation of roughly $31 billion.
Canopy Growth Corporation, based out of Smiths Falls is currently the largest of these companies, with a reported $77.9 million in revenue for 2018. Aurora Cannabis, based out of Edmonton is the second largest company in the country with a reported $55.2 million in revenue for 2018.
In addition to these numbers, Canopy saw a 550%+ stock growth over the past year, while Aurora saw similar growth at roughly 400%. These massive growth trends reaffirm the opportunity that this emerging industry presents.
Although consolidations and major buyouts have been trending across the Canadian market, there are still huge market opportunities for those with the means and the resources to enter this space.
Let’s explore some of the specific laws as well as the opportunities present for those in the marketing and advertising space.
Cannabis Marketing Laws
Marketing in the new recreational cannabis industry in Canada is a difficult space to navigate. To date, this is what we know based on the Cannabis Act and it’s big brother, the Tobacco and Vaping Products Act.
The Cannabis Act (Bill C-45)
Under Bill C-45 (the Cannabis Act) regulation surrounding the legalization of marijuana mimics that of the Tobacco and Vaping Products Act for the tobacco industry. Key objectives and focusses include:
- Protecting the health of Canadians due to the harmful health implications that can result from consumption of cannabis products
- Protecting Canada’s youth from readily accessible cannabis products, as well as the temptation to use such products
- Protecting the public from being misled regarding the health concerns as a result of advertising and marketing tactics.
I am proud of the work accomplished by our Government, Parliamentarians, and all Canadians who contributed to this important shift in our country’s approach to cannabis. Our goals are to protect our youth from the health and safety risks of using cannabis and keep criminals and organized crime from profiting from its production, distribution and sale.
For producers and retailers of cannabis and related products, the following marketing specifics have been outlined by Bill C-45, in conjunction with Health Canada:
- Health Canada’s guidelines for cannabis packaging suggest that packages must be a single uniform color, with no imagery outside of the brand logo and a distinct health warning.
- This allows for minimal freedom in terms of branding, and makes the company name and logo design of paramount importance.
- Promotion restrictions are geared to prevent any youth appeal through marketing or advertising, with an emphasis on clear, objective information allowing for informed purchase decisions.
- This means that promotion regarding factual information, surrounding details such as THC/CBD level, and other ingredients is legal.
- In all cases however, promotion is only allowed in places where it could not be seen by youth.
- Other specific limitations include the inability to use:
- Promotion considered appealing to youth.
- Promotion involving false or misleading information.
- Promotion through sponsorship, testimonials, or endorsements.
- Promotion involving the depictions of persons, celebrities, characters, or animals.
Top 7 Cannabis Marketing Opportunities
As implied by the restrictions put forth by our friends at Health Canada, marketing cannabis and cannabis based products is difficult (to say the least). These limitations mean no Facebook ads, no Google Ads, and no display ads anywhere that youth might be able to see them.
To the naked eye, it might seem fruitless to even attempt to deploy marketing tactics in such a heavily restricted industry… So, let’s get creative.
1. AR/VR Marketing
An emerging trend among current cannabis producers is experimenting with new Augmented Reality (AR) and Virtual Reality (VR) gear to provide unique product experiences and greater brand differentiation.
Imagine that you purchase a marijuana product and it appears to have uniform coloring, a logo, and a health warning. However, when viewed through the lens of your smartphone, you’d be able to see more distinct brand elements, click on different parts of the packaging to unlock brand information, and maybe even have access to promotional video content.
Future Farm Technologies Inc. is a Canadian agricultural technology company that has already announced interest in re-allocating resources at one of their subsidiaries, NexTech AR Solutions Corporation, to develop “augmented reality-enhanced packaging” and a “virtual budtender platform” for use by producers and dispensaries in the cannabis industry.
This style of promotion would be informational, and this type of packaging could also navigate youth restrictions by only being accessible within the confines of a dispensary. And, with an emphasis on delivering information, it would also mitigate concerns for making the product “more appealing”.
2. Celebrity Partnerships
I know, I know, Health Canada has placed restrictions on any advertising through celebrities or public figures. But, what if a celebrity wanted to get involved with a company as a business partner, or recommend a cannabis stock for its profitability? Something such as that would not break any of the current regulation imposed by federal authorities.
For example, take Gene Simmons who has partnered with B.C. based Invictus MD Strategies Corporation as Chief Evangelist Officer. He understands that endorsing the brand is crossing a legal boundary, but has been adamant about expressing the business opportunity that lies in the cannabis industry.
3. Organic Social Media Strategy
Although cannabis brands are unable to utilize any paid advertising, they aren’t entirely banned from social media channels. What they can do through age-gated social media, is aim to enter into intelligent conversation with consumers, and use channels such as Facebook as a means to answer or address different consumer questions and concerns.
Licensed producers are unable to show images of the cannabis flower on social media, and limited in what they are able to showcase on their own websites. What they are able to do through social media is talk about brand characteristics, different strains, product make-ups, and price—in an informational and educational way.
When such heavy limitations are placed on social media marketing, a clear message of safety, security, and trust will be the key to winning prospects over social media channels.
4. Search Engine Optimization (SEO)
Advertisers and marketers aren't able to run Google Ads or Facebook ads on marijuana products. However, what they can do is ensure that their clients in the marijuana space have fully optimized websites so that they can outrank their competitors and earn their traffic organically on major search engines, such as Google.
For example, consider that a potential buyer heads over to their most trusted confidant (Google, naturally) and enters a search like this:
This prospect is looking for help, and guess who’s going to get their business? One of the top search results. According to a study done by Advanced Web Ranking, the #1 search result is earning roughly 30% of user clicks, with an exponential decline for every position after.
Some brands have already been getting creative with SEO plays. For example, Canopy Growth Corporation (discussed above) use the stock ticker “WEED”. When you enter a new Google search tab and type in “weed”, guess what the first search result is? A google finance summary of Canopy’s stock history as well as a company summary banner. This is ingenious.
For brands that are going to be unable to market in the traditional ways, dominating search rankings will become an invaluable asset.
5. Reviews & Listings
For your clients in the cannabis industry, particularly dispensaries, it's more important than ever to have accurate listing information and a high star rating across a variety of listing and review platforms.
Imagine that you pour your blood, sweat, and tears into dominating the search rankings for target keywords, but have a low star rating, or an inaccurate phone number on your listing?
If so, all of your hard work will be wasted, as consumers will simply choose another location. Consider these dispensary locations in Vancouver:
How many of you are going to choose the second or the third results over the first one...? None.
What's more? There are now listing platforms that deal exclusively with cannabis, so that consumers can be sure to find the right shop. This is great news for marketers because getting your clients listed on new directories like Weedmaps and Leafly has never been easier than it is with their Reputation Management integration.
Having accurate listing information, and leveraging technology to ensure that your clients always have world-class review scores will be of paramount importance as you enter into this space.
6. The Storefront
With such strict marketing regulation, one of the greatest assets for third-party cannabis marketers will be sales-staff education.
With little room for differentiation based on branding, winning the trust of front-line sales staff will be a key determiner of brand success. Producers/marketers will want to work closely with each of their retailers, and provide as much education and collateral as each is interested in.
When you walk into the new dispensary down the street and every product on the shelf looks the same, who are you going to turn to for product information, and possibly even a recommendation? The front line staff.
7. New Entrants
With the new cannabis industry still occupying something of a grey space across in terms of public perception, it is possible that established media groups and marketing agencies may not want to have their brands associated with anything cannabis.
This hesitation is creating great opportunity for new entrants that want to specialize in servicing these unique businesses with very unique needs.
Get Creative!
Producers and retailers have already been experimenting with different promotional tactics that conform with the complex regulatory environment. Here are a few of the tactics that have been experimented with:
- Branded mindfulness sessions. Picture a yoga class for cannabis users that has a silent sponsorship from a cannabis company.
- Old-School Community involvement. There is nothing restricting dispensaries or other local entities from getting involved in their communities by sharing local news or other content that is relevant to their customers.
- Cannabis focused apps/platforms. There are a growing number of cannabis apps and social media platforms being launched that may grow into huge market opportunities for producers, retailers, and marketers.
- Attorney Partnerships. Marketers are known for their creativity, but in this instance, it could be of great value to collaborate with an attorney differentiate oneself and truly act as expert entities surrounding legislation.
Regulations will likely be disputed for quite some time, but there are already great opportunities for those who are interested in entering the cannabis space.
Conclusion
As legal cannabis businesses continue to open across the country, it is important that advertisers and marketers recognize the opportunity that this industry presents for new streams of revenue. However, staking a claim in this multi-billion dollar industry won’t come without some inherent risk.
Some of the greatest challenges for advertisers and marketers entering the space will be:
- Mitigating possible negative public perceptions;
- Operating within the confines of the Cannabis Act;
- and navigating different provincial regulations if providing services on a larger scale.
Although this industry has placed heavy limitations on the standard abilities to run digital ad campaigns and leverage tools such as email marketing—it drives something else: Innovation. It forces marketers like you to break the norm and bring new ideas to the advertising table.
Here are some of the most innovative opportunities today:
- Leveraging AR/VR technology;
- Partnering with lawyers and celebrities for stock promotion;
- Building a media strategy to bolster community involvement and knowledge sharing;
- Adopting search engine optimization tactics;
- and optimizing reviews and listings for a boost within local search parameters.
What’s more? This is just the beginning. With the certainty of ongoing push-back on current regulation, and major questions yet to be answered surrounding the proposed 2019 introduction of edible products—there is ample opportunity in Canadian cannabis.
Check out the Vendasta Marketplace today to explore great marketing tools and discover new marketing opportunities in the cannabis industry.
