The Canadian cannabis industry, once touted as a land of ample opportunity, finds itself navigating treacherous waters in 2024. Hindered by government overregulation, burdensome taxation, and relentless price compression (along with poor management and reckless spending), businesses within this burgeoning sector are facing an existential crisis. The repercussions extend far beyond the cultivation and distribution of cannabis products, permeating into the realm of marketing and sales agencies – particularly those focused on in-field representation. As the landscape shifts, an alarming trend emerges – a cascade of closures and layoffs within the cannabis agency sector.

Cannabis Sales Agencies Facing Closures and Layoffs

In recent months, the once-thriving ecosystem of cannabis marketing and sales agencies has been upended, with closures and layoffs becoming distressingly commonplace. Among the casualties stand prominent names like Velvet Management, Hybrid Brand Management, Higher Peaks, Cannavolve, and Humble & Fume  – each recently succumbing to the harsh realities of a tumultuous market. These bankruptcies and closures not only signify the demise of individual businesses and the loss of jobs but also underscore broader systemic challenges plaguing the cannabis industry across Canada.

Challenges Facing the Modern Cannabis Marketing Agency

There are several reasons that may explain why the traditional cannabis sales agency is failing.

  1. Government Regulation and Taxation: The cannabis industry is over-regulated and over-taxed on every level, leaving cannabis brands with less funds to allocate towards sales and marketing agencies. 
  2. Clients with large Accounts Receivable: Unfortunately sales agencies, co-packing manufacturers and other ancillary companies are facing negative consequences due to their clients not having the ability to pay their outstanding invoices. When brands aren’t paying but overhead expenses and representative’s salaries are still due, agencies can find themself in precarious financial situations. 
  3. Inherent Flaws in the Prevailing Business Model: Central to the unraveling of cannabis sales agencies are the inherent flaws in the prevailing business model. Representatives are often stretched thin, compelled to juggle multiple brands simultaneously. This fragmentation dilutes focus and exacerbates confusion at the retail buyer and budtender level, undermining the efficacy of marketing efforts. In an industry where differentiation is paramount, such a lack of singular focus can prove fatal.
  4. The Wrong Employees: Agencies may assume that those with sales experience in “similar” regulated industries such as tobacco or alcohol will be able to adapt their skills and knowledge to the cannabis industry, but in actuality, it isn’t that easy. There are a number of intricacies to the Canadian cannabis industry, market and consumers that brand representatives must be keenly aware of when talking to retail stores. It isn’t enough to bring in sales experience, they must be trained on the specifics of the market as well. 
  5. Outsized Salaries and Compensation Packages: To survive and thrive in this industry, it’s essential to stay lean and scrappy. Teams with manageable payrolls and incentives geared to performance will always beat out those with bloated budgets and overcompensated executives.

Cannabis Sales Agencies that have Closed Down or Layed Off Employees

  • Velvet Management: Velvet was a one-stop sales and marketing agency for the cannabis sector that at one point represented The Green Organic Dutchman, Greentone, Pure Global Cannabis, and Highland Growers. Velvet was acquired by Kindred in 2023. 
  • Hybrid Brand Management: Hybrid was a full service marketing and sales team dedicated to the cannabis industry and based in British Columbia with clients such as 3Saints, Greenade, Adastra, Herba Farms, Sitka and Purplefarm. It has been reported that Hybrid began to wind down operations for a full closure in December 2023.
  • Higher Peaks: This agency was based in Ontario and was responsible for representing brands such as Strains LTD, Avicanna, Feather and Ripe Flower. Higher Peaks is reported to have fully closed down in late 2023.
  • Cannavolve: This company was the agency of choice for brands such as WeedMe, Glacial Gold, High Plains and Valhalla Flwr BC Craft. Cannavolve is reported to have fully closed down in January 2024.
  • Humble & Fume: In January of this year, Humble & Fume filed for CCAA creditor protection. This company used to represent brands such as Fume Extracts, TREC Brands, Olli, and Wyld, but seems to be focusing solely on their accessories side of the business as they re-structure.

Differentiate To Succeed

Amidst the turmoil, a select few agencies have managed to defy the odds, leveraging unique strategies to not only survive but thrive in the unforgiving landscape. Adaptability emerges as a common theme, with successful agencies demonstrating agility in response to evolving market dynamics. Whether through niche specialization, innovative digital campaigns, or strategic partnerships, these outliers exemplify resilience in the face of adversity.

It’s worth noting that these closures and layoffs seem to primarily be affecting sales agencies that often focus on in-field representation and key accounts management. Agencies specializing in other areas of support, such as Public Relations and creative marketing, haven’t seen the same dramatic contraction. PR and marketing-focused agencies like Marigold PR and Marketing, based in Ontario, continue to thrive and adapt with the industry’s changes.

There are some sales teams that have continued to persevere and succeed against all odds. Agencies such as grnhouse agency in Ontario, Alberta, and British Columbia and Catapult Agency on the East Coast, have adopted lean business models with dedicated representatives to ensure brand satisfaction.

The closure of prominent cannabis marketing agencies serves as a sobering reminder of the challenges confronting the Canadian cannabis industry in 2024. However, amidst the wreckage lies the promise of innovation and reinvention. As the landscape continues to evolve, adaptability and ingenuity will remain the hallmarks of survival. For those navigating the turbulent waters of cannabis marketing, the journey ahead may be fraught with uncertainty, but it is also ripe with opportunity for those daring enough to seize it.

Work With an Agency that Grows With You

If you’re looking for a sales and marketing agency that works with you as an extension of your company, providing in-field representation, key account services, social media, and email marketing management check out grnhouse agency and drop them a line at info@grnhouse.agency to book a discovery call.

Last Updated on March 28, 2024 by ADCANN

ADCANN

ADCANN

ADCANN is a digital publication and content creation team that showcases the most creative concepts in the cannabis space.