The “recession-proof” cannabis industry?
By Kaitlin Domangue
Celebrity cash in cannabis
I’ll just tell it like it is –
Cann has incredible branding and a powerhouse strategy that amazes me every time I dig into it. (Plus the drinks are delish.)
In February, the infused drink brand raised $27 million in a Series A round – packed to the brim with celebrity investors.
Nina Dobrev, Julianne Hough, Sara Foster, Paul Scheer, and Adam Devine made the star-studded roster this round, joining current investors Gwyneth Paltrow, Baron Davis, Rebel Wilson, Kate Hudson, Darren Criss, Rosario Dawson, Casey Neistat, Tove Lo, and Bre-Z.
PS – I love Adam Devine. Modern Family fans, where ya at?
No other cannabis brand has such a diverse list of celebrity investors, especially celebs that aren’t necessarily known for being cannabis consumers.
With that being said, Rosario Dawson in particular is a strong voice for social justice and equality in the cannabis space, even citing her and her parent’s personal experiences with the plant.
“My father was diagnosed with pancreatic cancer, and I watched him tell his doctors that he didn’t want to take several different medications to help with pain tolerance when he could do that with CBD and I don’t blame him. He said he wanted to stay away from Big Pharma and stick to more natural alternatives via big farm-a,” said Dawson.
Celebrity involvement to this degree normalizes the cannabis industry even more.
The celebrity cannabis investor
Though I feel the impact of celebrity endorsements is waning generally speaking, I see extreme value in the cannabis industry partnering with these big names as we fight to simply exist.
Especially for a brand like Cann.
Because here’s the thing: Cann isn’t really going after the heavy consumer. The heavy consumer will enjoy Cann’s drinks, but there’s only 2 milligrams of THC in every can. They aren’t after the consumer needing 10+ milligrams of THC, which is what most edibles are offering.
Instead, they speak to the canna-curious that want to try something gentle first. Or casual consumers who don’t like to smoke. Or people who dropped alcohol, but still want to be part of the conversation at social gatherings. That’s why Cann’s investor strategy is so impactful.
Celebrities don’t really appeal to the cannabis industry on a large scale. Cannabis consumers who are purchasing regularly aren’t influenced by celebrity names, but other factors like price and potency.
Many celebrities enter the industry and think slapping their name on a label will generate sales, but we all know how hard it is to succeed in this space. Most celebrities don’t have the time to commit, so a lot of people (including me) conclude that it’s not worth it for celebrities to launch a brand.
But, Cann had a different strategy. To approach celebrities as investors and not to be the face or public persona of the brand. Cann has the branding part nailed down.
And – Cann’s plan worked. The low-dose social tonics currently claim 25% of California’s total cannabis drink sales & sold $3 million worth of products in 2020 – and have a star-studded lineup contributing to the brand’s multi-million dollar valuation.
Ultimately, I’d love to see more “normal” celebrities like Gwyneth Paltrow and Rosario Dawson (and the rest of Cann’s lineup) tactfully getting involved with the cannabis industry from an investor or strategy point of view.
It’s just one more way we can usher this new industry into the mainstream.
The “recession-proof” cannabis industry?
I hear it all the time.
“A recession won’t touch cannabis.” “We are recession-proof.” “COVID-19 proved that we are a solid industry that can withstand almost anything.”
It’s true. Cannabis outshined most industries in 2020 – totaling an unbelievable $17.5 billion in the U.S. – up 46% from 2019.
We were deemed essential business and our doors remained open. While libraries weren’t operating and my children’s regular playgrounds were literally closed off with caution tape – cannabis businesses remained open.
And don’t get me wrong, I’m grateful we stayed open. I did well in 2020 as a freelance writer serving cannabis businesses. Many people were able to keep their jobs. Patients could still access their medicine & anxieties about the world were soothed.
Being deemed essential business was amazing for our industry. I’m just saying – we have no idea how cannabis will perform under “normal” economic downturns. The COVID-19 pandemic was unlike anything we’d ever experienced before.
Everyone was forced to stay home, unemployment & stimulus checks were dished out, and the things we did for fun were closed. No sporting events. No indoor dining. No playgrounds. No movie theaters.
But dispensaries were open. With extra cash, high anxieties, stay-at-home orders, and plenty of time on our hands – cannabis sales skyrocketed. It makes sense.
Now, we’re coming back down to earth. Reports of declining cannabis sales rolled in last year and they’re continuing to drop in 2022. Our normal life is returning and many public events have been open for a year at this point.
But a lot of operators are acting like we’re still in April 2020 with cash to blow and time to kill. The recent layoffs indicate that we aren’t, and 2022 is a much different game than 2020 for the cannabis industry.
Most recently, Weedmaps laid off 10% of its workforce because the cannabis market has slowed down. The cannabis tech giant’s CEO, Chris Beals, said:
“Given the unique macro headwinds we saw facing cannabis markets amid broader headwinds to the economy this last quarter, we believed the prudent approach was to plan more conservatively for the coming quarters.”
And of course, they aren’t the only cannabis company reducing their workforce. Dutchie laid off 8% of its staff in June, less than a year after a colossal 3.75 billion valuation and $350 million Series D round in October.
“Like many other companies watching the dramatic market shift over the last few months, we took time as a team to carefully think through our business plans to ensure we are set up to fulfill our mission. Fortunately, the cannabis industry is still growing at a rapid pace and is positioned well to be resilient in the case of a broader recession,” Dutchie CEO, Ross Lipson, said as part of a larger statement about the layoffs.
Which brings me to the central question: is cannabis positioned to be resilient in the case of a broader recession?
Yes, we are definitely positioned to be resilient – but what does that actually look like in practice? Resilience means recovering quickly from toughness or difficulty – it doesn’t mean we don’t go through those moments, which is the perspective many have adopted after being labeled essential business during the pandemic.
In the case of broader recessions, we don’t pick and choose which businesses stay open. The economy sorts that one out for us. People choose where they spend their very few dollars. What happens when we don’t have stimulus checks & stay at home orders, but the economy is failing quickly – will people still shop at the dispensary?
I’m not saying they won’t, I’m saying we don’t know. COVID-19 was not an accurate test of resiliency, because most businesses were closed and dispensaries were one of the only places open. Plus – citizens were being paid through unemployment or stimulus checks, encouraging dispensary shopping.
During The Great Recession from 2007 to 2009, less than 15 states had a medical cannabis program. The industry as we currently know it didn’t exist and it wasn’t impacted by economic volatility in the same way it would be today – where over half the country has a legal cannabis program.
The layoffs in 2022, to me, indicate that we are not as recession-proof as we might think. It’s a reminder to operators that running lean and spending wisely with a calculated strategy behind you is still pertinent to success during times of economic uncertainty.
Relying on our “recession-proof” status won’t cut it.