Can Drake’s joint venture save Canadian cannabis?

The Canadian cannabis business has suffered a few teething issues in recent months, with reports revealing that the black market was still alive and well, along with talk that supply has been rapidly outweighing demand.

However, that could be on the verge of a major change in light of Drake – a global pop-star – venturing into the market.

Aubrey Drake Graham has partnered with Canadian cannabis firm Canopy Growth as the duo aim to launch a brand new venture in the artist’s home town of Toronto.

Drake is the latest in a long line of celebrities that have taken a leap of faith into the emerging billion dollar industry, with the likes of Snoop Dogg, Miley Cyrus and even Mike Tyson all endorsing products in recent months.

Ryan McConnell, the senior vice president at Kantar, a business insight and brand consulting firm. said “I don’t think they’ve reached full saturation yet,” when discussing the cannabis industry.

“[Cannabis] is a field that is not, in some people’s eyes, legitimate yet,” he continued. “It still has that veneer of being illegal.”

Endorsements

Unlike simple investments or endorsements offered to other celebrities, Drake will own 60% of More Life Growth Company while Canopy Growth will retain the other 40% share.

He will also have the ability to “exclusively exploit certain intellectual property” in Canada and internationally within the company.

The company aims to sell medical cannabis, herb and preserved form THC and CBD alongside cannabis products and accessories which include smoking paraphernalia and weed styled clothing, according to the More Life Growth Company trademark database record.

Despite not being initially associated with cannabis, Drake now has his foot firmly in the industry as he is the majority owner of the company with a license from Health Canada, which reviews and approves licenses for the entire industry and ultimately supervises Canada’s entire legal weed market.

Health Canada has a well-known strict policy regarding cannabis promotion, and Drake’s new business move has subsequently allowed him to evade this rule as he is the major shareholder and owner of the new company alongside Canopy Growth, and thus he is not technically being paid directly by the company.

The danger with paying celebrities lucrative packages to advertise cannabis products is that it will eventually lose authenticity.

It’s undeniable that many celebrities have a cultish following of fans who will presumably listen to their insights, but it may damage the brand of the cannabis companies in the long run.

Signs the hype bubble is over

Drake getting involved with cannabis companies may not be the absolute end of the hype cycle, but it may be a signal that those days are beckoning.

Looking at Drake’s work over the past few years. He became a philanthropist, a producer for hit UK TV show Top Boy and even attempted a switch in genre to UK grime music.

This demonstrates numerous key points, one of which is that regardless of what Drake is doing, he wants to be seen doing it and known to be associated with it.

Previous endorsements such as Snoop Dogg make sense as the image he presents in public is associated with cannabis – a feat that even those who hate cannabis and the industry would be able to attest to, whereas weed is not the initial thing that comes to mind when piecing Drake’s public image into a bigger picture.

This is what makes the partnership with Canopy Grow seem somewhat forced, which will possibly damage the industry’s reputation.

On the other hand, utilising Drake’s monumental following could attract potential new customers to the industry who may have turned their noses up to it previously, as celebrity endorsements can enforce a sense of trust and credibility for hesitant newcomers.

With almost 53 million instagram followers, his YouTube views at more than 13 billion and the title of the most top 10 songs of any solo male artist, Drake is among the most successful associates in terms of mainstream popularity, that a business looking for market power could hope to work with.

Canopy Growth has been open about wanting to reach the mass market and having one of the most well known names in pop culture currently on board will certainly support its endeavours for further global recognition.

The success of the joint venture has already shown, as a mere few hours after promoting More Life Growth Co. on his instagram, the company’s own instagram page had gained thousands of new followers.

The new dual endeavour and ensuing success of the announcement will no doubt liven spirits for Canopy Growth, which along with other top cannabis businesses, has been experiencing a lengthy slump after firing their founder and enduring a 60% drop in the share value earlier this year.

Projections need to be met

Last month, the Leaf Desk reported on estimates predicting that the cannabis market would be worth $66.3 billion by 2025.

This seemed like a bold projection at the time, but also one that could quite easily be met in light of the sheer euphoria and optimism surrounding the industry.

But, a few unfortunate reports about the lack of demand for legal cannabis has sent several investors running for the hills, with pot stocks continuing to be anything other than high.

Shares of the main large corporations in the industry such as Tilray, Canopy Growth and Aurora continue to fall as the increasing prices drive customers back to the black market. Overestimating the supply needed to meet predicted demand leaves product unused and competition ramping up in the industry – all adding to the falling cannabis stocks.

The recent bear market has led to the average cannabis stock losing more than half its value since March this year.

Despite celebrity endorsements and ventures enabling a boost in brand recognition, and mainstream awareness amongst industry outsiders, it may not result in a desired upsurge in value for shareholders, but only time will tell.

The North American cannabis market needs to buck up its ideas and innovate in order to preserve expected profit projections that can be made from the blossoming industry.