Cannabis has long since gone mainstream, with sleek marijuana dispensaries outnumbering coffee shops and liquor stores in many towns in America. Yet the marketing landscape looks more like Dodge City in the 1870s.
It’s a noisy frontier, full of confusing rules and messages. There’s no definitive playbook for the thousands of retail dispensaries — or, for that matter, for the marketers tasked with selling gummies, beverages, edibles, lotions, patches and old-fashioned smokable weed, among tens of thousands of other cannabis products. As for fledgling brands targeting patients with specific medical benefits or plain old general wellness, the scene is more baffling still.
Marketers aren’t exactly embracing the chaos, but they’ve accepted it. “When it comes to brand maturity in the healthcare space, we are in the very earliest phases,” says Holistic Industries chief marketing officer Kyle Barich, who is trying to turn brands such as Cannaceutica and Garcia Hand Picked into household names. “We don’t know who will be the whales and who will be the guppies.”
There are analogues in the recent past. Martin Bihl, executive creative director at LevLane Advertising, likens the current state of affairs to search-engine marketing 20 years ago.
“We had Netscape, Dogpile, Lycos, AltaVista, Ask Jeeves and Yahoo,” he recalls. “It’s easy to say, ‘Well, of course Google would win, because of X, Y and Z.’ But at the time, nobody knew — and that’s where we are right now with cannabis.”
That means the No. 1 goal for brands is respecting Charles Darwin. “Your job is to survive until the winnowing happens,” Bihl continues. “You just have to live long enough to make money.”
No one disputes there is plenty of money to be made. BDSA, a cannabis data company, reports that global legal cannabis spending rose 5.2% to $32 billion in 2022. It forecasts that the market will reach nearly $60 billion by 2027.
In the U.S., where sales topped $26.2 billion in 2022, BDSA expects cannabis sales to climb another 14% this year. When you ponder that sum, don’t forget that cannabis is legal in only 37 states.
Meanwhile, healthcare marketers are keenly aware that the medical potential is enormous. Cannabis shows promise in treating a wide range of conditions, including Alzheimer’s disease, amyotrophic lateral sclerosis (ALS), HIV/AIDS, Crohn’s disease, epilepsy, glaucoma, multiple sclerosis and nausea caused by cancer treatments. The evidence is strongest for its use in treating severe and chronic pain. While there is less support for its use in treating mental and behavioral disorders, cannabis may also help mollify the symptoms of anxiety and depression.
But for cannabis to reach its potential — and the tens of millions of adults its supporters claim will benefit — the industry has 12 major problems to solve.
It’s illegal. Despite fast-changing state regulations, U.S. federal law prohibits using whole plant cannabis sativa or its derivatives for any purpose. (CBD derived from the hemp plant with less than 0.3% THC is legal under federal law, but federal oversight is murkier than ever.)
While national guidelines would clarify many commercial guardrails, a divided Congress and looming presidential election suggest that such guidance won’t arrive anytime soon. Republican politicians widely oppose legalization, despite growing support among Republican voters.
That means marketers must follow the laws of health departments in 37 states, each with a different approach to regulation.
“Nothing is unified right now,” says Brick City Greenhouse founder and content lead Fred Kinch. “It’s like voting. Every state runs its own system, whether for medical or recreational use.”
The stigma remains hard to shake. Perceptions of cannabis as a sinister and addictive party drug have faded dramatically, at least among providers. When Barich left his job as CEO of CDM to join Holistic in 2019, he didn’t know exactly what to expect.
“I thought I would be using the Viagra playbook, in terms of de-stigmatizing an embarrassing condition,” he says. “But the vast majority of doctors are past it.”
Consumers aren’t so sure, and many believe that doctors still regard cannabis as a lifestyle evil. “Patients are concerned that providers will treat it the same way and ask questions like, ‘How many drinks do you have a week? Do you smoke?’” Kinch explains.
Celebrity influencers such as Snoop Dogg, Seth Rogen, Sarah Silverman and Jay-Z have helped younger consumers normalize use. But among older people, the stigma still has “heartbreaking effects,” Kinch adds. “I have a friend whose dad is suffering severely from Parkinson’s. Even though his doctor recommends cannabis, he just won’t take it.”
The absence of effective pharmaceutical treatment for many conditions, it seems, has slowly ground down resistance. “People reach a point in their disease states where they’ll try anything. Now that the opioid market has also been stigmatized, they’re becoming more open to adjuncts,” Kinch says.
According to Amanda Daley, a former VP of medical marketing at Canopy Growth, a Canada-based company, Canada is ahead of the U.S. in its cannabis acceptance journey. Not only are providers further along, but consumers are as well.
“Often that’s been driven by midlife adults looking for medical alternatives for aging parents. It’s become much more of a dinner-hour conversation,” Daley explains.
But some providers remain uneducated. While only about 9% of physicians learned about medical cannabis in medical school, according to Holistic’s research, patients are demanding they do their homework. The company recently surveyed 445 providers who treat chronic pain, and 65% responded that patients ask them about cannabis every day. Yet only 18% said they consider themselves familiar with cannabis as treatment.
“While they all believe there’s a future in chronic pain for cannabis, they’re not familiar with the evidence,” Barich notes. “Their patients are coming in with more energy about it.”
For now, most providers have accepted that they’ll “let patients find their way to the local cannabis shops. In such a diluted market, medical brands get lost in the fray,” Daley adds.
Demographic dogfights are all too common. To put it succinctly, the tidal wave of older users that many cannabis supporters envisioned hasn’t yet materialized. “I thought I’d be fending off soccer and chardonnay moms and that the graying-of-America audience would be beating down our doors,” Barich says. “While there have been enormous changes with more women and older consumers, 80% of the market is still younger guys going to a dispensary for high potency products and a good time. Those who would benefit most just aren’t in the dispensary, and that’s the only place where they can get the product.”
Complicating the matter further is that different demographic segments have warmed to different business models. Millennials expect the kind of on-demand services supplied by brands such as Hims and Ro, according to Bihl, which represents “a fundamentally different way of looking at how you engage with the medical community.”
Yet older customers aren’t seeking out cannabis brands until doctors direct them to. “That’s where the square starts to come apart,” says Bihl.
The messaging often contradicts itself. Not that this needs restating, but casual partiers are a different audience than sick people.
“For recreational use, you see a lot of super-concentrated products,” Daley explains. “What resonates better with medical patients who haven’t considered cannabis is low-and-slow messaging, even microdosing. These people aren’t looking to unwind on a Friday night; many just want a good night’s sleep. It’s about addressing their symptoms and improving their quality of life.”
The gap between Team Recreation and Team Healthcare is diminishing, according to Lisa Buffo, founder and CEO of the Cannabis Marketing Association.
“It’s more of a spectrum now. Our data shows some of the top reasons for consumption are relaxation, stress relief, reducing anxiety and improving sleep quality. Those fall into that wellness space,” she notes.
That means the recreational user and the wellness consumer may, in fact, be the same person. “They might be adding a nightly gummy to their sleep routine and smoking joints on the weekend with their friends,” Buffo continues.
Kinch agrees, adding that well-educated budtenders at dispensaries have proven valuable educators. “Often, there’s a separate section of the store, even if it’s just cordoned off, where customers can speak to budtenders privately,” he says. “It’s hard to track who’s taking it purely for medical reasons and who’s taking it purely for recreational. There’s a large number of people who are likely a combination of both.”
Research barriers remain. Widespread acceptance and credibility will only come when the medical community gets behind cannabis, Daley says flatly, which will require an accumulation of evidence that doesn’t yet exist. As long as cannabis is classified as a Schedule I substance, don’t expect that research to proliferate.
“Cannabis isn’t produced and regulated like other drugs. You can’t really patent a flower, so no pharma company will pour all the necessary R&D money into it,” she explains. “It’s a real conundrum.”
Barich believes that Holistic’s Cannaceutica, which counts “cannabis with evidence” as its tagline, will crack the code. “Our formulation addresses chronic pain, which has the greatest level of evidence — and we’re doing a study at the University of California, Irvine, that will substantiate it.”
Mainstream pharma is knocking on the door. Jazz Pharmaceuticals bought GW Therapeutics, a medical cannabis pioneer, in 2021. It markets Epidiolex, a cannabidiol, for adult and pediatric patients with severe childhood-onset epilepsy.
The brand-building playbook is unwritten. Which is why marketers looking for a list of best practices are out of luck.
“The biggest challenge is where you can advertise,” Buffo says. “The channels used to market other CPG brands are not open for cannabis. You can’t advertise products on social media or many of the major media, and you can’t make any health claims.”
When Twitter recently relaxed its rules, Florida-based medical cannabis company Trulieve became one of the first multi-state operators to advertise on the platform.
But Meta, which allows dispensaries to run membership pages, continues to restrict marketing.
So while cannabis companies are responsible for teaching consumers about the plant, they have to toe the line between advertising and education. In-store marketing basics, like packaging and design, are thus essential.
“Cannabis, to some degree, is a commodity. So what does your brand stand for? What makes you unique? What are its attributes?” Buffo says.
This presents another challenge. The Cannabis Marketing Association reports that 80% of its members find it difficult to get the right message to the right clients. With limited resources — nearly half of the companies that participated in the CMA research have budgets of less than $50,000 — they instead focus on top-of-the-funnel campaigns, mostly across social media.
“Even on a good day, clients have difficulty planting a stake in the ground and saying, ‘This is who we are.’” Bihl notes.
The tax code is judgy. It’s not inaccurate to say that cannabis companies are punished by federal tax laws. Section 280E, for instance, prohibits cannabis marketers (and any other company that trafficks in Schedule I or II drugs) from deducting advertising, marketing and promotional expenses.
“That means their budgets are a fraction of what other brands have,” Buffo says.
The Food and Drug Association keeps sending mixed signals. While CBD products are legal at the federal level, they’re technically under the regulatory aegis of the Food and Drug Administration. Thus, many brands aren’t sure what they are allowed to say.
“Even innocuous health claims that are true can land brands in hot water,” says Griffen Thorne, a California attorney, who adds that it remains unclear why the agency will send a warning to one brand and not another. “It does seem to be random. The safest approach is not to make any medical- or health-related claims whatsoever.”
In the wake of the FDA’s recent announcement that it doesn’t plan to regulate CBD as a dietary supplement, Thorne expects few significant changes in the years ahead.
“There’s a lot of tension between folks in my shoes, who are lawyers, and folks on the marketing side,” he explains. “But it’s too big a risk. Let’s say you’ve marketed a skin cream with CBD, citing anti-aging properties. You’ve invested in building up the brand. Now you get a warning letter from the FDA and have to stop making those claims — so you’ve wasted all that time and all that money.”
The cannabis enthusiasm has been curbed. It’s getting harder and harder to make money, as the rush into cannabis “resulted in a massive oversupply in some states, which drives prices down,” Buffo notes. Curaleaf, for example, no longer operates in California, Colorado and Oregon, three of the most competitive states.
Sales have fallen in turn. “While legal cannabis sales saw rapid growth during the height of the pandemic, 2022 marked the first overall spending contractions in many mature markets throughout the U.S.,” the BDSA wrote in a report. “Mature adult-use markets of California, Colorado, Nevada and Oregon suffered a combined spending decline of 13%.”
Financial backing is becoming harder to find. Cannabis’ rapid market growth owes a lot to the VC industry, which places considerable pressure on companies to make a quick buck. Not surprisingly, capital-raising activity is decreasing, with EY pointing to a 76% drop in equity raises in 2022. Meanwhile, the total value of debt raises fell 56% in 2022.
Illicit marketing persists. Experts estimate the size of the illegal U.S. cannabis market at around $60 billion a year, perhaps double the size of the legal one. Cannabis companies are raising the alarm and municipalities such as New York City are cracking down on illegal storefronts. Research from New Frontier Data found that 78% of consumers only shop in licensed dispensaries and 18% use illegal sources, at least occasionally.
So yeah, that’s a lot for any business to overcome. Still, most major players are hopeful that, sooner or later, more effective ways to market cannabis brands to patients looking for relief will emerge.
Barich, for one, isn’t sorry he left the medical marketing agency world to help cannabis brands sort out the confusion.
“This market is heading toward $50 to $70 billion in U.S. sales in the next few years,” he says. “Like other industries, we’ll see consolidation, like going from 100 banks or airlines to perhaps five or seven.
“There will be turmoil, pain and suffering. But there will also be a handful of big winners.”
From the May 01, 2023 Issue of MM+M - Medical Marketing and Media
