fbpx

First Mover to Fizzle: Canada’s Failure to Succeed in Cannabis

In 2018, Canada was in a position it rarely had seen, led by an election promise by Justin Trudeau, their newly minted rock star of a Prime Minister. They had first-mover advantage in the legalization of cannabis, a sector served primarily through the black and grey markets that was already generating $100’s of billions of tax-free dollars in revenue. Through their pole position, Canada could build global brands, earn patents, season their go to market strategies, be a leader in medical cannabis for humans and animals, and be the epicenter for capital.  Cannabis to Canada could be like the content industry is to America.  Canada could dominate.

Capital poured into to support this rarefied opportunity, and businesses went from seed to billion-dollar valuations.  

I was a skeptic. I spent three decades building two internationally renowned branding agencies and a research firm.  I worked on go to market strategies for local and global brands. I believed that the Canadian government was setting us up for failure, not a success.

Two weeks before the launch, I delivered my opening keynote at O’Cannabiz, an international conference: ‘Cannabis, It’s a Bong Show’ where I outlined my feelings on why Canada was coughing up this advantage like a cat coughs up a hairball. I didn’t back down, and followed that talk up with a series of national television interviews and newspaper columns to support my position. Throughout 2019 my position never wavered, even when I hosted other cannabis conferences. I had the opportunity to interview people on stage like Bruce Linton, founder of CanopyHenry Rollins of Black Sheep, Kevin O’Leary from Shark TankMontel Williams, and leading investors from around the world.

I agreed that the opportunity for recreational and medical cannabis is unprecedented and almost without a boundary. However, it’s a market that is efficiently served by the black and grey market. These aren’t kids in hoodies and designer running shoes parceling out a joint at a concert; this is organized crime and artisans that are both masters of their craft.

Organized crime and crafters approach this sector by making the user their hero. They identify their unmet needs and then offering them what they want and when they want it in a personal way, yet without a data footprint. They have brands, packaging, formats, different strains, cultivation techniques, narrative, and very convenient and personalized distribution.  Customers say I have ‘my’ dealer.

In markets like Canada, where recreational cannabis is now legal, the new rules make it even easier for organized crime and crafters to execute. They include the opportunity to grow plants, to service their customers, and to improve their prices and margins. 

Fierce competition, among the best in the world, and neither organized crime or crafters were going to back down in the war for market share.

The only way for legalized cannabis to win was to give the existing consumer a compelling reason to buy, and also to offer a curious consumer who wasn’t a current user an equally compelling reason to try. That is marketing and sales 101.

Canada, in its desire to carefully roll out the legalization, was doing the opposite. With their restrictions on packaging, branding, formats, marketing, and advertising, they were effectively going to market with two hands tied behind their back, and their mouth zippered shut.

If Canada (or any newly legalized market currently well served) wants to succeed, it has to set up for success.  My advice is to execute across the 5 P’s, while taking advantage of today’s media that enables targeting only to adults, and not children.  

Here is what I would advise:

Product: Great products create an itch, and they create a reason to buy. They deliver against unmet needs, and they communicate with expressive packaging and labeling. What are the unmet needs? With recreational and medical cannabis, the list is extensive – from great conversation to couch lock, from great sex to pain relief, and a thousand points in between. The packaging and labeling must be exciting and cater to a wide range of users from super-premium to value players. At the point of sale – bricks or clicks, we must present providence, and offer transparency across the entire supply chain. Certified BC Bud, 100% organic, etc.

We need to unleash versus handcuff the very best branding and innovation experts on the planet.

Place: In a world where your mobile device has become the world’s largest vending machine, where delivery of food and material goods are at the palm of your hand, cannabis needs to offer the same level of service. With conventional retail, the focus must be more on experiential, targeting the demographics of the neighbourhood. For the curious new user, education and controlled experimentation is paramount. Experts must be on hand to guide the consumer.   

Tourism, and hospitality, the world’s largest industry, can also benefit from legalization by creating places where like-minded people can gather. They can listen to music, eat and even cook, and converse while at the same time knowing that their room is a short walk away, and experts are there to prevent mishaps.

Price. Legalized cannabis is taxed, and therefore, is priced at a premium. You have to give the user a reason to pay this premium. If you don’t, a surplus of an uncontrolled product creates commoditization where there is no value-added. We only have to look at how illegal cigarettes are dominating the market in places where the price delta caused by taxation is widening.

With legalized cannabis, will we be willing to pay this premium for different reasons. Some are socially conscious; others will feel better knowing where the source of their product, the quality control, and ensuring there are no harmful additives.   Regardless, with consumers, convenience and being anonymous, at least in the early days, is paramount.  

Promotion: With today’s tools, marketers can fly fish creative directly to individual consumers. They can target different ages, needs and value states, and serve up personalized communication at the speed of life.  We need to unleash the creative segment and give the consumer a compelling reason to try these brands over the ones offered by the black market.

People: Cannabis has a supply chain that stretches back to the seed, and within each segment, their lies purposeful and exciting jobs. Any country that is looking at legalization should also look at a way to integrate their education and retraining initiatives to meet the needs.

Can legalized cannabis compete?  It isn’t a skip in the park, as markets like California are proving. ‘Organized’ Crime is highly efficient, and crafters are highly personal – both have their strengths.

For legalized cannabis to win more than its fair share, and investors to get a payback on their capital, the industry must untie hands, unzip mouths and embrace the 5 P’s. Governments must make the consumer, and not their tax coffers the hero.


You might also like

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More