It doesn’t seem intuitive for a cannabis company to raise a red flag on how damaging pro-cannabis propaganda could become for brands.
The cannabis industry still has opposition in multiple forms that, collectively, specialize in being loud and wrong about the facts, and one would think that those foes would call out pro-cannabis disinfo because it fits with their agenda.
That would be a fine case if our opposition were arguing on the facts in good faith, but they’re not. So the cannabis industry needs to step up and embrace a watchdog role, calling out pro-cannabis propaganda and disinformation when and where it’s evident. When we’re talking about cannabis, we’re not just talking about recreational pot. We’re also talking about healthcare — healthcare that’s helping millions of Americans and could help many more if we grow the industry in a responsible way, which puts patients and consumers first.
Cannabis needs to be brand-safe, and right now it isn’t. But it can be.
In the past, it was government actors peddling anti-cannabis propaganda, but today’s pro-cannabis disinformation comes from actors that have an economic incentive. The cannabis market is estimated to be $38 billion this year — about two-thirds the size of the wine industry in the U.S. — and it has no real regulatory or legal coherence. What this means is that a lot of pro-cannabis disinformation is going to look like marketing in the way that anti-cannabis disinformation looked like politicking. Some of it is going to just be over-eager marketing, and some of it is going to be deliberately misleading lies meant to spread. The line between the two is going to be tough to see.
The CBD industry is a powerful case study. In 2021, we conducted an analysis that found CBD companies earning under $1 million made up 97% of the market, and the top 20 over-the-counter brands only accounted for 17% of market share. With so many brands competing so voraciously, and a vast majority losing visibility year over year, the need to stand out becomes life or death. That motivates them to add functional ingredients or make unsupported claims, because any potential penalties are worth the risk if they're going to go under anyway.
As CBD companies do this in an environment that lacks rigorous research, the message consumers get is that CBD helps with all kinds of ailments. Seventy-one percent of CBD users are millennials or Gen X, demographics that are savvy enough online to find products but should not be expected to vet medical information as if they’re doctors.
It’s easy to see how misleading claims from dying CBD companies became the consensus belief among their audiences. But here’s the rub: When that becomes the prior assumption of an audience, then it’s straightforward for most every other ailing CBD company to ride on that wave by just confirming the prior to tap into the wellness market. The repetition strengthens the prior. It becomes a circular reference, like successful disinfo does.
Whether CBD or THC, the inability for scientific research to be done on cannabis also contributes to pro-cannabis disinformation. Most people who use cannabis do have genuinely good experiences with it, and so without statistical data to point to that shows some small percentage of users have negative consequences, what gets amplified are the anecdotes. Some private-sector cannabis companies, including ours, have done more than their share to contribute to the research, but there are limits as to what we can collectively achieve. Most kinds of in-house research will have some selection bias, and we’ll be criticized for funding academic studies, even when the goal is objectivity.
Here’s why this matters now. Retail affiliations and brand integrations are going to be on the table for brands looking to differentiate themselves by being among the first movers in the cannabis space. Just 10 years ago, it would have been ridiculous to seriously ponder what the cannabis strategy was for consumer brands like CVS, Starbucks, McDonald's and many others where there are obvious synergies. Today, it's a pretty common question, one that many crucial stakeholders, including investors, are asking.
In this respect, far more than its estimated market size is riding on the continued maturation of the cannabis industry. Institutional investors want growth in market share, and they do not want adverse publicity for their portfolio companies, and there is a tension between these two things when you talk about which brands will dip a toe into the cannabis space and when. It’s pretty easy to argue that cannabis companies and those who participate in the cannabis space are ESG-friendly investments. It’s harder to get all of The Street to buy that argument. It will be fascinating to see what the first big cannabis brand integration will do to the value of that brand’s stock in the short-term.
What can cannabis-curious brands do to create more safety for moving into that space? It starts with using their political power to influence legislation. Cannabis needs to be removed as a Schedule I substance, which would open the door for more federally funded research.
It also involves using their power as advertisers. Twitter recently relaxed its policy on cannabis ads, which is commendable, but other social media companies like Meta still have restrictions on cannabis advertising. Permitting paid cannabis ads on social platforms would allow legitimate companies to gain visibility, making it harder for disinfo to propagate. When social platforms boot legitimate cannabis companies, the big players ignore the medium, which leaves more room for other sources of information, not all of which are accountable to anyone, to build the narrative.
Alex Milligan is cofounder and chief marketing officer at NuggMD, a telemedicine provider for medical cannabis.