The legal cannabis industry is expected to be a $50 billion industry by 2026, according to Bloomberg. That is nearly a 7 fold growth from where it is today. In the United States alone, it is believed that over 100 million Americans have tried cannabis, with 25 million Americans having used it within the past year. Investment in the US cannabis industry has boomed over the past few years with 2015 hitting a high of over $220 million in equity financing to private companies. The uptick in funding corresponds to the loosening of cannabis restrictions. The number of verticals being funded within the cannabis sector, including e-commerce, healthcare, and information service solutions, has also increased as cannabis startups have arrived to solve problems in the cannabis supply chain. What are the challenges of marketing marijuana?
The majority of people with any industry knowledge are growers. Old hands in the industry talk of a 15 year learning curve for new growers. 5 years to understand how to grow high quality product, another 5 years to learn how to improve yield without compromising quality and a final 5 years to learn how to get operational costs down without compromising quality or yield. Established growers are passionate about what they do, the newcomers are in it to make a quick buck. Neither group has any real understanding of what it takes to create an integrated marketing strategy. In fact the majority of the cannabis industry lacks any clear marketing strategy.
As Michael Straumietis, CEO of fertilizer producer, Advanced Nutrients puts it. “You’ve got to remember, this is an industry of farmers, and they don’t have the business expertise the industry needs.”
Many “cannapreneurs” are smart enough to see that the super-normal margins which exist in parts of the market today are not sustainable and that prices will inevitably come down as more players enter the market. They know they need to build brand equity or risk being left in that part of the market which will become commoditized. As recreational cannabis becomes legal, a much larger and more diverse demographic can be targeted by the new cannabis brands.
Conducting research to understanding segmentation is fundamental to success. At this point the market is in transition from medical to medical and recreational, two very different segments that don’t easily dovetail together in terms of a single brand identity. Medical marijuana and cannabis derivatives are distinct segments. Each comes with its own purpose, products and potential consumers.
Retail recreational cannabis appeals to several different and evolving demographics, For example, one large group of new users are late Baby Boomers and early Gen X (in their 50’s and 60’s) — predominantly empty nesters, they are interested in new modes of consumption such as edibles and are averse to smoking. At the same time new Gen X female consumers tend to be interested in not only edibles but also tinctures and beverages. This segment is also strongly predisposed to high quality organic products. Which immediately raises a marketing challenge – the cannabis industry can’t use the same organic label, which is familiar with consumers, as other crops can. This is because cannabis is not so much considered a plant as it is a drug. The label “organic” requires certification by the US Department of Agriculture, which is a federal agency. By the same token the use of trademarks to protect cannabis brands is blocked because of its classification under the federal Controlled Substances Act as a Schedule 1 drug. The United States Patent and Trademark Office (USPTO) is prohibited from recognizing cannabis-related trademarks.
Once the marketing strategy is defined then the design of logos, positioning statements, websites and product packaging can commence. However, there are more hurdles to overcome, legal cannabis is a highly regulated business category, just like alcohol and tobacco. But unlike those industries, cannabis is not legal at the federal level. Therefore there are no federal regulations – but there are very specific state regulations. Child safety is a primary concern wherever cannabis sales are regulated. For cannabis-infused edibles, San Francisco’s packaging rules include a “Keep Out of Reach of Children” warning, allergen warnings and opaque packaging materials that conceal the products from youngsters.
The cannabis industry must find truly qualified marketing advice from experienced and skilled companies. In such a new industry, where consumer segments are still undefined, it is tough finding experts with deep experience in both traditional marketing and new marketing channels – but we do exist.
First published by Adrian G Stewart at OOKII.Company