Professional Documents
Culture Documents
Marketing
Cannabis:
Online
WHITE PAPER
Page 19: Insight 3: Build Brand with CSR & Thought Leadership Content
The pathway to global legalization of cannabis has never looked as clear for
investment and growth. While its difficult to quantify given the size of the
unregulated, black market, estimates show the legal cannabis industry to be
worth over $60 billion by 2025.
However, in the short term brands can expect some significant headwinds to
profitable scaling. The industry is in its infancy and even the best-meaning
government regulators will have a challenge getting the rules right. To say
nothing of political and cultural resistance to cannabis legalization as a whole.
The week before this report was written, the US Federal government announced
an update to its 2018 Farm Bill, that permits hemp to be grown and harvested so
long as its less than 0.3% THC. The so-called “Interim Rule” calls for a testing
regime that is stricter than many farmers had been planning for.
03
This, at a time when regulators in both the US and Canada are scrambling to
process licenses and conduct testing on the rules that are currently in place.
How can brands operate legally - and inside social channel regulations - when
the laws and rules seem to change by the hour?
The popularity and demand for cannabis products and services sector that is
being built around them is well-documented. However, we also see that the early
valuations for publicly traded companies have recently come back to earth.
Brands like Hexo have announced layoffs, and other brands like Leafly initated
hiring freezes.
04
As has been said, cannabis isn’t a license to print money and the opportunity
needs to be quantified correctly. Or as Nebraska entrepreneur and industry
advocate Chad Fey said, “[Cannabis] shouldn’t be a get rich type of crop, it’s
just another crop in the rotation”.
From the supreme inconvenience of having one’s social media account closed
without notice - and all the content and contacts that go with it - to legal peril,
it’s clear that we can’t just dive into the online marketplace without assessing
the risks. It behooves any operation, large or small, to get help evaluating and
mitigating these risks.
05
Our intention for this report is to share 3 actionable insights that we feel can
positively guide brands up and down the cannabis supply chain.
06
point-of-View
statement
As we began to research, interview, and compile data for this white paper, we
noticed the following straight away:
First, we are witnessing the birth of an industry, who’s value we can only begin to
comprehend. Yet, this does not mean that being in the cannabis industry is a
license to print money. Only actors that play the long game, focusing on the
end-consumer with integrity, will thrive.
Second, while certain jurisdictions may have taken an early lead, cannabis and
derivatives have a high probability of being a global phenomena at scale. While
this report does focus more on the industry in North America, subsequent
versions of this report will include content from Europe, Latin America, and Asia.
07
We truly appreciate that while jurisdictions in North America may have early-
pov
adopter advantages, the rest of the world will be poised for last-mover benefits.
statement
Finally, despite the vast pools of capital scouring the Earth for the next billion-
dollar cannabis exit, no one really knows what is going on yet. Only recently,
have the large valuations of early entrants given way to sobering reflection, and
in some cases layoffs. Therefore, while we are net-positive for growth in this
emerging sector, it comes with strong caveats and warnings.
We spent some time reflecting on the terms we would use in this report. We chose to deploy
“legacy”, “informal” and “black” markets interchangeably. When we use legacy, we include the
following actors: Well-intentioned brands, growers, distributors, brokers, etc on various points
between the “grey” or “black” market. We exclude predatory enterprises that deploy violence and
corruption as part of their expansion and operations activities.
08
The reason is that the expertise and institutional memory lies with the legacy
market not the legal. After 80-years of prohibition, these individuals have
pov
created a largely stable supply chain and serviced a giant customer base to their
statement
satisfaction.
So while governments are keen to exclude the black market actors from the
legal one, the legal market doesn’t have enough supply of product or quality
genetics to compete with the black market.
Our focus for this report is for brands who already have legally sound business
models or are on the near-term path to doing so. We believe that a fairly
regulated industry, free of stigma and prejudice, best serves our societies.
Report contributors
Before you make a move in this industry, we highly recommend getting legal
guidance or at the very least immersing yourself in the legislation that affects
your business. We are thrilled to have Matt Maur, Vice-Chair Cannabis Law Group
- Torkin Manes LLC as our legal contributor to this report.
From the content standpoint, traditional marketing isn’t open to many cannabis
brands. So, we have Megan Henderson, Director of Marketing and Business
Development for HelloMD in Canada, to help us navigate how to create
marketing strategies that stay onside of regulators.
Given these challenges, we also bring you PR-driven awareness strategies, with
Cory Herescu, founder of RNMKR Agency providing wisdom to brands who want
to deploy media outreach as part of their approach.
09
For those brands that see a risk-appropriate path to engage in e-commerce and
pov
online sales, we have Stuart Lutterman, President of Brother Processing
Solutions to share insights around accepting payments and risk-proofing your
statement
ability to do so.
Vini Villatoro, COO of Global Hemp Solutions, working on a global supply chain
from Asia to the US.
Chad Frey, CEO of Attilah and Executive Director of Nebraska Hemp Industries
Association brings us the news from the US heartland.
We know that while any errors or misunderstandings are contained in the report
are our own, the contribution of these individuals has made this report as rich as
it is.
10
key
insight 1
Consumers and patients have risked jail time and social stigma in order to gain
access to cannabis. Any newcomer to the community would do well to remember
that the marketplace is built on authentic relationships of trust. As of this writing,
the black market still has a lion’s share of the market, even in jurisdictions that
have been legal for a number of years. To ignore the economics of this phenomena
will result in this trend continuing.
For brands in the legal space, it’s important to better understand the culture of
cannabis, its deep roots in passionate and sometimes outlaw communities.
11
The simple truth is that most cannabis consumers, outside of medical patients,
have more trust in the black market than the legal one. If brands and governments
wish to see this trend reversed, it’s time for us to map the legal industry in ways
that learn, honour, and partner with cannabis industry pioneers.
Creating consumer brands at scale isn’t about the best idea or product, it’s about
having the processes and the people to deliver on the brand’s value proposition.
The growers need to leverage the knowledge of other scaling industries and
professionals to build audiences and supply-chains, at scale. This mutually-
beneficial relationship will only work if there’s authenticity and respect between
these two groups.
If you’re looking for ways to bring more authenticity and resonances to your
cannabis brand, here’s a list of four things to start or continue doing:
Do respectfully seek guidance and resources from the legacy market, both in
terms of production as well as supply chain management. Where possible lean
into the medical community, showcasing the hard work that patient’s rights and
compassion clubs have been doing to ensure this medicine is available.
12
Do engage with the Amnesty movement. By authentically placing yourself front-
and-centre with the fight to free and clear records of persons jailed for possessing
or selling this plant, you’ll appeal one of the most pivotal issues for cannabis
consumers.
"There are exemptions and exceptions built into [Canada’s] Federal Cannabis
Act. Smart companies are finding creative ways to reach customers
notwithstanding the restrictions around traditional marketing tactics. Invest in a
solid team of marketing professionals who can think outside the box and market
your products effectively. It can be done despite the tight regulatory framework,
indeed many companies are doing it quite effectively,” Matt Maur, Torkin Manes.
13
Key
insight 2
In our research we learned that there are plenty of brands marketing their
cannabis products and accessories online, and depending on the jurisdiction
and channel, doing-so legally.
Medical cannabis brands, once working with people with medical prescriptions,
are free to ship their products to online consumers. However, the regulations of
what can be said about medical cannabis varies, so even these brands will want
to have strong legal and compliance reviews before entering the online
marketplace.
14
We’ve even seen industrial hemp be scrutinized by social media, both ads and
organic posts have been removed for any mention of selling and cannabis,
hemp, CBD, etc.
“It is imperative that you understand what you can and cannot do before you
dive into an e-commerce strategy. No one likes to spend money on legal fees,
however failing to understand the framework before you go down a path can
have ruinous consequences. Fines or having to unwind a strategy that has
seen a significant investment of time and money can be crippling to a
company,” said Matt Maur.
If you’ve determined that you’re comfortable with getting into online business,
choosing the correct financial partner will be imperative. There’s no point in
getting your marketing right, drive customers to your site, then not be able to
accept electronic payments.
Only this year, Elavon Merchant Services boarded hundreds of CBD merchants
to process debit and credit cards. Within months, Elavon reversed course and
shut down all of these accounts without providing an alternative solution.
15
“Look for partners who are already working with cannabis companies like
Shopify. They can help you navigate this. But no matter who you work with
whether it be an agency or other partners – make sure they understand the
cannabis act restrictions. You do not want to have to train them or take the
risk that they don’t fully get the regs. That will put you and your brand in
jeopardy,” said Megan Henderson.
Even where jurisdictions and banks permit credit card processing, expect to be
hit with high risk service fees and limitations on borrowing. In the US, so long as
Cannabis remains a Schedule 1 “drug”, many banks and social channels are
taking a wait-and-see approach.
If you’re an LP, partnerships with platforms like Shopify can help navigate the
legal and regulatory roadblocks that currently exist. However, the opportunities
seem to be for larger operations. Particularly in Canada, smaller accounts seem
to be getting shut down.
If you’re a smaller shop, you may need to weave together multiple partners to
get your financial services needs met.
16
“We recommend starting with a merchant account as this can often be the
cause of bottlenecks in the sales transaction. There are plenty of payment
gateways and shopping cart solutions that could also connect you with
reputable payment processing solutions. Wherever you begin the journey:
Shopping cart, payment gateway, or payment processor, all roads will eventually
lead to a major credit card company or bank.
As with everything in the cannabis business, believe “half of what you see and
none of what you hear”. Do your due diligence, ask for references, review online
forums and message boards, and trust your bs detector.
When choosing a financial partner(s) in the cannabis space, here’s the top 3-
things you should look for, according to Stuart Lutterman of Brother Processing
Solutions:
1. Make sure the vendor is clear about who they represent. In the Elavon
fallout of 2019, many businesses were applying for merchant accounts with
“multiple” service providers, only to discover they had submitted applications
to the same banks but through different independent sales organizations
(ISOs) and ISO sales agents. Application fees are the norm and often non
refundable, so knowing who you're applying to is critical to save time and
money.
2. Make sure they can stand behind their solution. Many ISOs and agents will
promise processing solutions, only to have the application turned down by
underwriting or shut down shortly after boarding. While accounts are neither
guaranteed to be accepted nor permitted to keep processing if red flags
appear, a professional ISO or bank should be able to state confidently
whether a certain type of business is supported or not.
17
3. Invest in Backup solutions. Visa and MasterCard, the main decision makers
in the payment solutions industry, are capable of changing policy quickly. What
works today may not work tomorrow. Having a backup service like an offshore
merchant account, e-checks or e-mail transfer service, means that even if your
main account does get frozen or shut down, you can still accept payments in
the interim. In cases like an offshore account, you’ll pay more than a traditional
merchant account, and be prepared for on-boarding fees and processing
volume minimums. However, if paying a few more percentage points for the
ability to accept payments means you can stay in business it may be worth
considering.
18
Key
insight 3
Brand is (almost) the only viable game in town; Tell educational, entertaining,
and inspiring stories to build an audience and scale your business; Think Web 1.0
- e-mail newsletters, blogs, etc.
Once legalization hits scale, we do feel the social channels will open up, and can
recommend limited use of Twitter and LinkedIn’s content advertising platforms
as examples of what this may look like for other channels.
19
However, if you want to reach your audience on other channels you will need to
be creative in getting your message. You may want to get support from an
outside agency that specializes in social media compliance for cannabis brands.
You may want also want to hire consultants or in-house creative to plan and
deploy campaigns.
Once you’ve cleared the rules of social, you still must contend with jurisdictional
regulations. The legal framework of talking about cannabis is almost an onerous
as growing and distributing it.
However, just because there are hurdles to clear, doesn’t mean that there aren’t
authentic and proven ways to engage with and grow your customer and
audience online. With the right legal and marketing support, there are
incredible opportunities to get your message out.
"I think brands may not be able to put the exact message a traditional
marketer would have out in the world but it doesn’t mean there are no
opportunities to advertise,” said Megan Henderson, Director of Marketing and
Business Development for HelloMD in Canada.
Henderson points out that there are vastly different regulations between
jurisdictions and that even in the United States and Canada, rules can differ
widely between regions. To say nothing of the different laws and restrictions for
recreational, medicinal, and industrial cannabis.
20
“"Once you have established your interpretation of the rules then you will be
better able to navigate how to create messaging within that. When it comes
to your digital creative and copy you need to remember that you can’t have
people or animals, cartoons etc. You also can’t have testimonials, health
claims or speak to health benefits.
Quebec has essentially said no digital advertising so you can always exclude
that province in your digital targeting. In the US the rules differ state to state
so you need to understand where you want to advertise and then familiarize
yourself with that state's regs. Some have no restriction on digital advertising
and some do,” * said Henderson.
How can a brand proceed with a strategy that’s both onside social media rules
and government regulators near and far?
In our research we found that brands are using storytelling and design strategies
to reach audiences indirectly, and often through earned media.
Design-driven brands like Tokyo Smoke are also telling interesting stories
through the design of their products and packaging. The design becomes the
story, not the product itself.
21
We anticipate this trend to grow steadily over the next number of years as
subject matter experts and thought leaders are born in areas we can only begin
to imagine. The combination of the personalization of the options cannabis
invites and the regulatory hurdles should translate into highly creative content
by brands.
If you’re leading a smaller brand without the deep pockets of the larger players,
content and CSR strategy are all ways that you can leverage your DIY storytelling
capabilities on one of the major social channels. Look to hire outside resources
only once you’ve exhausted your internal team’s capacity to create consistent
content.
The greatest cost in content development is the time it takes to create, edit, and
distribute. If you’re looking to save on costs yet still hire external agencies,
consider creating the content in-house and get the support of an agency to
reach out to media or influencers.
This will help you better understand the mediums of social outreach that have
swept across our cultural and professional landscapes, better to understand
how to spot value and opportunity when you engage resources, going forward.
22
The average cannabis consumer is savvy and highly suspicious of inauthentic
actors. A wrong foot planted by a neophyte brand could easily be amplified
from a minor to a major PR crisis, should the cannabis community’s more vocal
members take issue with it*. The best way to mitigate this type of risk is to
thoughtfully engage with an issue and make a good-faith effort at helping.
*I was recently taken to task on LinkedIn by members of the cannabis community for using the term
“craft” cannabis incorrectly. The OGs of the industry take great delight in calling out BS, so do make
sure you do your homework.
23
Top 5 CSR Initiatives brands can deploy
24
credibility to new entrants to the industry. Just be aware of rules around health
claims.
The key here is to take an issue that your customers care deeply about. Then go
and deliver something of value that moves the needle. As you do something
that actually helps, as in the Amnesty Movement, and through your telling of
that story people, connect to your brand’s good intentions and share your
message freely and organically.
Education and awareness fit so well as part of a content strategy, plus creating
content is financially accessible at every budget, making it a highly effective way
for smaller brands to get noticed. While we don’t recommend trying to recreate
the “Ice Bucket Challenge”, we do recommend you embed your content team
with your CSR team, documenting and amplifying the message you want to get
out.
With the combination of genuine intention and the authentic content that you
create around that issue, you’re now equipped with the ability to reach out to
traditional media and share your campaign with them. With persistence and
empathy, you can develop relationships that can lead to earned media, another
way to build brand onside of uncertain and rapidly shifting regulations.
25
Direct audience to your website, own the relationship and the data
The combined risk of getting a social media account shut down and the
opportunity that building a content and sales channel that you own is too big to
pass up.
Text communication, according to Gary Vaynerchuck (aka Gary Vee) is the next
frontier of direct-to-consumer marketing, given the obstacles that
communicating thru 3rd-party channels pose, we recommend paying close
attention to text marketing in the coming months.
26
conclusion
This report aims to provide a start-point for cannabis marketers and we intend to
update the white paper’s recommendations in future iterations.
Finally, we offered insights into how to build an audience and brand by deploying
high-impact CSR content campaigns in the areas of: Environmental sustainability,
legal amnesty, patient access, conscious consumption, restorative justice for
communities hid hardest by prohibition and the War on Drugs.
We are confident that if brands retain solid legal guidance, have a reliable payment
solution partner, and engage in creative storytelling, they will be able to scale and
compete for many years to come.
We look forward to learning and updating our recommendations as the industry
unfolds.
27