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Leafing through the Cannabis Marketing Landscape

June 26, 2019

Cannabis seems to be all the rage these days. Rarely a day goes by without a new state breaking down legislative barriers, or a new study coming out reinforcing the plant’s myriad health benefits. But for cannabis brands looking to navigate this landscape, the ever-expanding frontier of legalization brings nearly as many challenges as it does opportunities.

To gain a better understanding of the current state of play within the cannabis industry and how brands are adapting to this rapid rate of change, I caught up with Ryan Rapaport, a Boulder-based VP of Market Development for Best In Grow, an award-winning cannabis technology company specializing in dispensary operations, brand-building, and customer experience.

I picked Ryan’s brain on a variety of topics related to the industry in general and branding and marketing in particular. Below is a transcript of our conversation, edited for concision and clarity.

What does the landscape look like for brands? Is it similar to the craft beer market, with a large number of smaller brands? Or are bigger players dominating?

Currently, it’s a pretty fractured market, but it’s evolving fast. From state to state, sometimes from county to county and even town to town, the regulatory patchwork has prevented the kind of consolidation that we’ve already started to see in the craft beer market, for example. This environment has created opportunity for smaller niche brands that promote a specialized, targeted offering to a very specific audience.

That being said, there’s a growing trend of consolidation occurring, which only promises to continue accelerating, whereby larger companies are acquiring and cultivating those smaller niche brands. These larger companies have the scale and resources that allow the smaller brands they acquire to become vertically integrated – in other words, to own all supply chain processes from farming to cultivation to retail – which gives them a huge profitability advantage over the smaller independents that still rely on outsourcing a portion of their production.

The consolidation trend is also being accelerated by certain regulatory developments. One such example is in Colorado, where Gov. Jared Polis recently signed legislation lifting the ban on publicly-traded cannabis companies, opening up the industry to out-of-state investors for the first time.

So where do the biggest opportunities exist for brands to break into the industry and thrive?

It’s hard. You essentially have to pick a place to start, and you have to build a product that’s differentiated. The vertically-integrated companies are always going to have better control of both costs and logistics. That being said, those larger, vertically-integrated companies can’t do everything as well as craft and niche brands that are laser focused on a specific market segment.

And a lot of these companies run pretty tight to the wire in terms of financials because of the current tax environment, some paying as much as a 60-80% tax rate, and are forced to operate at a loss while holding out for expanded legalization and increased market share. This means brands are at a competitive disadvantage because of costly barriers to entry.

The real opportunities, therefore, are for brands that offer high-quality products that speak to a very specific niche, catering to them in a way that larger, “mass-market” brands cannot. For example, catering to specific groups like senior citizens, the urban community, musicians, etc. Or to very specific interests. For example, instead of “we are this drink,” what about “we are this drink for a hot summer day,” or “we are this drink for after your workout,” or “we are this drink for before you go out.” It’s taking that approach of “this is how we help you. This is how we enhance your experience.”

What are the major pitfalls or threats lurking that brands should avoid?

A lot of the industry is still made up of former black market operations that have evolved into white market. That’s where the market comes from – people doing this in their closets, in some cases for decades. And now we’re seeing growing pains in the marriage between this older way of doing things and the larger corporate world of pharma, alcohol/tobacco, consumer packaged goods (CPG), etc. 

One negative consequence of these growing pains is discrepancies that exist around efficacy. Brands need to make sure that any product they put out is clean, tested, and avoids making any false claims. And these exaggerated claims don’t just risk damaging the specific brand making them; they do a disservice to the entire industry, which is still working hard to undo decades of misinformation and stigma.

How are brands getting their message out in light of the restrictions from the big digital advertising platforms (Facebook, Google, etc.) which refuse to run ads promoting legalized cannabis?

Great question. Facebook and Instagram are both murky right now. It seems like every other day we are hearing sometimes-conflicting reports that Facebook is cracking down, or people’s accounts are being deleted without warning.

Actually, LinkedIn, unbeknownst to many people, is sneakily the best social media platform for the cannabis industry. Not necessarily the social side of it, but the business side – there’s over 60,000 people today with “cannabis” in their LinkedIn profile. I do 90% of my business – if not more – through LinkedIn.

There have been a number of cannabis-focused social platforms – Duby, MassRoots, LeafWire, etc. – that have emerged recently, but they’ve all struggled to catch on.

I’ve heard at least 12 times that “we are going to be the LinkedIn of weed,” but the reality is, all the weed people are on LinkedIn! The stigma is dissipating enough where people no longer feel the need to hide that they’re in the industry. LinkedIn has been very good to the community to allow people to have interest groups, post relevant content, etc.

Gary Vaynerchuk spoke about this at the recent Hall of Flowers industry event. His message for how to circumnavigate these social media restrictions was simply to “do something else.” Do live events, partner with other organizations. Do live activations. Be innovative.

What are some of your favorite brands out there currently? What are they doing that’s helping them stand out from the crowd?

I’ll give you three: Lobo Cannagars, Viola, and Coda Signature. Each of these companies is tied to a very strong and compelling story.

Lobo Cannagars: A super high-end, curated product that’s telling a story and is replacing that nice bottle of wine, or that nice bottle of scotch, with a similarly high-end cannabis offering. There’s real brand value in that “baller” image that they’ve cultivated, allowing them to charge a premium, and the quality of the product absolutely “walks the walk” as well.

Viola – Was started by Al Harrington, a former NBA player. What he’s done is used his money to build not just a great product, but a great brand and story. He found the healing power of cannabis when his grandmother, after whom the brand is named, tried cannabis to relieve pain associated with glaucoma and diabetes, and found immediate relief. They’ve built a tight network of growers and extractors to create a consistent, high-quality product, and they’ve leveraged Harrington’s unique story to build what has become a top-selling national brand.

Coda Signature – A very high-end edible that was created by master French chocolatiers to deliver a taste and quality that’s unmatched in the industry. Their success has allowed them to expand into other types of edibles and even bath balm and skin creams. Now they’re expanding from Colorado into California.

Looking to find the right brand story for your cannabis company? Contact Dan for more on how our integrated team can help.

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