THE WEED EFFECT ON THE BUSINESS WORLD

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Welcome TO THE WEED EFFECT

The Sound is renowned for coming up with provocative insights and dropping bombs of truth and that's just what we’re about to do. Here goes….people like weed.

That's right, lots of people really like weed. And here’s another truth bomb. People have been smoking weed since the dawn of time, even though it’s been largely illegal everywhere. Yes, the law has been ignored like the ass it is and people have been buying weed, selling weed, smoking weed and having a good time regardless of what the politicians say.

But things are about to change. Governments around the world are looking at weed differently. Perhaps it isn’t as bad for you as we thought? Perhaps it’s even good for you? Perhaps putting people in prison for selling weed isn’t that smart….or fair? Perhaps if we regulate weed it might be a new stream of tax revenue? Hmmmm.

The era of global weed prohibition might just be about to end…and we want to be there when it does.

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THE BIG BATTLE IS OVER; THE BIG OPPORTUNITY HAS just begun

Some form of marijuana has already been approved in 25 states, and roughly 80 percent of the American public currently favors medicinal use. Support for recreational use finally outweighs dissent.

And it’s not just liberal bastions like Washington, or progressive states like Colorado leading the charge. Recently, Ohio voted against full legalization but for the legalization of medicinal marijuana making it the 25th state in the US to do so. While full legalization didn’t pass, just bringing it to a vote shows how far the nation has come.

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In the USA, the states of Alaska, Colorado, Washington and Oregon have legalized weed recreationally; this means that you can pop into a weed store, talk to a Budtender (yes that's right, a budtender) and buy weed just for fun; no need to pretend to have a headache or be experiencing stress to get medicinal weed. And, no need to have a dealer on speed dial.

Some form of legal marijuana has already been approved in 25 states, and roughly 80 percent of the American public currently favor medicinal use. And, support for recreational use finally outweighs dissent.

So this must mean that everyone is stoned all the time and that the weed store owners are billionaires already right? Wrong.

WEED IS LEGAL IN SOME PLACES ALREADY

Alaska

Colorado

Washington

Oregon

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According to statistics it would seem that 1 in 4 adults have smoked weed in their lives. When we did the same survey amongst The Sound employees we learned that perhaps everyone in the world smokes weed, and some of them every day (this may account for your late deliverables, sorry).

In the USA, estimates reveal that people are spending approximately $6 billion on weed already, even though its only legal in 25 states, and only four of them have gone full carrot, (and apparently if you smoke “The Full Carrot” in Amsterdam, you may get stuck in a toilet in a cyber punk bar. Full story upon request.) and made it recreationally legal.

So this means there’s a lot of people out there who have medicinal weed cards or a nice man who delivers…

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BUT WEED IS niche, RIGHT?

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WHY AREN’T THE WEED BRAND PIONEERS really rich?

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These visionary men and women were first to market, so in most categories that would tend to mean a head start on the road to riches. In the weed market, things just aren’t that simple.

Firstly, in CANADA , where weed is kind of legal but kind of not, weed brand owners are living with complete uncertainty as to whether their business will even be open next week; landlords are suspicious, zoning is fluid and the police still pop by every week.

In the USA things are even more complex. Weed remains a Schedule 1 drug at the Federal level. This means that the government still considers weed to be harmful, addictive and of no medicinal benefit. As a result you can’t distribute weed across state lines (even between states where it is legal), banks won’t touch the money and things like staff costs are not deemed tax deductible.

This all means that being in the weed industry now is far from profitable and far from easy. It all sounds very stressful, if only they had something to help them relax…

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BUT WHO WANTS TO HAVE stoners as customers ANYWAY?

Good point. Unless you’re selling tie-dye t-shirts or Cypress Hill CDs, right?

Wrong, very wrong.

Weed users range from rap artists to stay at home dads to cancer patients to astro-physicists and everyone in between.

In fact, when you talk to weed users and weed brand owners, you quickly learn you’re talking to an incredibly informed and passionate group of people. Weed users are concerned with things like efficacy, origins, ethics and the corporate practices of growers and brands. Talking weed is a lot like talking about craft beer, craft coffee or small batch spirits.

Who wouldn’t to engage with people like that?

stoner?

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POT. IT’S NOT just for potheads ANYMORE

Over the past 40 years we’ve watched perceptions of pot move from menace to mainstream. With that, its acceptance has evolved from a tolerated mainstay of youthful counterculture to become an accepted part of life or even embraced as a miracle drug. Heck, even the ‘highest’ office in the land, the US presidency, hasn’t been immune to the Mary Jane.

All of this is to say that the target audience for weed is pretty much anyone “of age”. Its appeal spans race, income and social boundaries making it a truly universal category.

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Legalized weed is the fastest-growing industry in the US. As weed becomes legal and regulated we’ll see the continued expansion of the growing, producing, dispensing and accessories markets. ‣ Weed Extensions (smoking, vaping, edibles, drinks, lotions, patches, booze, etc.)

However, some of the most interesting opportunities are found in the myriad of businesses springing up around weed. We’re already tracking: ‣ ‘High’ tech (a burgeoning tech scene has sprung around the weed-scape) ‣ Agra businesses (including equipment, fertilization, agra-science) ‣ Commercial real estate funds (dispensaries are popping up in portfolios) ‣ Investment products (pot stocks exist and private equities opportunities abound) ‣ Detection & safety (the race is on for accurate testing for law enforcement) ‣ Abuse / addiction related businesses (products like Cannitrol help people stop using) ‣ Lobbying, regulatory and legal related businesses (pot law will stay profitable)

GET READY FOR AN explosion OF POT RELATED BUSINESSES

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Last year, weed generated $2.7 billion in sales…

…and delivered more than $200 million in tax revenue to the legal states.

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THE BATTLE TO BECOME THE Budweiser of Bud HAS BEGUN

While pot’s not legal nationwide, many companies, both large and small, are preparing themselves to go national when it does. But there’s a battle for the soul of the category. That is, whether the industry should be dominated by profit-driven Corporate Weed and Wall Street or by purpose-driven craft / small businesses of America’s mains streets.

Some companies, like Privateer holdings unabashedly desire to be “Big Marajuana”. Among others with grand aspirations a common refrain is to become the “Starbucks of Weed”.

Still others in the industry, including noted advocate Willie Nelson, want to fight against the corporatization of the industry in hopes that it might help revitalize small farms, support small businesses and grow in environmentally responsible ways.

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As the category matures we’re already seeing growers or producers shift from selling in bulk, to packaging and selling branded products. Not surprisingly, manufacturers want to stand out vs the competition, and people are accustomed to knowing where a product comes from.

Currently, the weed brandscape looks immature and is dominated by wacky strain types, like Schnazzelberry, Lucky Charms or Skrunk Special.

More recently celebrity licensing agreements have exploded. Tommy Chong, Snoop Dog and Bob Marley’s family are of the many that have already inked deals with weed brands, accessories and other marijuana related products.

That being said, licensing or co-branding isn’t necessarily a long term strategy to build any brand, much less a brand in the weed category, according to HBR Author / Colorado State professor John Quelch who recently reported on the subject.

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Puff Puff Give: SHARING EQUITY TO STAND OUT

- JOHN QUELCHHBR AUTHOR / COLORADO STATE PROFESSOR

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However, among the neon pot leafs and images of rap stars smoking blunts, there are some interesting exceptions. Brands like The Goodship Company or Dixie Elixirs and Edibles are pioneering a sophisticated and premium packaging and branding that would be at home on the shelves at Barney’s. It’s their efforts that are pushing the narrative around pot beyond its stoner image into mainstream and upscale markets.

Ultimately, as the market expands, the need for skilled marketing will increase in order to help brands stand out. Weed focused marketers, like Cannabrand, are already emerging to help develop the next big weed brand and its communications.

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Help Wanted: CRAFTING THE FUTURE NARRATIVE OF WEED

THE NEXT Dot Com bubble

The green rush is already on and the expected explosion of brands and related businesses in this new category harkens to last major category creation event – the dot com bubble.

Undoubtedly, there will be competition as the market invents itself and brands jockey for competition. With the need to stand amongst the crowd, will come the advertising and media spend.

And while dollars probably won’t flood the TV airwaves (due to regulation), they will likely saturate other channels reducing inventory and driving up costs. Print, OOH, DM and especially digital (programatic, paid, earned and owned) will see an influx of budget allocation.

Inevitably, competition will ‘weed’ out weaker brands and investment dollars will dry up, as will the influx of media dollars, leaving a more balanced flow of media investment in the CannaBusiness space.

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So, what happens if governments make weed legal and a multi billion-dollar category emerges into the light?

The answer is that everything changes, and nothing changes…

Everything changes in the sense of where and how weed is bought (and who is not in prison for selling it)…but nothing changes in terms of anything else.

Well not much anyway.

Whisper it, people already use weed and making it legal doesn't make more people use it or stop people drinking beer or start eating more chips…there might be the occasional person who uses weed again because they lost the number of their weed dealer in 1998, but for most it just becomes something that's easier and more pleasant to purchase. And that’s a big deal and a big opportunity for brands both in the category and on the fringes.

SO WHAT’S GOING TO HAPPEN?

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At The Sound we believe that the legalization of weed is predominantly a brand world opportunity, and a significant legislative shift will be needed to dramatically and positively affect some demographic groups…

Arrange for a presentation and a screening of our documentary, Weed Co. The Branding of Weed, to learn more about the first weed brand owners who are trying to change the world.

info@thesoundhq.com

And if we're a little slow to respond, well...we'll get back to you when the smoke clears...

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IMAGE REFERENCES

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3 http://portland.thephoenix.com/news/148267-as-marijuana-laws-ease-nationwide-maine-leads-a/

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5 http://greenseek.co/wp-content/uploads/2015/10/Budtenders_guide.jpg

6 http://www.vox.com/2014/12/24/7408571/marijuana-legalization-colorado

8 https://vice-images.vice.com/images/articles/meta/2016/04/11/a-history-of-women-and-weed-1460395199.jpg

9 http://www.movin925.com/wp-content/uploads/2015/04/2015-04-20_1217.png

10 https://d1zcpq3nu9qcg4.cloudfront.net/production/blog/post/pictures/2176/content_1_1.jpg

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IMAGE REFERENCES

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11 http://www.mailtribune.com/storyimage/MM/20151001/NEWS/151009948/AR/0/AR-151009948.jpg

13 https://cdn3.vox-cdn.com/uploads/chorus_image/image/49520043/grow.0.jpg http://www.weeddepot.com/files/9214/2790/9650/Marijuana_Stores_Turned_Into_Starbucks-Like_Establishment_-_Weed_Depot.jpg

14 http://www.marijuana.com/wp-content/uploads/2015/04/willie-nel.jpg

15 http://www.gannett-cdn.com/-mm-/2e478fbb31ee5694356867d590457c36e9278f78/c=228-0-4821-3453&r=x404&c=534x401/local/-/media/USATODAY/test/2013/12/31//1388507952001-AP-Legalizing-Marijuana-Denver.jpg

16 http://www.thegoodship.com/wp-content/uploads/2015/05/the_goodship_cookie_marijana_boxing.jpg

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18 http://www.smokingwithstyle.com/wp-content/uploads/2015/06/mmj-dui.jpg

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