Challenges and Opportunity in Canada’s Recreational Cannabis Industry

- August 26th, 2018

Strong branding and understanding target markets are keys to success in Canada’s competitive cannabis industry.

It’s an exciting time for Canada’s legal cannabis industry, but it’s also a challenging one for emerging licensed producers (LPs).

Canada’s legalization of recreational cannabis for adult use has come to be, but that doesn’t mean the country’s laws and regulations regarding the plant are set in stone.

LPs across the country are racing to prepare the strategies that will hopefully establish their brand in a market that is quickly becoming crowded. As with all industries, effective branding and marketing is a crucial factor deciding whether a company will sink or swim as the market matures.

This INNspired Article is brought to you by:

Wayland Group Corp. (CSE:MARI; FWB:75M; OTCQB:MRRCF) is a licensed cannabis producer focused on cannabis cultivation, extraction, formulation and distribution.Send me an Investor Kit

One of the top questions emerging that LPs should be asking themselves right now is how they can differentiate themselves, their brands, their customer experiences and more to stand out from the crowd and gain a competitive advantage. This is true with any industry, but cannabis adds extra challenges due to strict regulatory limitations, shifting policies that vary from province to province, and the inherent unknowability that comes with a brand new industry.

There’s a reason so many companies are looking to face these challenges. The market for cannabis in Canada is already massive. According to data from Statistics Canada, the country is home to approximately 2.05 million self-identified regular cannabis users, as well as 2.41 million people who will consider giving cannabis a try once it’s legal. StatsCan also estimates that Canadians spent C$5.7 billion on cannabis in 2017 with the vast majority of that accounting for illegal sales. Assuming that the numbers from the black and grey markets of 2017 transfer to Canada’s new legal market, cannabis in Canada is going to be huge.

Canada’s cannabis market doesn’t even tell the whole story for how critical the first few months of legalization will be to emerging cannabis companies. The brands that set themselves apart and manage to establish themselves as major players in Canada will be on good footing to move into other markets as other countries begin to follow Canada’s lead.

The opportunity for Canadian LPs to become national and perhaps even global giants in a new industry is clear, but that potential rests on being able to roll with the unique challenges of this new industry and stand out from the crowd from day one.

Challenges in Canada’s cannabis market

While there’s already a few big players in Canada’s medicinal cannabis market, the legal recreational market is going to be a different beast entirely from a marketing and branding standpoint. An LP’s branding strategy needs to reflect that, with a clear distinction between medical and recreational cannabis in almost every way. Consumer behaviors and preferences with medical cannabis differ drastically from recreational use in demographics, need states and even delivery method. Additionally, with medical cannabis, a company’s messaging is directed at physicians and healthcare professionals who act as the gatekeepers to the consumer. With recreational cannabis, however, marketers are speaking directly to consumers who are guided by preference and the type of experience they seek. Obviously, these two groups vary significantly in terms of what kind of outreach and messaging is going to resonate.

In Canada, the Cannabis Act has a huge influence on the branding strategies of cannabis companies. In some ways the Canadian government has not made this easy. Health Canada has imposed stringent regulations on some key branding areas. Packaging is limited to a single uniform color with a standard font style and no graphics outside of a brand’s logo. Brands are forbidden to use celebrity endorsements or fictional characters on their packaging or advertising. These rules are set up to keep cannabis brands from using any sort of lifestyle associations to sell their product.

Further complicating matters for LPs is the fact that the rules they are following are subject to change. Each province has its own differing set of rules and restrictions and with each province acting as a “test lab” for its own approach to regulation, these rules could likely be revisited and adjusted in the years following legalization. Geoff Kosar, VP Sales and Marketing for Canadian LP Wayland Group Corp. (CSE:MARI,FWB:75M,OTCQB:MRRCF), told INN that this means LPs need to future proof their brands for any potential changes that come their way.

“Generally speaking our thinking has been to prioritize ‘big bets’ on certain brands, while remaining nimble with some of the other brands in our portfolio,” Kosar said.

Another challenge presents itself when recreational cannabis companies try to understand their target consumers. By this point it’s well understood that decades of prohibition kept cannabis out of the hands of researchers and created a gap in our understanding of the plant’s medical properties. For similar reasons, we also have a cannabis market research gap. Most larger research firms remain wary about doing in-depth studies on cannabis. Premade, ‘canned’ market studies do exist for purchase by LPs but Kosar says that these studies rely heavily on government figures that his company believes are not representative of what’s truly happening with consumers across Canada.

“We have worked to pull together an industry-first approach of creating our own studies against general population, millennials and current legalized US states to give us what we feel is the most robust view of what the present and future of Cannabis consumption in Canada,” said Kosar. He says these studies paint a picture of who is consuming cannabis, when and why they consume cannabis, and which purchase drivers are most powerful, strategically positioning them in the market.

Takeaway

As a new industry with particularly stringent regulations, the Canadian recreational cannabis market will be difficult, but not impossible, to master. LPs are taking creative approaches from remaining nimble with multiple brands to circumventing packaging restrictions using augmented reality. A strong understanding of the Canadian cannabis consumer along with a well thought out branding strategy will be key to survival in what promises to be a highly competitive market. Even with the regulatory restrictions, Canada will certainly be the most advantageous place place in the world to build a cannabis brand after legalization. This new Canadian market is full of potential and could potentially be a launching pad for the first global cannabis players.

This INNspired article is sponsored by Wayland Group (CSE:MARI,FWB:75M,OTCQB:MRRCF). This article was written according to INN editorial standards to educate investors. 

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