Cannabis industry copes with social distancing

There is demand for product, but marketing and retail in the category has been disrupted as much as any other.
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Since last weekend, purchases at the Ontario Cannabis Store (OCS) have been steadily increasing.

That’s according to Daffyd Roderick, director of communications for OCS, who told strategy that last Saturday there were almost 3,000 orders (an 80% increase over the average Saturday), while Sunday saw more than 4,000 orders, a 100% increase from the previous week. On Monday, there were more than 6,000 orders. It’s a boost for a recreational industry that has dealt with misjudged demand, an inconsistent retail rollout and ongoing competition from the illicit market (which is less attractive amidst social distancing practices).

Paul Lawton, chief strategy officer and founding partner at cannabis-focused agency Sister Merci, is not surprised by the increase, given how many consumers use cannabis when they are feeling anxiety, stress or boredom – helped along by a recreational system that has superseded the medical one for some users – but says brands should be thoughtful about continuing to use some of the euphemistic language to reach those people.

“If you look at other countries, there’s going to be days or weeks of intense anguish and existential terror and hardship,” he says. “That’s probably not the best time for some of your brand messaging, but it’ll oscillate with times where people are just looking to be entertained and informed, and that could be a welcome retreat from just looking at your newsfeed and waiting for the next wave to knock you over.”

A senior marketer at a licensed cannabis producer, speaking on background, points out that restrictions on what cannabis brands can say in their advertising and messaging already makes it unlikely that they would say something insensitive or be seen as trying to take advantage of a crisis (something marketers in other categories have been concerned about). Lawton says that while Sister Merci has pulled all of its scheduled posts for clients – as the evolving pandemic has made it difficult to predict what will be in the news on a given day or how much noise there is to compete with – pulling marketing completely will likely be a mistake.

“This is the busiest we’ve been since opening the agency last year, helping our clients navigate the uncertainty,” Lawton adds. “Cannabis brands have worked really hard to build brand awareness and equity, the data we have shows that it has been growing across the category, and that’s been driven by utilizing all the marketing channels available. It’s a mistake to turn the lights off and wait for this to blow over, because in four or six or 18 months, the cost of rebuilding brand strength from scratch is way too high.”

That might be easier said than done, however, since the heavily restricted cannabis industry now needs to use a smaller toolbox. The cannabis brand marketer pointed out that many of the age-restricted avenues for advertising in the category are no longer available due to closures: places like bar restrooms, activations at concerts and ads in Cineplex VIP theatres. In any cannabis stores that remain open, engaging with “budtenders” – previously highly effective in guiding customers to brands and products that suit their needs – might not be a good idea during a period of social distancing, if stores even remain open, also cutting off other in-store activations. What they are looking at now is examining tools they have left, like digital and one-to-one channels, but even those might be worth a moment of pause.

“Sending an email about your cannabis availability seems unimportant at the moment,” the marketer says, “especially when people are getting a thousand emails from every brand they’ve ever taken a passing glance at about what they are doing to keep people safe right now. We just need to understand the right time and place to go out with these messages.”

Many of the retail touchpoints have faced the same disruption as other categories: Canopy Growth, the largest licensed producer in the country, announced the closure of its corporate-owned stores on Tuesday, while cannabis retailer Fire & Flower closed all locations that didn’t offer click-and-collect services. Other private sellers are following the lead of some retailers, limiting hours and the number of people allowed in the store at once (the latter of which was already a requirement in most provinces).

On the ecommerce front, Canada Post is no longer making in-person deliveries for packages that require age verification, though Roderick notes same- and next-day delivery options from the OCS – which are provided by a different, third-party logistics service – remain available. Vendors the third-party contracts for delivery still require ID for age verification purposes, but do so without handling it and have stopped asking for an electronic signature to maximize social distance.

The cannabis marketer says that while there is degree of simply needing to “ride out” the retail situation and see what happens, a big part of the response will be in managing allocation. For example, “Cannabis 2.0″ products are still in high demand, as consumers look for what’s new in the category, but allocation of those products will need to shift to markets where there is a clearer path-to-purchase. Some retailers, such as the OCS, don’t allow for the shipment of cannabis beverages, so products will need to shifted to provinces where it is allowed, or where more physical retail stores are open.

The cannabis industry was in a bit of a tough spot prior to the pandemic; in recent months, many producers laid off staff and closed growing facilities they thought they would need to meet demand (but which did not arise), leading to many stocks tumbling. But Lawton notes that since a significant amount of cannabis stocks were held by speculators, a downturn in the stock market could have a normalizing effect on prices as those speculators offload. He also adds that performance of other “vice” categories suggest cannabis may also be crisis- and recession-proof, as people turn to it for more comfort.

Cannabis isn’t the only category that’s being disrupted by Canada Post’s new delivery policies. In Ontario, the LCBO is continuing to make online order and delivery available; however, due to Canada Post suspending age verified home deliveries, packages are instead being delivered to a customer’s post office or delivery outlet. A spokesperson for the LCBO said the agency respects Canada Post’s decision, saying that inconvenience for online customers – many of whom did so to avoid leaving their home – is “regrettable.” The LCBO does not have any other delivery partners, though orders are available through Foodora in Ottawa and Toronto following pilots that began last year.