Office of Marijuana Policy Bans Brand Logo for Targeting Kids
Maine waited nearly four years after legalizing adult-use cannabis for its regulated market to open, but less than four months after adult-use cannabis sales finally began in Maine one of the first dispensaries to open its doors might be wishing for a do-over as it faces the prospect of a costly rebrand.
SeaWeed Co. of South Portland is facing thousands of dollars in fines and having to design a new logo and rebrand its storefront, website, and products.
What happened? State cannabis regulators determined that the brand’s logo, which included a drawing of a mermaid, was prohibited under the state's laws and regulations. Like other states that have legalized cannabis, Maine has a set of rules that govern what content appears on cannabis product labels, including prohibitions on content that makes the product more attractive to minors (intent aside). Similarly, promotional rules (which often have expansive definitions of advertising) prohibit cannabis marketers from including similar content in their collateral.
Getting this right is a key strategic advantage, and working alongside talented client creatives to help them design and thrive within these shifting confines is one of the most rewarding aspects of MadisonJay’s work. Like many other aspects of the cannabis space, branding must be done with the rules top of mind. And while launching a cannabis brand in a single state can be a herculean task, that’s only part of the battle for forward thinkers. Brands must also be proactively planning potential expansion into new states, potential investor diligence, or potential acquisition. Put another way, no one wants to be fined, relabel their cannabis products, and/or face tens of thousands of dollars of merchandise that can’t be used to promote their brands. That means planning ahead.
Details matter in cannabis, so it's worth taking the time to understand how SeaWeed ended up with a mermaid logo that the Maine Office of Marijuana Policy concluded (1) impermissibly appealed to minors in violation of Maine cannabis marketing and packaging rules and (2) included images of a human and an animal in violation of Maine cannabis packaging law.
SeaWeed argued that its mermaid logo, liberally placed on its cannabis products and non-cannabis merchandise alike, did not appeal to minors. Yet that’s a subjective question and a regulator could reasonably disagree (think The Little Mermaid, and not the Starbucks logo mermaid). Ultimately, SeaWeed’s regulator did disagree.
Similarly, SeaWeed argued that a mermaid did not violate the Maine prohibition on images of humans or animals because mermaids are not real humans or animals. Yet, again, that’s a subjective (and somewhat comical) question, and a regulator could reasonably disagree. And again, SeaWeed’s regulator did disagree, concluding the mermaid was both a human and an animal.
Make no mistake, the resulting consequences have been dramatic. Though originally ordered to immediately halt sales of all inventory carrying the logo, in light of the crippling impact that would have on the business, a “short” sell-off period has been permitted. Nonetheless, SeaWeed faces the prospect of recreating its brand on the fly alongside significant financial pain.
What can we learn from this unfortunate outcome? In a world in which strong brands are essential for success, yet also governed by a complex web of subjective and objective regulations, successful operators must conduct sophisticated risk analyses as they invest in developing these core IP assets.
Why does strategic planning on these questions matter? Because these questions create expansive and ongoing risk for cannabis brands. When operators take significant risks in their brand design that does not mean that they will face immediate consequences. But the regulatory spotlight can turn to an operator for a variety of reasons, whether now or in the future when the brand has grown, seeks financing, or enters merger discussions.
Deciding to take on additional risk in one area should not lead a business to simply accept all risks; if anything, incremental risk in one area should be offset by additional conservatism in other areas.
Strategic, proactive thinking about these risks (among many others) is critical for any cannabis entrepreneur. Sometimes those conversations are hard for would-be operators who are convinced they have an amazing branding idea, notwithstanding the significant regulatory risk associated with it. But “yes men” do cannabis brands few long-term favors.
Building a highly regulated business, especially a cannabis business, requires a proactive approach to identifying, managing, and mitigating overall risk exposure to balance risk and reward. It requires making tough decisions in a complex and ever-evolving environment. But those challenges also present a prime opportunity for strategic operators. Helping those building for the long-term in the cannabis industry is what we do every day at MadisonJay.