Cannabis Entrepreneurship 101: Understanding the rules of CPG brand growth in the context of cannabis

Since legalization in Canada, cannabis has quickly emerged as an entirely new consumer packaged goods (CPG) category. It initially seemed as though it would be an extension of the alcohol and beverage industry when it was first announced that liquor licensing boards like Ontario's LCBO would have a hand in the retail side. The problem with this assumption is that cannabis overlaps many different categories at once. It can be both relaxing, like a glass of wine after a long day, stimulating, like a fresh cup of coffee, or used medically, putting it in it’s own grey area. As consumers start to navigate the legal cannabis industry, there may be lots to learn from other CPG brands if you don't also lose sight of what makes cannabis unique.

1. Similar CPG verticals can bring a lot of insight

Having spent 13 years in the cosmetics industry, Julie Chamberlain, now marketing VP at licensed medical cannabis producer Organigram, brings that knowledge with her to her work. She sees plenty of overlap between the realms of beauty and cannabis, and uses this to frame her marketing mentality. “I think [cannabis] flower is similar to cosmetics in terms of consumer engagement and involvement,” she says. “I think as a marketer, if you're authentic and passionate about the product, that creates a lot of great opportunities to engage in conversation, to create and share content, and also to be a voice for people who are looking for more education and involvement”.

The comparisons to beauty and cosmetics are helpful beyond the consumer. Unlike coffee or alcohol, cannabis tends to follow more of an assisted selling model. “Coffee is quite self service, like you're in an aisle and you're going to [buy] that by yourself,” Chamberlain explains.  “Versus cannabis, which is highly an assisted service model where the bulk of sales are still happening at brick and mortar stores but with the aid of somebody. I think that's a huge difference. Thinking about something like cosmetics, it’s also assisted: you have a beauty adviser or a makeup artist to help you.”

Drawing these comparisons helps Chamberlain strategize in an industry that’s currently doing its best to continue scaling. “Coming from that background helps me to ensure that we're only biting off what we can chew and that we're only taking on that with which we think we can execute well,” she reveals. “[Having that knowledge] helps, and I think that this would be true for any CPG industry, just to recognize that winning at retail is paramount. Nothing you do in the top of the funnel will matter and you need to get it right.” 

2. Navigating cannabis retail is key to success

Chamberlain points out one of the fundamental differences between cannabis and cosmetics is in retail. “What isn't developed yet in cannabis that I would normally have as a parallel [in beauty] are chains,” she says. “They are developing and at a quicker clip now. And when that happens, it will help the customer experience. It obviously helps when [as a marketer] you can build programs at scale versus going out over hundreds of independent negotiations.” 

Recently, COVID-19 lockdowns have also helped accelerate e-commerce offerings, though that development also varies from province to province. “I think that's fundamental to penetrating the illicit market,” Chamberlain says. “What we [at Organigram] know from research with over almost 3,000 cannabis consumers and illicit market purchasers is that after price, which is what everyone's talking about, convenience is the number two barrier to the legal market.” As Chamberlain points out, making inroads via e-commerce is essential to the industry’s growth because it will help meet the demand of an illicit customer base used to getting their product with some immediacy. Once that expansion takes place, Chamberlain explains that it’ll then likely be on brands and retailers to provide more education and product selection to the point that a coffee or other unassisted retail option might. 

3. Regulations may not be a hurdle to brand loyalty or recognition

When experts talk about the differences between cannabis and other CPG verticals, they often emphasize the regulatory frameworks and restrictions that limit what can or cannot be said. But creative minded brands are showing that there may be  flexibility within the regs for innovation and the ability to achieve loyalty and recognition. As Chamberlain believes, if you’re not following the regulations, then you’re not doing your job. “Regulations around age gating should not be a huge hindrance because if you are not age gating, you're not targeting your consumer,” she says. “I don't actually see that as a huge barrier as more and more spend is digital. ” 

Chamberlain also points out that the regs can actually work well with many marketing standards that are already in place. There’s a growing trend toward engaging with consumers on a deeper level. “You can still obviously talk [about] what your product is and why you think it's better than others or why it's worth paying more for,” she says. “But I think what's even more important is that the way marketing has evolved, people want to know not just what you do and how you grow, but why you do it, who you are, and what you care about, which there's  the least regulation around.” Going into detail about hiring practices, the locality, and community of your business, and your general business practices will appeal directly to consumers’ sensibilities and values. 

As an emerging CPG product, cannabis shares a lot of similarities with other verticals. Those similarities can help you tap into reams of knowledge from other CPG verticals, so long as you keep in mind that cannabis is very much its own unique product. Understanding what to borrow from CPG and where innovation is needed will likely be key to success. 

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