Ottawa cannabis companies fret over restrictive branding rules

Cannabis

A haze of regulatory uncertainty surrounding marijuana marketing has Ottawa pot producers and investors worried, even as local companies position themselves to capture a slice of the new market before the now-settled Oct. 17 legalization date.

With the federal government mandating that pot be sold in plain packaging, some cannabis companies in the region are marketing themselves as “craft growers,” investing in educational initiatives and launching new lifestyle brands – all ahead of an expected clampdown in October.

Many in the budding industry say they fear upcoming regulations will severely limit their ability to brand and market products.

“It's important to build brand awareness in advance of those regulations,” says Chuck Rifici, founder and CEO of Auxly Cannabis Group (formerly Cannabis Wheaton Income Corp.). “And so people are advertising now in ways that they won't be able to advertise in a few months.”

Craft growers

Not everybody’s outlook is so dank. Sean McNulty, the co-founder of cannabis investment company Canopy Rivers and principal of XIB Financial Inc., is betting that recreational marijuana consumers will follow a similar path as beer drinkers in this country.

He says Canadians have an appreciation for local, small-scale products, evidenced by the popularity of craft beer. That’s why Canopy Rivers is investing in smaller companies even as its parent company, Canopy Growth, makes large acquisitions around the globe worth millions of dollars.

To this end, Canopy Rivers – the investment affiliate of the well-known Smiths Falls-based producer – recently invited cannabis entrepreneurs to pitch their business business plans to access a share of $1 million in seed funding.

McNulty compared the product produced by micro-growers to a high-end scotch – grown in small batches at a level of quality that large companies can’t match.

He said companies such as Canopy Rivers have the opportunity to invest in these small-scale operations, allowing them to benefit from the business acumen of a big player like Canopy Growth without being swallowed whole.

“The people that were the best in cannabis over the past 20 years were mostly criminals, or were doing something that was stretching the lines of the law,” said McNulty. “Now we’re in a spot where those laws have all changed, and many of these people did not get licenses.”

“The time to do that is right now and we’re giving them an opportunity to do so.”

However, Michael Garbuz – the head of corporate strategy and legal counsel at Ottawa-based cannabis holdings firm CannaRoyalty – argues that the parallels between cannabis and beer in Ontario are limited.

Garbuz said that though Canadians might have an appreciation for small-scale cannabis, the regulations could mean these growers won’t fit into the industry like a craft brewery. Most significantly, the cost per gram offered by provincial resellers like the Ontario Cannabis Store often may not be profitable and, with strict branding regulations, smaller growers may have difficulty differentiating their products from the big names.

New brands

In other areas of the market, some say they’re worried about their ability to communicate with consumers.

Ottawa-based National Access Cannabis has spent the past four years establishing itself as a go-to destination for patients to access medicinal marijuana through proper channels.

In January, the firm said it planned to also expand into the recreational market, an announcement that was followed in April by news that NAC planned to convert a number of Second Cup cafes into pot dispensaries and lounges in Western Canada.

Matt Ryan, the head of marketing at NAC, says it’s important that companies focus on education.

“The entire industry is going to help change the stigma.”

“A lot of people believe that cannabis is just smoking weed,” says Ryan. “The entire industry is going to help change the stigma.”

Meanwhile, companies such as NAC that have traditionally marketed themselves as medical marijuana firms are now launching new “lifestyle” brands in advance of the opening of the recreational market.

NAC is launching a recreational brand, Meta Cannabis Supply Co., while just across the Ottawa River, Gatineau-based pot producer Hydropothecary recently launched a new brand, HEXO, aimed at “bring(ing) people together to share enjoyable and life-affirming experiences.”

Terry Lake – the vice-president of corporate and social responsibility at Hydropothecary – says he feels regulations are shaping up to be restrictive in a way that could harm the cannabis industry and prevent the move of cannabis from the black market to the mainstream.

“We shouldn’t be limiting information,” says Lake, a former B.C. health minister. By information, he doesn’t just mean advertising and branding.

“It’s an opportunity for the industry to talk about responsible use,” he explained. “We want to make sure that we can inform potential customers about our products.”