Recreational pot should be legal in Canada by summer, but it won’t be glamorous.
Producers trying to market their product face a battery of proposed government restrictions similar to those governing the sale of cigarettes. Labels may have to display graphic health warnings, adhere to standardized lettering and limit the use of colors and “brand elements.” Celebrity endorsements and consumer testimonials are banned.
It’s a reality check on an emerging industry that’s seen dizzying growth. Shares of Canopy Growth Corp. have more than tripled in the past year. Its market value of C$7.2 billion ($5.8 billion) now exceeds those of plane maker Bombardier, grocer Empire Co. and miner Kinross Gold. For some investors, including Norman Levine at Portfolio Management Corp., the branding restrictions make the stock unpalatable.
“You’ve got no advertising, you have plain packaging, how are you going to differentiate yourself and grow your market?” said Levine, whose company manages C$650 million.
Officials say their goal is to squeeze out criminal dealers, not encourage more drug use by making it look fun. “This is really predicated entirely upon a public health model, and not a commercial model,” said Bill Blair, the government’s marijuana point man and a former Toronto Police Chief. “We want to do a better job of protecting our kids.”
That doesn’t wash with Joe Potter, co-founder of Trider’s Craft Beer, a family-owned brewer that sells a Brew-Deau brand with the likeness of Prime Minister Justin Trudeau on the label at a Nova Scotia farmer’s market. The regulatory caution around marijuana will hurt the market and is “behind the times,” he said. “If they all have to package exactly the same, boring packaging,” he said, “that’s going to be a real issue.”
It’s a challenge for marketers such as Carol Levine, chief executive of energi PR in Montreal, who says pot producers will have to limit traditional advertising tools such as bright colors or cartoons of celebrities. “That’s what’s going to make it so difficult, because investors are going to want to see sales,” she said.
Trudeau’s Liberals are aiming to make marijuana legal around July. The federal health ministry will end a public comment period on Jan. 20 for proposed marketing regulations that would support the legislation still working through Parliament.
Canopy and Organigram Holdings were developing deals with rapper Snoop Dogg and the owners of the cult Canadian TV show Trailer Park Boys, respectively, when a federal task force recommended it should be illegal to promote marijuana by linking it with glamor, excitement or risk.
Greg Engel, Organigram chief executive officer, still plans to tie his brand to the series known for drinking, smoking, profanity and general misadventure. “We aren’t looking for a celebrity endorsement per se, we are creating a brand off of that group,” he said.
Engel wants ad rules closer to those that govern alcohol, rather than tobacco, which are more restrictive. In Canada, cigarette packages feature warnings that include graphic images of diseases linked to smoking, leaving less space for brand names. “They want to make sure people are educated,” Engel said by phone. “Well part of that education is the branding that goes along with that product.”