NetworkNewsWire Editorial Coverage: With legal recreational cannabis coming to Canada later this year, companies are making the most of the last few months to prepare for the challenge of a new and largely brand-free market. Choom Holdings, Inc. (CSE: CHOO) (OTCQB: CHOOF) (CHOOF Profile) is building a brand upon retail outlets and a slice of cannabis history, hoping to get the attention of existing and new curious consumers. Medical cannabis company OrganiGram Holdings, Inc. (TSX-V: OGI) (OTCQB: OGRMF) is expanding its operations, using larger growing rooms and more staff to ensure supplies when the law changes. Aphria, Inc. (TSX: APH) (OTCQB: APHQF) is also pursuing a growth strategy, using targeted investment and collaborations to reach a larger consumer base. Hydropothecary Corp. (TSX-V: THCX) is using the expertise of specialist companies, including Segra’s tissue culture propagation technique and Shopify’s expertise in building ecommerce sites. Meanwhile, The Supreme Cannabis Company, Inc. (TSX-V: FIRE) (OTC: SPRWF) is looking beyond Canada, with an investment deal to bring in cannabis oils from Lesotho.
Branding for a New Market
Despite potential delays in the Senate, Canada’s Cannabis Act is on its way toward becoming law. When the legislation arrives this summer, it will turn Canada into the first G7 nation to fully legalize the sale and use of cannabis for recreational purposes. It’s a change which will vastly expand the Canadian cannabis industry, which is currently limited to the medical market. It may also become a test bed for other nations, as attitudes towards drugs shift around the globe.
One of the biggest challenges for the companies looking to enter this new market is branding. For obvious reasons, there are no established big-name brands in this sector. The closest things that exist are medical cannabis brands, and the marketing of pharmaceuticals is hugely different from the marketing of recreational consumables. Following an extensive consultation, Health Canada has released draft rules on cannabis packaging, rules which set strict limits on how the product is marketed. With plain packaging, health warnings, and space for only a small logo, companies will be limited in how they can use the packaging to sell their brand appeal. Tight restrictions on advertising will add to the challenge.
So how will companies make their mark with such strict limits and a cold start?
Branding with History
One of the companies looking to compete in this new market, Choom Holdings, Inc. (CSE: CHOO) (OTCQB: CHOOF) has found a way to build its brand through an established part of cannabis culture.
The word “choom” was originally Hawaiian slang for smoking cannabis. During the 1970s, when the cultivation and use of cannabis proliferated on the island, a group of students formed a group calling themselves the Choom Gang. Like so many groups of young people, their story would have disappeared without attention, it not for the later fame of one member of the group – Barack Obama.
Obama’s rise to the office of president of the United States brought attention to his past. Inevitably, stories about his youthful behavior surfaced, as opponents looked for dirt to use against him. Obama dealt with them with the grace and political cool that won him such global popularity.
Off the back of Obama’s presidency, the Choom Gang became known around the world. Their story, and the relaxed Hawaiian ethos they were associated with, has become well known among cannabis consumers. By building a brand that connects to that existing story, Choom Holdings is creating a brand with history and a reputation behind it.
A Relaxed Style
The brand Choom is building is a perfect fit for the recreational cannabis market. It’s all about fun and relaxation. Images of Hawaiian beaches combine with a mellow color pallet to evoke an atmosphere that’s far away from the clinical style taken by pharmaceutical cannabis brands.
The company’s website and marketing materials emphasize the story behind the brand and, by implication, the bigger history of cannabis use in American and Canadian culture. Choom is showing an awareness of the decades of recreational smoking that have come before, that it understands that most customers aren’t just taking up the habit now, and that they have a whole culture built around shared interests and values. Through its branding, Choom is selling itself as part of an ongoing history of people relaxing and enjoying cannabis.
It might seem like a lot of effort to go to for a single product, but there’s a lot of money at stake. Cannabis already has a huge market in Canada, and with the change in the law, the profits from that market will shift from criminals to legitimate businesses. It’s estimated that the cannabis industry will quickly be worth $10 billion by 2023, according to a recent Research report by Pacific International Securities, more than the spirits and wine markets respectively. That’s not counting ancillary products and services such as security, testing, tourism, and paraphernalia. By making a new brand feel established, Choom is marking out a strong place within that large market.
With the limits on packaging, cannabis companies will need other ways to mark their brands upon the public consciousness. As in so much about cannabis branding, Choom is already a step ahead on this.
The company’s business plan includes a complete supply chain, from production through to sales. As part of this, it has developed a design for distinct Choom branded dispensaries to sell its products. Sitting on Canadian high streets, these will provide a welcoming place for consumers to buy their cannabis. The style of the shops combines elements of the relaxed, choom gang aesthetic with others drawn from high impact modern brands. Comfortable sofas and wood panels sit alongside clean white shelves full of neatly ordered products. There are even touches of Hawaiian greenery to evoke the great outdoors.
These shops will let Choom establish its brand identity despite the limits on packaging and advertising. It’s a smart approach to branding that should help it take a leading place in the new cannabis market.
The Substance Behind the Sizzle
This isn’t to say that Choom is nothing more than a collection of flashy branding techniques. Far from it.
The company has been working for several years to establish two licensed facilities to grow cannabis, making use of the existing medical regulations. The buildings at Vernon and Chemainus are both undergoing a refit to bring them into prime condition. Between them, they will be able to grow $11.1 million worth of cannabis each year. Phase two of their development, scheduled to be complete early next year, will more than double this capacity to $24 million.
Choom continues to expand its portfolio of late-stage ACMPR applicants to include brands that are strategically focused on cultivating a consumer cannabis experience. The company has obtained substantial funding to support it through establishing its presence. With its growing facilities in place, its shops designed, and capital ready for a first big push, Choom looks set to become an important brand.
Companies Getting into Cannabis
Of course, Choom isn’t the only company preparing to take a share of the recreational cannabis market.
Medical cannabis company OrganiGram Holdings (TSX-V: OGI) (OTCQB: OGRMF) is going through a period of expansion. The company is looking not just to cater to the existing medical market but to add recreational users to its consumer base. The company has received approval from the Canadian government to expand its existing growing rooms, increasing not only its capacity but also the efficiency of its operations. Automated systems in its second phase of growing rooms will save costs and increase crop yields. At the same time, the company is expanding its staff, with a recruitment fair to find new employees for posts across the business.
Aphria (TSX: APH) (OTCQB: APHQF), another medical cultivator, is also pursuing a growth strategy. Targeted investment and collaboration with other companies have given it more resources and opportunities, including a route into the American medical cannabis market. Having recently acquired Broken Coast Cannabis, and with a distribution deal in place with Shoppers Drug Mart, the company is taking a larger place in the medical market, strengthening its position to reach recreational smokers.
Hydropothecary (TSX-V: THCX) is also using collaborations with other companies to develop its processes. It recently announced an agreement with Segra International Corp. to incorporate plant tissue culture propagation into the cannabis plant production process. By using Segra’s tissue culture technique, Hydropothecary aims to increase its yield to serve both the medical and the recreational cannabis markets. To better reach those markets, it has struck a deal with online commerce company Shopify. Shopify will build a bilingual ecommerce platform serving Hydropothecary’s customers in both English and French speaking Canada. Like Choom’s chain of dispensaries, this will give Hydropothecary a complete supply chain from production to retail, for vertically integrated cannabis production and sales.
The Supreme Cannabis Company (TSX-V: FIRE) (OTC: SPRWF) is developing its 7ACRES subsidiary as a cultivator of premium cannabis, ready to expand beyond the medical market and reach recreational users. Its supply chain has been further assured through a $3 million investment in BlissCo, a company about to complete its application for a cannabis license. But Supreme is not just concerned with Canada – it is looking at the global cannabis market. A $10 million investment in Medigrow Lesotho gives the company a position within that country’s medical cannabis industry, which will support the export of cannabis oils and so let Supreme start building a global supply chain and brand.
With legal recreational cannabis on the way to Canada, companies are finding many ways to prepare for the change. Strong brands backed by efficient production facilities will surely shape the future of the Canadian market.
For more information about Choom Holdings, visit Choom Holdings, Inc. (CSE: CHOO) (OTCQB: CHOOF)
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