This story originally appeared in the Winter 2023 issue of strategy. 

The Canadian cannabis sector has experienced dizzying highs – and lows – since pot was legalized in 2018. Anecdotally, it’s hard to say if anything has changed. Consider that B.C. set a record $60 million in pot sales this past September – around the same time Miller Thomson revealed that Canadian investors had lost more than $131 billion of their cannabis bets to-date.

So, how is the category shaping up? Strategy turned to Dave Bigioni, founding principal of fractional CMO consultancy start-up, Brave Strategy, and veteran of the cannabis, bev alcohol and banking sectors; Rebecca Brown, agency veteran and founder of Crowns, a dedicated agency that’s focused on the emerging cannabis market; and Paul Lawton, founding partner at Sister Merci, a creative firm dedicated to promoting brands in highly regulated industries and emerging markets to find out.

Where is the cannabis market in its evolution?
Lawton (pictured right): The interesting story right now is who’s left. The people who have survived are good. I’ve worked on the front lines and have seen some of the biggest cannabis companies disintegrate before my eyes. But, in their place you have smaller, more agile, craftier brands – more mid-crafts like the Ghost Drops of the world – start to figure out how to segment the audience and figure out who their market is. A lot of companies lost a lot of investor money, but I think the industry has started to figure some things out.

What will help drive further change?
Bigioni: When you look at where the money is flowing, it’s the government that’s benefiting from the sale of cannabis across Canada right now. It’s not healthy for the licensed producer (LP) or the retailer side from a margin perspective. There are only a couple of things that will help it change: regulatory changes that have to come through Health Canada – and they’re committed to do a review of the process. Or, I think we’re going to have to see more consolidation.

Has any consumer behaviour surprised you so far?
Bigioni (pictured left): I think consumers have more variety than they’ve ever had, both in formats and brands. But I don’t think it’s as sticky as a beer brand that consumers feel represents them. When you’re drinking Corona versus a Stella versus a Molson Canadian – they’re actually different people. I don’t think you’re going to see that here.

Lawton: The thing about cannabis, and this has always been the case from pre-legalization times, is that a lot of it is about exploration. Everybody thought this was going to be like beer, where you have your Budweiser and that’s all you’re going to buy through your life. But cannabis has always been about sampling and changing things up. You’re starting to see some brands figure that out – having a strain on the market for two months and then it’s gone. It’s more about the dawning that this is not bev alcohol. Cannabis is its own thing with its own cultural assumptions and nuance. It’s important that we treat it for what it is, not what we wish it was.

Cannabis marketers are embracing the individual personalities of their brands – and being more consistent.

Can you build a brand around cannabis?
Lawton: You’ll read a lot about how consumers aren’t buying on brand, but I don’t buy it for a second. Organigram’s dominance of Shred over the last two years, for instance – that’s a milled cannabis product that was frowned upon at one point. They put out a killer product and people ask for it by name because it constantly delivers on the value quality matrix. A brand like Carmel, a super-small grower that put a very interesting brand idea into market [one based on limited grows and constant experimentation] and totally disrupted what you would expect from a craft grow. There are consumer bases here that have started to show brand affinity.

A lot of the work that Sister Merci has been doing lately has been dynamic in-store experiences, like displayers, but also budtender education. But you also need a digital strategy and be able to compliantly talk to cannabis consumers where they’re meeting. It’s about touching all those points – and a combination of creative and PR and earned tactics. Even just the way brands are utilizing their retail spaces and creating a scene in that way. The brands that are communicating across those channels are doing quite well.

Why has branding been such a challenge?
Brown: I think the question we often ask our clients is: Have you really tried to build a brand? Can you really say, in a consistent manner, you have funded brand-building activities and put a consistent message and series of visual cues into the market that will help people understand who you are, what you stand for and how we’re supposed to feel about you? I think very few companies could say they’ve done that. Show me one brand that has been putting out an extremely consistent message and has been using the available channels in a consistent way for four years. Really no one has.

But I think the ones that are getting there are seeing traction in the market. Pure Sunfarms is, to me, the unsung brand hero. It dominates the dry flower category. They have a good product at a good price point – but they have an extremely consistent visual vocabulary that’s differentiated and has a discernable vibe. I think Back Forty is another. They have this idea about what the Back 40 is – it’s this relaxing space where it’s always the weekend. It’s clearly communicated and it’s a fun space to play in.

I think Shred is doing a pretty good job. And then I think of craft brands like White Rabbit OG. It’s very clear what the idea of that brand is – follow the white rabbit, come through the looking glass. We get it right away. The way they show up and look and talk reinforces that message. I don’t think this is so complicated – but I think there’s a lot of impatience.

It probably hasn’t helped that so many brands have repositioned since legalization.
Brown (pictured left): Unless the place you started from is totally untenable, I don’t think that’s a good way forward. I’m generalizing, but I don’t think that those changes are being made because they’re like, “No, that made no sense,” or “No, we have some compelling data that leads us to believe that this isn’t resonating.” I think a lot of the time what’s happening is you have senior leadership pushing their marketing team and saying, “Why aren’t we getting traction? Do something.”

So, what’s been the most effective marketing channel for cannabis to date?
Bigioni: When you think about marketing, the real question is: who owns the consumer? More and more, I see that leaning towards the retailer, because the retailer is in a much stronger position to cultivate relationships, and build trust and loyalty with consumers. The budtender is the gatekeeper – they are the sommelier of cannabis. I think that’s probably the most important relationship that consumers and LPs have.

It’s up to the retailer and budtender, and the store’s ability to have that right assortment for their trading area, because each community is going to have a different usage, type of consumer and age group. A retailer is on the way to success when they can name a good portion of their customers.

Are there risks in relying on budtenders?
Brown: I think the POS experience is critically important. But I think you’re going to build your brand by showing up in every space you can in a consistent manner, and that’s broader than retail. Budtenders are critical but I struggle with the default focus to exclusively market to budtenders. If I were the head of a marketing department, I would be extremely nervous to cede that much control to budtenders. The retail marketing piece is incredibly important, but it would be pretty awesome if someone came into the store and asked the budtender about your product first because they had connected with it somewhere else.

This market hasn’t seen a recession before. What do you expect the impact will be?
Lawton: Cannabis has an inelastic demand. Cannabis people aren’t going to lower the amount they consume during the recession. But one of the unknowns in this category is if people will start to gravitate back towards unregulated sources because they feel like they can get a better deal. Which, for the record, is not always the case. I’m optimistic that cannabis will be okay in a downturn. It’s just hard to know what part of it will be okay.

But our business exploded during COVID. In 2020-21, we tripled in size – and that’s during a period where there were headwinds, closures, mergers and everything else. I think that there are clients who are looking ahead and licking their chops.