Pot firms struggling to advertise

TV networks, social-media sites wary of federal drug laws

America's cannabis companies are racing to build national brands and market their wares to mainstream consumers. There's just one problem: It's hard to advertise products when the federal government considers the companies to be drug dealers.

Facebook, which like Google prohibits marijuana ads, has kicked some sellers off Instagram. Earlier this month, CBS declined to air during the Super Bowl a commercial touting the benefits of medical marijuana. Much the way banks are unwilling to finance cannabis startups, television networks and online advertising marketplaces are cautious because the federal government still classifies marijuana as a Schedule 1 drug alongside heroin and Ecstasy.

With a growing number of states legalizing marijuana for recreational and medical purposes, the U.S. market could surge eightfold to $80 billion in sales by 2030, according to Cowen & Co. But experts say it's hard to see that happening unless companies can market their wares the way beer and liquor companies do.

"The public has a stigmatized view of the product, but legitimate business owners can't reach them; it creates mistrust," said Kyle Porter, who runs CMW Media, which does marketing and public relations for cannabis companies. "We're really limited in how we can reach customers."

For several years, marijuana companies have considered Instagram an ideal place to build their brands. In an effort to position marijuana as a mainstream product, the companies post pictures of buds and joints and show people hiking with vape pens or relaxing on the beach with cannabis edibles.

But Instagram, a Facebook property, doesn't permit marijuana sellers to advertise. In a statement, the company said that while it allows "marijuana advocacy content," posts promoting the sale of cannabis are forbidden. Dispensaries are prohibited from providing contact information, including phone numbers and street addresses, "regardless of state or country."

Though many marijuana sellers -- legal and black market -- continue to operate on Instagram, some complain that the social-media site shuts down their accounts with little warning or explanation. Binske, a Colorado company that sells vape pens, bud and cannabis-infused chocolates made with Peruvian cacao, spent the better part of two years building up its brand on Instagram. Then in September, just a few days after the company paid Snoop Dogg $30,000 to host a promotional event at a Las Vegas dispensary, the account disappeared.

Concerned about losing social-media momentum, Alex Pasternack, Binske's vice president of business development, spent two weeks submitting documents to Instagram, trying to prove his company was legitimate. Then, without notice, the account returned with its more than 12,000 followers intact.

"Everyone is just making up their own rules," says Pasternack, who's looking at other ways to get the word out. Binske now has licensing deals with companies that will use its recipes and branding in California, Nevada and Florida, partnerships the company hopes will help double revenue this year. This type of arrangement is key in an industry where companies are still not allowed to ship products from one state to another.

Caliva -- one of California's top-selling marijuana brands -- said it has lost five or six Instagram accounts over the past couple of years. It sponsors education events at Bay Area yoga studios and senior centers, where representatives hold forth on the medical benefits of marijuana, how to fit edibles into an active lifestyle, and other topics. Many companies rely on the "bud tenders" manning the counter at dispensaries around California. If asked for recommendations, they can steer customers toward certain brands.

"Our hands are really tied from a marketing perspective," said Rosie Rothrock, Caliva's branding chief. "So we rely heavily on those relationships."

MedMen, one of the best-known names in the industry, is using a time-tested marketing trick: opening stores. With a market value of roughly $1.5 billion, the company has spent heavily on licenses and real estate to operate stores at high-profile spots in Los Angeles, Las Vegas and even New York City, where it has a location not far from the New York Public Library on Fifth Avenue.

New York state has a small medical-marijuana program, and Gov. Andrew Cuomo has proposed legalizing recreational use. Until then, the real estate is an "investment in a flagship," said David Dancer, MedMen's chief marketing officer.

Business on 01/29/2019

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