4 minute read 14 Nov. 2019
Woman smoking cannabis

How cannabis brands are standing out despite regulations

By Monica Chadha

EY Retail Consumer Products and National Cannabis Leader

Defining success in dynamic industries. Passionate about creative writing and health and wellness.

4 minute read 14 Nov. 2019

Learn how Canada’s cannabis companies are advancing their brands in a “wild west” where Health Canada has a close eye on their every move.

If marketing is at its heart differentiating your brand, how can you stand out in an industry that’s regulated down to the finest points of packaging and advertising? That’s the challenge facing Canada’s cannabis companies as they seek to establish themselves with consumers in a virtually untried sector against a backdrop of government oversight and intense scrutiny.

In November 2018, EY and Civilized brought together marketing and external and internal legal professionals that work with some of the country’s pioneering cannabis licensed producers (LPs) to discuss how they’re tackling the issue and advancing their brands in a “wild west” where Health Canada has a close eye on their every move.

What’s in a brand?

Participants illustrated the challenges of selling legal cannabis products to consumers under the Cannabis Act. The regime that legalized adult-use non-medical cannabis in Canada has numerous restrictions with respect to marketing, promotion, packaging, and labeling of cannabis. Essentially, cannabis products are subject to plain packaging and warning labels, which poses a major challenge for LPs that are aiming to build an iconic cannabis brand and loyal customer base.

While illicit market cannabis is nothing new in Canada, the large majority of Canadians are still unfamiliar with it. And most of those who have consumed it illegally have been largely unaware of — and likely uninterested in — its provenance.

Participants agreed that brand is about more than packaging. Companies focused on the recreational market can learn a lot from their medical peers, who have been in the legal medical business for some time. Medical LPs have collected large amounts of consumer data and built trust with their patients. They’ve been able to establish with patients that their products are of consistently high quality and uniform composition, which provide a standardized and reliable experience. Licensed entities – from cultivation to retail – that learn from that experience will be better positioned to build their brands.

Education is another opportunity for companies to stand out with customers. It was noted that in the first week of legalization, the vast majority of consumers had no idea which brands were owned by which LP and no idea what the differences were between products. By helping customers make informed decisions, LPs are confident they can build their brand and win a loyal following.

You can’t say that!

Cannabis has much in common with industries like agriculture, retail and pharmaceuticals. But it faces much tighter restrictions on how it sells its products to the public. LPs aren’t allowed to talk about the flower, the customer experience or the lifestyle — all messages that would be second nature for advertising in other industries. But LPs are finding creative ways to promote their goods within both the spirit and the letter of the law.

One big plus is having friends in strategic places, whether it’s celebrities or social media influencers. As in almost every other area of life today, social media represents a powerful way for companies to reach consumers indirectly. Influencers can act as surrogate marketing mouthpieces for cannabis companies and can talk about products in ways that LPs themselves can’t — about the bud, the experience, the lifestyle.

The lawyers weigh in

LPs’ in-house counsel act as gatekeepers to guide their marketing initiatives and make sure they colour within the lines. In the early going, the legal minds are going to have to interpret the regulations as best they can until the government comes down on them, since Health Canada does not provide ‘pre-approval’ for marketing and promotional materials. Many LPs expect their lawyers will let the marketing teams push the envelope to a certain extent for as long as they can, but they’ll still need to tick all the necessary boxes to ensure compliance with the law.

The legal reps agreed that it’s likely the government will revisit the regulations in the next three to five years, and will likely apply lessons learned to the next ’phase’ of legalization, which legalizes edibles, concentrates, and other derivative products.

 

Merging with the mainstream

Companies from adjacent mainstream sectors, including alcohol and food and beverage manufacturers, are taking a look at entering the cannabis industry. This has the potential to lend credibility to the sector — but it also has LPs on alert.

On the one hand, cannabis companies welcome the idea of being associated with established brands. But on the other they’re wary of being swamped by large competitors that bring enormous resources and marketing muscle to the ring. Participants voiced their concerns that LPs that are just hitting their stride could be “swallowed up and Americanized” by mainstream US-based companies, which would defeat the goal of making the Canadian legalization experience a unique precedent on the global stage.

Looking ahead

The legal cannabis sector is rapidly evolving, and the landscape even one year from now will likely look very different than it does today. LPs are going to have to take calculated risks and push boundaries in how they promote their brands if they want to establish themselves as competitive players.

Creative professionals have always found ways to be innovative and survive and thrive in highly competitive markets, and the industry marketing executives we brought together are optimistic that they can make their mark on the industry and one day make their products widely accepted among consumers.

Summary

If marketing is at its heart differentiating your brand, how can you stand out in an industry that’s regulated down to the finest points of packaging and advertising? That’s the challenge facing Canada’s cannabis companies as they seek to establish themselves with consumers in a virtually untried sector against a backdrop of government oversight and intense scrutiny.

About this article

By Monica Chadha

EY Retail Consumer Products and National Cannabis Leader

Defining success in dynamic industries. Passionate about creative writing and health and wellness.