US cannabis companies struggle to overcome marketing challenges
Firms are building national brands but the federal government prohibits them from advertising to mainstream consumers
New York — US cannabis companies are racing to build national brands and market their wares to mainstream consumers. There is just one problem: it is hard to advertise your product when the federal government considers you a drug dealer.
Facebook, which like Google prohibits marijuana ads, has kicked some weed sellers off Instagram. Earlier in January CBS declined to air a commercial touting the benefits of medical marijuana during the Super Bowl. Much the way banks are unwilling to finance cannabis startups, television networks and online advertising marketplaces are understandably cautious because the Feds still classify marijuana as a schedule 1 drug alongside heroin and ecstasy.
With a growing number of states legalising cannabis for recreational and medical purposes, the US market could surge eight-fold to $80bn in sales by 2030, according to Cowen & Company. But it is hard to see that happening unless companies can market their wares the way beer and liquor companies do. After decades of prohibition, many consumers need a push to give marijuana a try.
“The public has a stigmatised view of the product but legitimate business owners can’t reach them — it creates mistrust,” says Kyle Porter, who runs CMW Media, which does marketing and public relations for cannabis companies. “We’re really limited in how we can reach customers.”
For several years, marijuana companies have considered Instagram an ideal place to build their brands. In an effort to position weed as a mainstream product, they post pictures of buds and joints and show people hiking with vape pens or relaxing on the beach with cannabis edibles. But Instagram, a Facebook property, does not let cannabis sellers advertise. In a statement, the company said that while it allows “marijuana advocacy content”, posts promoting the sale of cannabis are verboten. Dispensaries are prohibited from providing contact information, including phone numbers and street addresses, “regardless of state or country”.
Though many cannabis sellers — legal and black market —continue to operate accounts on Instagram, some complain that the social-media site shuts down their accounts with little warning or explanation. Binske, a Colorado company that sells vape pens, bud and cannabis-infused chocolates made with Peruvian cacao, spent the better part of two years building up its brand on Instagram. Then in September, just a few days after the company paid Snoop Dogg $30,000 to DJ a promotional event at a Las Vegas dispensary, the account disappeared.
Concerned about losing social-media momentum, Binske vice- president of business development Alex Pasternack spent two weeks submitting documents to Instagram, trying to prove his company was legit. Then, without notice, the account came back— with its more than 12,000 followers intact.
' Making up their own rules'
“Everyone is just making up their own rules,” says Pasternack, who is looking at other ways to get the word out. Binske now has licensing deals with companies that will use its recipes and branding in California, Nevada and Florida, partnerships the company hopes will help double revenue in 2019. This type of arrangement is key in an industry where companies are still not allowed to ship products from one state to another.
Caliva — one of California’s top-selling marijuana brands — says it has lost five or six Instagram accounts over the past couple of years. It sponsors education events at Bay Area yoga studios and senior centres, where representatives hold forth on the medical benefits of marijuana, how to fit edibles into an active lifestyle and other topics. Many companies rely on the “bud tenders” manning the counter at dispensaries around California. If asked for recommendations, they can steer customers toward certain brands.
“Our hands are really tied from a marketing perspective,” says Caliva’s branding chief Rosie Rothrock. “So we rely heavily on those relationships.”
MedMen, arguably the best-known name in the industry, is using a time-tested marketing trick from the brick-and-mortar playbook: opening stores. With a market value of roughly $1.5bn, the company has spent heavily on licenses and real estate to operate stores at high-profile spots in Los Angeles, Las Vegas and even New York City, where it has a location not far from the Public Library on Fifth Avenue.
New York state has a small medical programme and is expected to approve recreational cannabis this year. Until then, the real estate is an “investment in a flagship,” says David Dancer, the company’s chief marketing officer.
While MedMen has also lost Instagram accounts, it is finding that some marketing channels are opening up as attitudes about marijuana shift across the US. The company, which sells cannabis in distinctive red bags, has billboards in California and runs spots during the Howard Stern show on Sirius radio. It has also started placing print ads in Conde Nast publications.
For now, television and streaming services are a “hard no” when it comes to cannabis ads, Dancer says, but he expects them to get on board sooner rather than later.
“It just keeps snowballing,” he says. “These conversations keep expanding and expanding.”