Marijuana companies may have limited abilities to advertise after federal legislation is passed

 

The Tragically Hip has announced a partnership with medical marijuana company Newstrike.

“After much discussion and assessment on our part, we’ve decided that this company — and the many creative people in it — are a perfect fit for The Hip,” said the band in a news release.

The company says the band members are “significant investors” in Newstrike, which will begin trading on the TSX in June under the new symbol HIP. The band will also play a role in the company’s branding efforts.

“No one knows Canada and Canadians like the members of The Tragically Hip,” said Newstrike executive chairman Scott Kelly. “With their involvement and support, Newstrike firmly believes we are developing the brand that adult consumers who choose to use cannabis will turn to.”

Tragically Hip on Stage

A release from the company cited the opportunity for “harnessing the artistic and business acumen of the band members in brand development within the government’s evolving regulatory framework.”

Newstrike CEO Jay Wilgar later told The Canadian Press, however: “This partnership with the band is not a marketing partnership, this is a business partnership, the band are shareholders in the company.”

The Tragically Hip says it chose Newstrike because of its “due diligence” in entering the market.

“They’ve hired pre-eminent scientists and growers, developed large, well-structured sites and have the wherewithal and expertise to take this on,” wrote the band.

The deal also comes more than a year before Ottawa’s promised date for recreational marijuana legalization, a policy change that’s been lauded by The Hip.

“This is a common-sense policy and, in our opinion, is a change for the best,” said the band.

Details of the deal

According to a May regulatory filing, The Tragically Hip has a “comprehensive licensing and promotional services agreement” with HPI Holdings Ltd., which was taken over by Newstrike effective Feb. 3.

Under the agreement, The Hip and its members will get 2.5 per cent of gross revenues “from the sale of products bearing the brand or likeness of The Tragically Hip.” The band also received three million shares in the company, plus “a non-refundable advance payment against future royalties of $1,000,000.”

Trading in Newstrike Resources shares was halted on Tuesday, with the stock worth $0.145 on the TSX Venture exchange. If The Tragically Hip still holds three million shares in Newstrike, those shares were worth $435,000 on Tuesday.

Creating ‘aspirational lifestyle’

Celebrity endorsements serve to “elevate your brand from a lifestyle lens,” said Jenn Larry, vice-president of strategy and operations with marketing and communications firm Precision CG.

“When you’re looking for endorsements, there’s a lifestyle component, but there’s also a generational component, because [celebrities] create an aspirational lifestyle that people like to be part of.”

Larry, who spoke to CBC News before The Tragically Hip-Newstrike partnership was announced, said it made sense for Canadian marijuana companies to seek celebrity tie-ups, particularly with musicians.

“I wouldn’t pigeonhole any type of genre per se, or artist, but genres that lend themselves to a natural collaboration with cannabis seem like the right place to go,” said Larry.

Legal considerations

The government’s Cannabis Act, which has not yet become law, would place significant restrictions on how marijuana can be marketed and advertised.

Promoting marijuana, accessories, or related services “by means of a testimonial or endorsement” would be prohibited under the current version of Bill C-45, as would promotions “by means of the depiction of a person” and any promotions that allude to “a way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring.”

CannTrust

Marijuana marketing may be contained to age-restricted stores and websites after federal legislation is passed. (CannTrust/Facebook)

However, Bill C-45 does allow for “informational” or “brand preference” promotion of cannabis under circumstances that would keep such marketing away from young people.

Some experts in Canada’s burgeoning cannabis industry say companies like Newstrike may be trying to secure celebrity endorsements before those laws go into effect.

However, once legislation is passed, that type of marketing may continue to exist inside age-restricted retail stores or websites, similar to the standard in U.S. states where recreational marijuana has been legalized.

“I don’t think you’ll see it in magazines, billboards and televisions in Canada, but you may see it in storefronts or websites,” said Will Stewart, managing partner at the strategy and communications firm Navigator on CBC Radio’s Metro Morning.

The Tragically Hip’s partnership with Newstrike isn’t the first time a legal Canadian marijuana producer has associated itself with a celebrity.

In 2016, licensed marijuana producer Tweed partnered with hip-hop celebrity and cannabis aficionado Snoop Dogg to sell “Leafs by Snoop”-branded marijuana in Canada.

Leafs by Snoop was launched in Colorado, where recreational marijuana is legal, in November 2015.

 

SOURCE VIA CBCNEWS