Recreational cannabis has been a huge success since Prime Minister Justin Trudeau ended cannabis prohibition. In fact, the first day legal recreational cannabis became available, it sold out across the country. Eager Canadian cannabis enthusiasts grabbed up huge quantities of cannabis. Demand greatly exceeded supply. Since then, supply has largely caught up to demand. And the market presents an exciting opportunity for marketing cannabis in Canada.
While there’s clearly no shortage of cannabis demand, which will only increase in the future, navigating the legal environment for marketing and promoting cannabis can be tricky. In this article, we’re going to help demystify Canada’s regulatory environment from a marketing perspective.
We’ll cover the following topics:
- Background & Legal History of Marketing Cannabis in Canada
- Canadian Market Opportunity
- Marketing Realities in Canada: Packaging, Labeling, and Promotional Restrictions
- Packaging Restrictions: Do’s and Don’ts
- Legal (and Effective) Cannabis Marketing Tactics
Marketing Cannabis in Canada: Background & Legal History of Cannabis
The prohibition of recreational cannabis use came to an end in Canada on Oct. 17, 2018. Prime Minister Justin Trudeau helped make Canada the second country (after Uruguay) in the world and the first G7 or G20 nation to broadly legalize adult-use recreational cannabis on a federal level. Cannabis is now legal for both medical and adult-use consumers. Under the new regulations, the cultivation, possession, acquisition, and consumption of cannabis are legal and codified into law. But, that’s not to say there aren’t plenty of laws and restrictions on how cannabis can be marketed. (We’ll get into this later.)
Legal Medical Cannabis
The laws and regulations for Canada’s medical cannabis laws — including the production, distribution, and use of medical cannabis — were defined in the Marihuana for Medical Purposes Regulations (MMPR) in 2013. This set of regulations replaced the Marihuana Medical Access Regulations (MMAR), established when Canada first legalized medical cannabis in July of 2001. The MMPR was an attempt to treat cannabis like any other medically legal controlled substance, in essence creating a commercial industry that is responsible for the production and distribution of cannabis.
Federal courts later struck down the MMPR on the grounds that it was unconstitutional because it prohibited patients from growing their own medicine. Health Canada (the equivalent of the U.S. Department of Health) replaced the MMPR with the Access to Cannabis for Medical Purposes Regulations (ACMPR) in July 2013. The new regulations allowed patients to grow their own medicine.
Legal Recreational Cannabis
Shortly after Prime Minister Justin Trudeau declared recreational users would no longer be violating federal by using cannabis, the House of Commons of Canada passed Bill C-45, Cannabis Act and Bill C-46, An Act to Amend the Criminal Code. In addition to codifying the use of recreational cannabis for legal consumption, the House of Commons established new taxation measures, while strengthening laws and increasing penalties for distributing to minors and those who choose to drive under the influence.
The new laws regulate cannabis much like tobacco and alcohol. There are limits on growing at home, distribution, where cannabis can be consumed, and what times it can be sold. Cannabis was also taken out of the Controlled Drugs and Substances Act.
Marketing Cannabis in Canada: The Market Opportunity
Based on most estimates (and current demand trends) cannabis is poised to become a massive market in Canada, eclipsing legal gambling. Industry analysts from Deloitte published a 36-page report in which they estimate legal cannabis sales will generate up to $7.17 billion in sales in 2019. Of the $7.17B, $4.34B of that will come from the legal recreational market. $770M to $1.79B will come from the medical cannabis market. And $510M to $1.04B will come from the black market.
The success of recreational cannabis should put to rest the more skeptical observers who regularly compared Canada’s medical market to California’s. In 2017, Canada’s medical cannabis market was valued at $755 million, while California clocked in at an impressive $3 billion. The problem with this comparison is that it was apples to oranges. Cannabis had been de facto legal in California for at least a decade. Literally, anyone over the age of 18 could get a medical cannabis card in less than 30 minutes. You could even get a card on the boardwalk in Venice Beach. Now that Canada is fully legal, comparisons to the California market are much more comparable.
Nonetheless, estimating growth is a challenge for any product in any market, as there are so many predictable and unpredictable potential confounding factors. For cannabis, this includes shifts in demand as consumer attitudes evolve, enforcement or non-enforcement of federal laws, the introduction of new local laws and regulations, to name just a few examples.
What We Know
Here are a few stats to consider from Statistics Canada, Deloitte, CIBC, and ArcView.
2017:
- 4.9 million Canadians used cannabis;
- Canadians spent $755 million [$569 million USD];
- They spent $5.7 billion Canadian dollars on pot;
- Less than 10% of their spend was in the legal market.
2018:
- Recreational legalization came into effect in October;
- The legal cannabis market doubled in size from 2017;
- Canadians spent $1.6 billion CAD [$1.2 billion USD] on legal cannabis.
Marketing Cannabis in Canada: Market Growth Estimates
With legalization well underway in Canada, the range in projecting market growth is fairly consistent.
Canadian Imperial Bank of Commerce (CIBC):
- A “Big Five” Canadian bank more commonly referred to as CIBC, predicts the legal cannabis market will grow to $6.8B CAD by 2020.
- CIBC estimates Canadians will consume 800,000 kilograms or 1.7 million pounds. This doesn’t include Seth Rogen’s consumption, which would increase consumption by 20%. (Just kidding!)
- Further, CIBC projects provincial governments will take in $3B in taxes and earned profits.
Deloitte Touche Tohmatsu Limited:
- More commonly referred to as Deloitte, this “Big Four” accounting and professional services firm speculate the market will reach $8.7B.
- Deloitte predicts the “overall economic impact” of cannabis on local economies could reach $22.6B CAD. This includes business associated with cannabis cultivation and ancillary businesses like hydroponics businesses; companies that produce fertilizers and grow lamps; craft breweries creating alcohol-free cannabis beers; and, vape manufacturers.
Marketing Cannabis in Canada Today
The laws governing cannabis largely mirror those of the tobacco industry (see Health Canada’s Tobacco and Vaping Products Act). The laws for cannabis are detailed in Bill C-45 (the Cannabis Act) and Bill C-46, An Act to Amend the Criminal Code. You can read the highlights in What Industry Needs to Know About Cannabis, published by Health Canada.
Packaging, Labeling, and Promotional Guidelines
Essentially, the Canadian government defines “promotion” as making any sort of a representation or claim — not including packaging or labeling — that will drive demand for a product or service, or likely influence consumer and public perception of the product or service. For the specific language, read Subdivision A: Promotion of the Cannabis Act.
The goals of Health Canada are two-fold:
- Protect the health of all Canadians by ensuring marketers don’t mislead or deceive consumers including:
- Labeling on packaging and marketing messages are truthful, nor make unsubstantiated claims
- Consumers have a satisfactory amount of information to make informed purchasing and consumption decisions
- Protect young people (under 18) from accessing cannabis or be exposed to cannabis marketing messaging including:
- Products don’t appeal to young people
- There are adequate safeguards against accidental consumption
Even though many rec-legal states in the U.S. share these goals, Canada is far stricter than states like California, Nevada, or Colorado. The vast majority of marketing done in these states would be against the law in Canada. Canada’s rules are strict. Very strict.
These restrictions apply to any entity promoting cannabis, cannabis accessories, or services related to cannabis. The Cannabis Act details the following restrictions for marketing cannabis in Canada:
- Communicating information about a cannabis product’s price or distribution;
- Engaging in promotional activities in which there are reasonable grounds to believe the intent is to appeal to young people;
- Using testimonials or endorsements no matter how they’re displayed or communicated;
- Depicting a real or fictional character, person, or animal in any advertising or marketing materials;
- Showing any brand elements in a way that “evokes a positive or negative emotion about or image of, a way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring.”
To make sure you’re crystal clear on what you can and can’t do, you’d be wise to enlist the advice of a qualified lawyer. The Canadian government expects that at the very least, anyone who’s involved in the cannabis industry should understand and/or comply with the following:
- What the laws are and what your obligations are under the law;
- That you’ll freely cooperate with inspectors;
- That you’ll adhere to all Health Canada orders and prohibitions.
While Canadian laws may sound strict, don’t despair. There are plenty of gray areas where savvy marketers can operate. For example, celebrity endorsements may not be allowed, but there’s no restriction on a celebrity having an ownership stake in a cannabis company. Marketing cannabis in Canada does require some ingenuity!
Further, the Cannabis Act makes exceptions for “informational promotion” or “brand preference.” Sound ambiguous? It is. But basically, here’s what you need to know:
You can leverage “brand preference” or “informational promotion” to market cannabis products, accessories, or services provided your promotional activities to meet the following guidelines:
- Communicate to individuals who are over 18 years old and the communication identifies the potential consumer by name;
- Market in places where minors are prohibited;
- Communicate via telecommunication in which the marketer has taken appropriate steps to make sure no minors can access the promotion;
- Promote in a prescribed place or prescribed manner.
At point-of-sale, promotions are limited to indicating no more than a product or service’s availability or price. That means things like educational information should be on your website—one of the best tools for marketing cannabis in Canada.
Packaging Restrictions
Many cannabis entrepreneurs and companies have complained that the packaging guidelines put forth by Health Canada seem designed to ensure packaging is as bland and boring as possible. And they certainly have a point.
Health Canada advises cannabis companies adhere to the following guidelines:
Do’s
- Do create packaging with a single uniform color
- Do include a distinct and prominent health warning
Don’ts
- Don’t show any imagery outside of the brand logo
- Don’t market in any manner that appeals to young people
To learn more on packaging rules, read Health Canada’s bulletin, Advertising Prohibitions Cannabis Information. Health Canada’s rules certainly limit the freedom to create distinctive branding. Let’s compare packaging in Canada and California. Here’s suggested packaging courtesy of Health Canada:
In contrast, here’s an example of fairly typical creative packaging in California:
No doubt, you noticed a big difference. However, some Canadian brands are learning to be (somewhat) creative even under what many consider draconian rules.
Here are some examples:
Legal (and Effective) Tactics for Marketing Cannabis in Canada
No doubt marketing in Canada poses some challenges. But, of course, with challenges come opportunities. Canada is a market you can’t ignore. Roughly equal in size and sharing similar attitudes, Canada and California are currently the two largest legal cannabis markets in the world. The long and short-term prospects for brands and dispensaries in Canada is strong and should remain so for decades to come.
Given the current marketing restrictions in Canada, here are seven ways to most effectively market dispensaries:
- Invest in designing an amazing storefront; your storefront speaks volumes about who you are and what your brand is about
- Get involved in the local community by sponsoring or exhibiting at local events and hosting educational seminars for patients and recreational customers
- Invest in emerging technologies to differentiate your dispensary and brand; for example, create innovative experiences with Augmented Reality (AR) and Virtual Reality (VR) gear
- Market on Canadian-focused apps and social platforms
- Make a commitment and invest in local SEO
- Ignore online reviews at your peril: build your reputation and credibility by investing in protecting and promoting your brand with positive reviews
- And, finally, don’t be afraid to get creative!
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