Hazy issue of legal cannabis sparks debate among PR pros

All the news lately about the cannabis industry seems to be about growth. Legalization is spreading, and over the past several months, major companies have announced substantial investments in the emerging market. 

But the fact that cannabis is still illegal federally presents serious challenges for marketing the product. Cannabis companies can’t buy Google AdWords, and they can’t post on Facebook or Instagram (it also affects banking rules and how vendors such as PR companies are sometimes paid).

It also means some traditional consumer PR tactics are verboten. The federal government has taken a hands-off approach to sales and use in states where cannabis is legal — but not when it comes to transporting it across state lines.

Rosie Mattio, founder of Mattio Communications, which helps cannabis companies build their brands, found that out firsthand.

"We had a client launch a new product, and we had a reporter asking about it," Mattio said. "The reporter really wanted to try the product, but the company is based in Colorado and the reporter is based in New York. She wanted to know its effects and how it works, but we couldn’t ship it to her." 

So, Mattio found a workaround: For clients where technology is the product, the company can send the equipment to the reporter, and then they can acquire the cannabis themselves.

That is just one example of an industry that still faces significant challenges — challenges that could be the kinds of opportunities PR pros are ideally suited to tackle.

Business is blooming

There’s no doubt the cannabis business is expanding. Adult or recreational use (there’s a debate over which phrase is preferable; see "An argument over terminology" below) of cannabis is now legal in 10 states and across all of Canada. Proponents of legalizing recreational use in New Jersey are close to securing enough votes, and New York could also pass a legalization bill this session.  

In early March, tobacco and alcohol company Altria invested $1.8 billion for 45% of cannabis company Chronos. Last summer, Constellation Brands increased its stake in cannabis company Canopy Growth by $4 billion. And last December, Anheuser-Busch InBev announced it was partnering with cannabis company Tilray in Canada.

This March, CVS announced it would sell CBD products in eight states. And last September, Bloomberg reported that Coca-Cola Co. was in "serious talks" with Aurora Cannabis about a cannabis-infused drink. In the article, Coke declined to comment on the Aurora connection but said it was looking at CBD as an ingredient. 

It’s important to keep the size of the market in perspective. Last year, the Marijuana Business Daily compared the size of the 2017 U.S. cannabis (both recreational and medical) market to that of other consumer goods. It found cannabis sales outpaced sales of products such as organic produce and Oreos but paled in comparison to those of cigarettes and beer. The cannabis market was even smaller than the sales of some individual companies such as Netflix and McDonalds. 

Still, it’s the potential that has people excited. In its chart, the Marijuana Business Daily tracked the sales of medical and recreational cannabis combined, listing them at between $5.8 and $6.6 billion.

According to numbers compiled by the National Cannabis Industry Association, sales of recreational cannabis by itself in 2018 was $6.7 billion. The Marijuna Business Daily chart estimates that total demand for recreational cannabis in the U.S. is between $50 and $55 billion.

A new report by Grand View Research predicts the global legal marijuana market is expected to reach $146.4 billion by the end of 2025.

Not surprisingly, cannabis industry leaders also predict massive growth. Last September, Brian Kennedy, CEO of Tilray, told CNBC's Jim Cramer that cannabis was a $150 billion market. And last October, Bruce Linton, chairman and CEO of Canadian cannabis producer Canopy Growth, told Cramer that $500 billion would be an "accurate" estimate for the disruption cannabis could cause.

Those numbers may be overblown, according to Keith Speights of The Motley Fool. But Speights did estimate that the cannabis global market could grow to $32 billion over the next few years.

For an industry seemingly on the verge of taking off, cannabis struggles with its self image, finding itself caught between an emerging health and wellness positioning and its obvious appeal as an intoxicant and historic connections to the drug culture.

It is precisely those challenges that offer themselves as potential opportunities for PR people whose skill set lives outside the world of traditional marketing and who are used to dealing with multiple stakeholders to tease out corporate narratives.

The legal issues

Despite the buzz (and regardless of the numbers you use), cannabis still has to clear some major hurdles. Foremost among them: It's still classified as a Schedule 1 drug by the U.S government, putting it in the same category as heroin and LSD. The 2018 Farm Bill created some space for hemp and CBD, but even that market is not as open as some are claiming.

And in states where cannabis is legal, the regulatory environment is new and the rules governing how the product can be marketed can shift suddenly and with little warning.

Rosie Mattio, founder of Mattio Communications, a firm specializing in the cannabis industry, is having to come up with creative ways to market her company's clients.

But while some laws close some doors, other laws actually help. A good example are the state laws and regulations addressing the marketing of cannabis.

"If you look at most of the states, they’re going to have restrictions that are pretty robust concerning marketing," said Bridget Hill-Zayat, an attorney with Hoban Law Group. "And a lot of that revolves around children and making sure the audience you’re addressing has a certain percentage of people 21 years old or older."

This amounts to a de facto ban on television and radio advertising and, sometimes, billboards. In fact, in some states, Hill-Zayat said, regulators have attempted to ban all advertising.

And when you combine state advertising bans with social media blackouts, the power of PR grows.

"You can get a big boost from any media wins you get," Mattio said. "So that’s become a real opportunity for PR firms."

The above map shows where cannabis is legal for adult use, medicinal use and limited medicinal use. The dark gray states indicate where cannabis is still illegal. Click image to enlarge. (image courtesy of the National Cannabis Industry Association)

But PR firms must be flexible, Hill-Zayat said, because state regulators are mercurial and the rules governing products and marketing can change significantly, sometimes with little notice.

"The rules are determined by the state commissions," she said. "They can decide to change a rule and can be a little bit capricious about how they do it. Sometimes they’re very targeted in what they’re doing when trying to solve a problem and they don’t appreciate the ramifications. It makes it extremely difficult for these licensees to promote their businesses."

Mattio learned that the hard way.

"There was a company I worked with in Washington, and the regulators had gone back and forth over whether you could make gummies or not and if you can make jellies that might look like candy for a child," she said.

Mattio’s firm spent months working on the campaign only to find out the product category had been banned.

Cannabis growing pains

As legalization spreads and money comes pouring into the space, the personality of the cannabis industry is changing.

Jon Bloom, CEO of McGrath/Power, which formally started a cannabis practice last spring, describes the change as "moving from backpacks to briefcases."

David Eichler, the founder of cannabis marketing/comms agency Decibel Green (and non-cannabis firm Decibel Blue) and a longtime user of cannabis, thinks that change is nearly complete.

"I would characterize the cannabis industry now as 75% professionals who are entrepreneurs and opportunists using it to make money," Eichler said. "They don’t use the product or barely ever use the product."

Cory Ziskind is a senior VP at ICR, a strategic comms firm that has helped cannabis companies go public. He’s seeing C-suite talent from around the business world move into cannabis. 

"They’re coming from every sector, certainly from the food and beverage sector and retail sectors," Ziskind said. "They are people that have built successful retail businesses in the past and/or CPG execs that have built consumer brands."

William "Beau" Wrigley Jr. is a good example of that. The former CEO of Wrigley was recently named CEO of Surterra Wellness, one of the original cannabis licence holders in Florida. Surterra also has an operation in Texas and plans to acquire operations in Nevada and Massachusetts, said Andrew Smith, Surterra’s SVP of external affairs. 

"We’re also looking to enter into the California market in the next several months," he said.

In addition to bringing on high-profile CPG talent, Surterra is an example of another cannabis trend — companies trying to distance themselves from the stoner stereotype. 

When he speaks about messaging, Smith admits there’s no denying cannabis’ drug culture roots, but he says the future of the product is in the health and wellness space. 

"We see that as the long-term arc," he said. "You will always see the recreational use out there, but we definitely think the growing population of cannabis users will be in the health and wellness side."

Eichler says the trend is inevitable and understandable but also overplayed.

"They don’t want to depict the business as the old-fashioned stoner sitting on the couch, and rightfully so. But what’s fascinating to me is that the advocacy for this drug, this product, this plant, happened over the last 30 years from people commonly referred to as stoners," he said. 

"The stoner stereotype is not a good thing, but there’s definitely been an overcorrection in the zeitgeist of the industry, if they think the foundation of cannabis use doesn’t remain people who love this flower."

Morgan Fox, media relations director for the trade group the National Cannabis Industry Association, suggests there’s room for both narratives.

"Traditional cannabis culture may seem like it is going away, but I think that the people who respond to that kind of branding direction are not turned off by the addition of different perspectives on cannabis consumers that are more inclusive," he said.

"A lot of this is just the result of consumers who don't identify with 'stoner' culture being more open about their cannabis use, and the cannabis industry recognizing that and responding. In general, this shift has been good for the industry and has helped drive policy change by alleviating some of the stigma associated with cannabis consumers." 

But whether it’s a medically positioned company or one focused on intoxication, Bloom says there’s most definitely a need for sage comms advice.

"What I have seen, from both the medical and recreational side, is the ‘trying to be everything to everybody’ scenario," Bloom said.

"I do think there are certain people in the industry who are well intentioned but a little overexuberant about the reach and benefit of any product. And, like in any industry, the comm counsel’s role is to dial it back and focus on the needs of the audience."