Restrictions on the marketing of legal cannabis help the black market pot dealer

Governments at both the federal, provincial (Canada) and state (11 states + DC) levels have all rationalized the legalization of recreational cannabis as an important part of stemming the flow of cannabis from illicit sources. Their arguments seem legitimate – while the local dealer may seem friendly, black market weed supports drug trafficking and the crime that goes with it. In addition, illegal cannabis is untested and could carry mold, mildew, pesticides or worse. Legalization also aims to keep pot out of the hands of youth. And lastly, new revenue streams from the taxation of legal pot can be directed to badly needed social programs.

And while I don’t believe they are all completely valid, governments have good reason to want to promote the new legal alternative. These are lofty and challenging objectives, so why have some jurisdictions – the federal government of Canada in particular – put severe restrictions on the marketing of legal cannabis?

Our first clue – politicians put the management of the cannabis “file” in the hands of the bureaucrats at Health Canada. Our friends in this federal agency generally do good work, but their focus is on safety and managing (i.e. limiting) Canadians access to this drug called cannabis. Important work, but it ignores the fact that an overwhelming percentage of weed, even one year after legalization, is sourced via the black market. These socio-economic issues are not the primary concern of Health Canada and nobody there will be rewarded for making cannabis more accessible and thereby more competitive with illicit supply.

Unfortunately for LPs in Canada, the sections of the Cannabis Act that govern marketing activities are modelled after the Tobacco Act, significantly restricting marketing communication channels such as packaging, digital marketing, out-of-home advertising and social media. Worse for marketers, the Act completely bans most mass advertising (TV, Radio) and sponsorship.

In some jurisdictions, like California and Ontario, state and provincial governments have severely limited bricks & mortar dispensaries, making access to legal cannabis even more difficult. If Ontario had the same store density as Alberta, Oregon or Colorado, there would be in excess of 700 stores in the province. As of November 2019, there are less than 25 in Ontario.

Legal cannabis faces an uphill battle against a very strong competitor. The local black market dealer owns direct customer relationships that, in many cases, span years. Their products meet consumer expectations, are readily available (often home delivered) and at a price that the legal marketplace cannot match. Tough to beat, made even tougher in jurisdictions where regulations prohibit the most effective forms of marketing.

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 Restrictions on legal cannabis marketing help the black market pot dealer
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Restrictions on legal cannabis marketing help the black market pot dealer
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Legal cannabis faces an uphill battle against a very strong competitor – the black market. Tough to beat, made even tougher in jurisdictions where regulations prohibit the most effective forms of marketing.
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