Advertising Obstacles

Marketing avenues are limited for cannabis

When opening a retail business, one of the biggest concerns is developing a customer base. Typically, this involves marketing and advertising to entice consumers to venture into your establishment. Maybe that is done with print ads, radio/podcast/television promos, sandwich boards on the sidewalk or even a sign-spinner on the corner.

Marketing is a numbers game for any business. Advertising costs money, but it is meant to drive enough business into the store to cover those costs and increase the overall revenue of the company. But while most industries can advertise through a variety of creative channels, the cannabis industry is not given the same latitude.

In Colorado, cannabis businesses are not allowed to utilize outdoor advertising, other than a fixed sign located on the licensed premises that exists solely for the purpose of identifying the location of the business. This means no billboards, vehicle-mounted ads, handbills, leaflets or any other form of advertising that would be visible to members of the public “from any street, sidewalk, park, or other public place.” On top of those physical advertising restrictions, cannabis businesses cannot advertise via television, radio or the Internet unless the business has “reliable evidence” that no more than 30% of the program’s audience is “reasonably expected” to be under the age of 21.

In Washington, the rules are similarly prohibitive, though slightly more flexible than Colorado. Businesses are only allowed two signs on the licensed premises, limited to no more than 1,600 square inches (which is quite small for a standard storefront). Billboards are prohibited on licensed premises; however, they are allowed if they’re on private property that complies with all other advertising regulations, meaning it is generally 1,000 feet away from any school, park, arcade, etc. Retail cannabis businesses were formerly required to cover their windows so the public could not see into the store from the street or sidewalk, but despite that requirement, the businesses were not allowed to cover their windows with anything including their business name or advertising materials. It continues to be unclear whether window advertising is allowed.

Alaska has adapted the rules from Washington and Colorado to create a more reasonable standard. A cannabis retail business is allowed up to three signs visible from the public right of way. The signs can be up to 4,800 square inches and businesses are also allowed to advertise on their storefront windows. The same restrictions apply for distance from schools, parks, libraries and other locations that frequently have children present. Alaska’s regulations conspicuously fail to mention advertising by billboard, print, radio or television so these options might be a risk without seeking guidance directly from state regulators in advance.

Advertising has been the most common topic of inquiry from my clients and prospective clients. Cannabis businesses want to be creative with their approaches to gaining new customers but are unsure of what will get them fined or penalized by the regulators. For instance, I was asked about advertising on a giant balloon tethered to the roof of a building with the name of the retail store and a green cross. In another industry, I would have said this was fine unless local zoning laws restricted adding height to your building (or if there were any other well-defined air space restrictions). For cannabis businesses, the question is much more nebulous. I had to research zoning laws and ordinances, state regulations and even place phone calls and emails to the regulators to get an official opinion, leading to a high bill for my client for something that should be simple and straightforward.

I have also been asked about sign spinners. Is it legal to hire someone to stand at an intersection spinning a sign for the retail store? Probably not. The intersection likely consists of a public sidewalk and advertising on that could be a violation in most states. Further, that sign spinner may now be closer to a school or park and that would need to be measured from any place the spinner may move to as they attempt to draw customers to the store. If these factors are accounted for, a sign spinner may be possible, but that added effort might be enough to counter the value of the spinner to begin with.

Additionally, marketing efforts in this industry are further frustrated by regulations. The cannabis space is full of artists and creative types, but vague and unclear statutes hamper creative marketing efforts and prevent businesses from expressing who they are and what kind of vibe they want to present to consumers. Studies have shown time and time again that marketing makes a difference for businesses but it is impossible to differentiate a corporate identity when each company is required to comply with the same narrow set of options.

If a business needs to hire an attorney to determine how they can advertise, the rules are not what they should be. Colorado and Washington have been the reference points for each new state entering the cannabis market and I am hopeful future legislative plans will produce more reasonable results for cannabis businesses.

Matthew Cleary is an attorney at Van Kampen & Crowe PLLC (www.vkclaw.com), practicing business and transaction law with an emphasis on the cannabis industry. He has represented cannabis businesses from highly trafficked retail stores to large producer operations and everything in between. Before practicing law, he was an enforcement officer for the Washington State Liquor and Cannabis Board.

 

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