Marketing Industry Braces Itself for Cannabis 2.0

the lit agency Marketing Industry Braces Cannabis 2.0

Only a year after Canada legalized recreational cannabis it has already become a multibillion-dollar enterprise. As only the second country in the world to enter this uncharted territory, the journey from the underground to the high street has not been without trials, particularly for cannabis marketing firms. As the canaries in the cannabis coal mine, even the best marketing firms realized that safely circumnavigating Health Canada’s regulatory minefield would require a new batch of fresh, creative solutions.

On October 17th, 2018, when the Cannabis Act was passed, only certain cannabis products, including dried cannabis buds, seeds, plants, sprays, and oils were given clearance to enter the market. Other derivatives such as edibles and cannabis-infused beverages were held back, purportedly to allow the industry and regulators time to smooth out the bumps in a virgin industry with no existing playbook. Whether or not those kinks were worked out remains an open question.
What we do know is that ready or not, twelve months to the day since round one of legalization, the cannabis market sits on the cusp of what many have labelled ‘Cannabis 2.0.’ October 17th, 2019 is set to welcome in a whole new spectrum of soon to be legal products including beverages, edibles, concentrates and topicals.

October 17th is a huge date in the Canadian cannabis industry calendar. According to a report released by accounting titan Deloitte, these new products are set to dominate the cannabis market and represent an estimated 2.7 billion Canadian dollars of new business. According to the report:
edibles will be worth 1.6 billion Canadian dollars

  • cannabis-infused beverages will be worth 529 million Canadian dollars
  • topicals will be worth 174 million Canadian dollars
  • concentrates will be worth 140 million Canadian dollars
  • tinctures or liquid extracts will be worth 116 million Canadian dollars
  • capsules will be worth 114 million Canadian dollars

Although this represents a golden opportunity for cannabis marketing firms, it also means that branding success will require taking a hard, naked look at ways in which to apply lessons learned in the previous 12 months. Research has shown that due to packaging restrictions, less than 11% of Cannabis consumers recognize the brand that they purchased. If that number sounds low, it’s because it is. However, in all likelihood that number still represents a hard-won consumer demographic for the brand recognition experts, many of whom use marketing tactics that narrowly skirt the outer edges of regulations. Although this daring and delicate balancing act may reap rewards, it’s possible these shenanigans could make them the unwitting poster children Health Canada chooses to make an example of.

In a year of trial and error, what have the agencies and producers learned while trying to navigate Health Canada’s marketing restrictions? More importantly, as Cannabis 2.0 rolls out, how well adapted is the marketing industry for the challenges and rewards on offer?

In a recently released podcast, Bruce Linton, the former chief executive of Canopy Growth, Canada’s largest cannabis company, discussed what he believes the marketing terrain for cannabis-infused beverages and edibles will look like.

As beverages tinctures, oils, edibles become legal, Bruce Linton believes from a marketing perspective, the success will go to the companies able to conceive the most recognizable containers. “If you truly wish to have people migrate to a supply chain where it’s governed, they have to be able to distinguish the product that knows what it’s about.”

“I could put a Heineken bottle on this table and there wouldn’t be a single person in this entire venue that wouldn’t know that was a Heineken,” says Bruce. He believes that if a similar level of brand recognition could be achieved by cannabis industry players the business opportunities could be endless.

“I think if we do similar things with great products and formats of recognizable containers, what’s in it is unique and good people will start to understand that’s what I want. You can then export that IP or that creation process around the world. So it could be massive.”

Again, such developments raise questions about government marketing rules and packaging design. Bruce explains; “I think that you’re going to find that with all things Canadian, they start cautiously and expand somewhat. So I think you’re going to find the packaging and things are open for discussion and evolution.”

Although Bruce considers Cannabis 2.0 to be a huge opportunity, the chance for the Canadian cannabis industry to truly spread its wings remains on the horizon. He explains Cannabis 3.0 will be the era of massively increased research. This is what Canada must focus on in order to be a global leader.

“Cannabis 3.0 is when you start reading data and saying this product in this dose delivered this way may assist anxiety or may assist sleeping,” says Bruce. “I think cannabis has sharpened people’s intellect to actually ask questions to say, how could this help me. Regarding the medical potential of cannabis, we’re at 1 percent of the knowledge. If you’re talking about what inning are we in with research into psychoactives and mental state, we haven’t begun the game.”

If Bruce Linton is right (and he probably is) then the LiT agency creative team has a busy and exciting few years, probably decades ahead. And we can’t wait to dive in.

Financial Posts original podcast