Cannabis industry wants rules loosened on joint in-store promotions

As legal sales of cannabis show signs of flattening in Canada, the industry is urging provinces to loosen rules that ban pot producers and retailers from collaborating on promotions. 

Nearly all provinces currently prohibit direct financial relationships between licensed producers and retailers, effectively barring retail outlets from offering special prices or holding joint in-store promotional events to highlight particular cannabis brands. 

After five straight years of growth following legalization, official Canadian figures show legal sales of cannabis plateaued in 2023 and the industry's economic output shrunk. Big pot companies laid off workers, and smaller ones folded or entered bankruptcy protection.   

Companies involved in the weed sector are looking for ways to woo more customers away from the illicit side of the market, and argue in-store promotions to build brand awareness would help.

"If you think about how the alcohol industry works, most people that walk into a liquor store typically know what they want to buy before they walk in, whereas in a cannabis retail store, that isn't the same," said Shakir Tayabali, CEO of the Independent Retail Cannabis Collective, which represents more than 750 members across Canada. 

"Consumers aren't necessarily quite familiar with what brands are out there or what they like or what they want to try," Tayabali said in an interview. "You need to get people more aware of what the legal brands are, because that helps to combat the illicit market." 

While the federal Cannabis Act sets down the overall laws about weed advertising, the provinces have the power to bring in additional rules about what is permitted in retail shops. 

In all provinces but Saskatchewan, retailers and producers are barred from collaborating on promotions by rules that ban direct financial relationships, unless the retailer is owned by the licensed producer. 

Ontario's regulations explicitly prohibit retailers from accepting any payments from producers for in-store and online advertising, promotions, preferential shelf space, specialized display materials, or any gifts or incentives that fall under the definition of an inducement.   

Brad Poulos, a lecturer in the Ted Rogers School of Management at Toronto Metropolitan University, says the bulk of pot marketing in Canada currently has to happen at the store level because of the restrictions on producers' advertising. 

"It's very, very difficult for a brand to build any kind of relationship directly with the consumer," Poulos said in an interview.  "You just don't have this natural flow of information between a brand and the consumer, like you would with virtually any other consumer packaged good." 

Industry insiders say the lack of brand awareness results in many consumers basing their purchasing decisions solely on price and the amount of THC, the chemical compound in cannabis that delivers the high. 

"They're looking for the biggest bang for their buck," said Tayabali. "They want the highest THC at the lowest cost."

He says retailers need more leeway to promote other characteristics of various brands of pot.