There are some critical differences between cannabis and alcohol when it comes to how business will develop after prohibition ends. For alcohol, it was a mature industry before prohibition hit. Brands already existed when the 18th Amendment was ratified and during the prohibition years those companies entered some interesting businesses (Coors started a ceramics business that still makes more money than their alcohol business. Who knew?) to weather the dry years.
Cannabis companies do not have the same advantage… for the most part. I did catch this interview of Canopy Growth CEO Bruce Lipton discussing his company’s growth strategy.
While companies like Canopy Growth do not have the same kind of brand recognition that the alcohol companies had before and after Prohibition they are smart to start building their brands now. And it looks like Canopy Growth is doing it in a very smart way.
A big takeaway from the interview is that they are always going to follow federal law. As the first cannabis company listed on the New York Stock Exchange, they would be taking needless risks by flaunting federal laws.
Instead, what they are doing is strategically leveraging existing state laws to make inroads into American markets. They are going to stay away from THC because their concern, a very justifiable concern, is that once they run afoul of federal law that could endanger their ability to have bank accounts. Full stop: cannabis companies need to have a way to make money and if they cannot have bank accounts that certainly puts a damper on that. This is especially important for a company like Canopy Growth since it is traded on the NYSE.
CBD As an In
Canopy Growth’s strategy right now has them making inroads in New York where they have rules that allows companies who make CBD products in New York to sell those products in New York. Canopy Growth and other companies selling these products have to follow rules listing the amount of CBD in their products but that should be expected under the current regulatory regime and it makes good business sense as well. Consumers want to know what it is they are consuming and listing the components of their products on the packaging satisfies that requirement. More importantly, it’s the moral thing to do.
As you may know, CBD is gaining more acceptance because it does not have any of the hallucinogenic properties that THC, another compound found in cannabis, has. This plays in well with the gradual acceptance of overall cannabis products that we think will eventually happen; it just has to be an incremental process that gradually gains acceptance with the populace and politicians.
No Health Claims
Canopy Growth’s CBD for New York will be derived from hemp oil. This is another way to sidestep the cannabis worries (it wouldn’t be fair for people to gain the benefits of CBD and also have fun, would it?) that politicians have. Furthermore, any company selling CBD products cannot make health claims. That is a big no-no.
Why? Once a company starts making health claims they start to fall under the jurisdiction of the FDA and their panoply of regulations. And, as discussed earlier, that would also make this a federal issue, which is something that Canopy Growth wants to avoid until federal laws become accepting of these kinds of products.
Martha, Martha, Martha
Celebrity endorsements are as American as apple pie, NASCAR, and celebrity sex tapes. And Martha is a great fit for this industry. Her brand is all about quality products and she is a trusted voice for millions of Americans. Her partnership with Snoop Dogg doesn’t hurt either.
This kind of celebrity endorsement will help to position Canopy Growth as a legitimate company as they work towards elevating their Q Score before full legalization and, presumably, will help them weather the onslaught of competition that will inevitably come as full legalization becomes a fait acompli.