It may not be easy to pic­ture John Wayne with a joint, but that’s actu­al­ly a pret­ty apt rep­re­sen­ta­tion of the U.S. mar­i­jua­na indus­try as it stands in 2015. The Amer­i­can cannabis mar­ket has a Wild West feel to it with an expan­sive ter­ri­to­ry with plen­ty of space for brands and adver­tis­ers – as well as for­tunes to be made – but, like the Duke’s Old West, it’s also rel­a­tive­ly law­less ter­ri­to­ry pop­u­lat­ed with some out­laws and a few des­per­a­dos.

But as more states legal­ize mar­i­jua­na and the mar­ket grows, it’s clear this is not just a prod­uct with appeal to col­lege kids and aging hip­pies. Mar­i­jua­na is indeed a legit big busi­ness and this is a unique moment in time for both brands and adver­tis­ers, pre­sent­ing oppor­tu­ni­ties and chal­lenges to brands.

The Context of Legalization

As of July 1, Ore­gon res­i­dents can grow and pos­sess lim­it­ed amounts of mar­i­jua­na for per­son­al use.

Per the Ore­gon Liquor Con­trol Com­mis­sion, which has the author­i­ty to tax, license and reg­u­late recre­ation­al mar­i­jua­na – and will begin accept­ing appli­ca­tions to com­mer­cial­ly grow, process, whole­sale or oper­ate retail mar­i­jua­na out­lets on Jan­u­ary 4 – the abil­i­ty to buy mar­i­jua­na from retail­ers in Ore­gon is expect­ed to begin cir­ca Fall 2016.

This makes Ore­gon the fourth state to legal­ize mar­i­jua­na after Col­orado, Wash­ing­ton, and Alas­ka (as well as Wash­ing­ton, D.C.), per the Nation­al Orga­ni­za­tion for the Reform of Mar­i­jua­na Laws.

Med­ical mar­i­jua­na, how­ev­er, is legal in about half of the coun­try.

All of this adds up to a pret­ty big mar­ket. Accord­ing to ArcView Group, an investor net­work focused on the cannabis indus­try, the mar­ket for recre­ation­al and med­ical mar­i­jua­na nation­wide will be $3.5 bil­lion this year.

Gen­er­al con­sen­sus among busi­ness and mar­ket­ing experts is that this is a mar­ket that will only grow as the prod­uct even­tu­al­ly becomes legal on a fed­er­al lev­el. So just like the enter­pris­ing Amer­i­cans who set­tled the fron­tier, we are col­lec­tive­ly at a unique moment at which there is both huge oppor­tu­ni­ty, but also tons of road­blocks for this prod­uct that is simul­ta­ne­ous­ly illic­it and not.

Marijuana’s Big Branding Opportunities

For starters, there are almost count­less brand­ing oppor­tu­ni­ties with­in this bur­geon­ing indus­try.

That includes grow­ers, which can brand them­selves as sup­pli­ers of prod­ucts that pos­sess cer­tain qual­i­ties, notes Peter Lev­i­tan, CEO of strate­gic agency Peter Lev­i­tan & Co. and an investor in two med­ical mar­i­jua­na dis­pen­saries.

Then there’s the prod­uct itself, as well as acces­sories like rolling papers and vapor­iz­ers.

Also, there’s infused prod­ucts like edi­bles, as well as extracts and oils.

For his part, Kris Krane, a man­ag­ing part­ner at 4Front Advi­sors, a mar­i­jua­na busi­ness con­sult­ing firm, sees big brand­ing oppor­tu­ni­ties in extrac­tion in par­tic­u­lar as sales in recre­ation­al states shift from flow­ers to edi­bles. That’s in part because extrac­tion can pull out spe­cif­ic chem­i­cal pro­files.

“We’re not talk­ing about a strain, but a chem­i­cal for­mu­la­tion that will be exact­ly the same every sin­gle time as opposed to a flower,” Krane said.

In oth­er words, a grow­er can pro­duce the Blue Dream strain, but if grow­ing con­di­tions are slight­ly dif­fer­ent, this par­tic­u­lar strain could have a dif­fer­ent chem­i­cal make­up, where­as extrac­tions ensure spe­cif­ic chem­i­cal pro­files every time.

“That to me is a real brand­ing oppor­tu­ni­ty,” Krane adds.

In fact, he points to one man­u­fac­tur­er that uses extrac­tion to cre­ate non­smok­able prod­ucts and names them after the effects they have, like Calm or Alert.

“That I think is an inter­est­ing tech­nique,” Krane said. “You can talk to con­sumers at a lev­el they under­stand.”

There are also the can­naceu­ti­cals, or prod­ucts that uti­lize cannabis for med­i­c­i­nal pur­pos­es, not to men­tion the retail brands that sell all of these prod­ucts to the gen­er­al pub­lic.

The McDonald’s Of Marijuana?

As more states con­sid­er bal­lot ini­tia­tives and/or legal­ize mar­i­jua­na and it becomes more main­stream, tar­get audi­ences expand. Some of these con­sumers may feel more com­fort­able buy­ing from a brand they know, mean­ing there is also oppor­tu­ni­ty in stan­dard­iz­ing the pot-buy­ing expe­ri­ence, much like McDonald’s did with ham­burg­ers decades ago.

Krane points to Cal­i­for­nia-based med­ical cannabis dis­pen­sary and well­ness cen­ter Har­bor­side Health Cen­ter, which has two loca­tions and is look­ing to open addi­tion­al sites in dif­fer­ent parts of the coun­try, as a good exam­ple. It’s a brand that pro­vides a uni­form expe­ri­ence no mat­ter where the con­sumer shops.

Oth­er ear­ly cannabis lead­ers include brands like Dix­ie Elixirs in the edi­bles mar­ket, notes Saman­tha Chin, direc­tor of mar­ket­ing at PotGuide.com, a mar­i­jua­na-focused trav­el guide.

How­ev­er, as of this moment, Chris Walsh, man­ag­ing edi­tor of the Mar­i­jua­na Busi­ness Dai­ly, a busi­ness pub­li­ca­tion that cov­ers the U.S. cannabis indus­try, said it is dif­fi­cult to come up with the “Star­bucks of cannabis” because of chal­lenges tied to vary­ing state reg­u­la­tions. But, he said, own­ers of larg­er oper­a­tions in states like Col­orado and Wash­ing­ton are com­pet­ing for licens­es in oth­er states, which means that some brands might emerge as lead­ers and then con­sumers want­i­ng a trust­ed name and expe­ri­ence will be able to turn to those brands. But, he notes, this could play out over quite a long time.

Building Brand Loyalty In The Marijuana Industry

There is also a lot of noise when it comes to the strains them­selves, pre­sent­ing an oppor­tu­ni­ty to the brand­ed prod­uct that can fig­ure out how to cut through it.

In fact, Lev­i­tan likens the mar­i­jua­na indus­try to the wine busi­ness in that con­sumers in both mar­i­jua­na dis­pen­saries and wine shops are faced with a slew of not only vari­eties, but also brands. Because there’s poten­tial to over­whelm con­sumers with choice, Lev­i­tan said smart play­ers in mar­i­jua­na are licens­ing names from rec­og­niz­able fig­ures like Bob Mar­ley, Willie Nel­son and Tom­my Chong from Cheech and Chong.

“The great­est liv­ing voice for smok­ing mar­i­jua­na at this point – Miley Cyrus,” Lev­i­tan said. “If I was a big league mar­keter, I would try to fig­ure out how to get on her side. I would per­son­al­ly like to smoke a Cyrus joint more than an old white guy’s.”

Say­ing that Mar­ley and Nel­son are “prob­a­bly the top two names [asso­ci­at­ed with cannabis], along with Snoop Dogg,” Krane calls work­ing with celebri­ties a “pret­ty safe bet,” but notes these names can only take the prod­ucts so far and it will ulti­mate­ly come down to the qual­i­ty of the prod­uct itself, which could also still fail if con­sumers only buy these brands once for the nov­el­ty fac­tor.

“Just as we’ve seen in oth­er indus­tries, con­sumers will soon be will­ing to pay more for their favorite brand­ed strain, sim­i­lar­ly to how they go to their favorite piz­za shop across town or shop for shoes at their favorite store in town,” Chin said via email. “Cannabis can often be very con­fus­ing to under­stand, so as more and more peo­ple get famil­iar­ized with legal­ized mar­i­jua­na, I could def­i­nite­ly see many con­sumers stick­ing to what they know and even becom­ing great brand loy­al­ists.”

Marijuana Marketing Challenges For Brands

But that’s not to say cre­at­ing a brand­ed strain is an easy task.

Per­haps the most obvi­ous chal­lenge is that this is still an ille­gal sub­stance.

Despite clear oppor­tu­ni­ties on the prod­uct side, because the indus­try is so small – and ille­gal – there hasn’t been a ton of mon­ey put into brand devel­op­ment, Krane said. But, as not­ed, there’s huge growth oppor­tu­ni­ty, which means there’s a real prospect for brand con­sul­tants to work with emerg­ing cannabis busi­ness­es to devel­op smart brand­ing and mar­ket­ing for com­pet­i­tive advan­tage.

At the same time, geog­ra­phy is anoth­er huge hur­dle.

“In the devel­op­ment of every indus­try, for every type of prod­uct, there are a hand­ful of real­ly strong, rec­og­niz­able brands,” Krane said. “Because cannabis is so new as a legal indus­try and restrict­ed to geo­graph­ic areas, that hasn’t real­ly hap­pened yet. It’s still in the brand devel­op­ment phase.”

Call­ing nation­al brands “the next evo­lu­tion of the indus­try,” Walsh agrees the mar­ket has not yet seen big brands emerge because “the indus­try has been very high­ly region­al­ized.”

While some brands are begin­ning to sur­face as known enti­ties, they won’t be known nation­al­ly like alco­hol brands because cannabis is still a state-by-state indus­try. For exam­ple, Krane notes that if Col­orado-based Dix­ie Elixirs wants to sell prod­ucts in anoth­er state, it has to build an entire­ly new fac­to­ry and cater to an entire­ly dif­fer­ent set of reg­u­la­tions, mak­ing it much more of a chal­lenge than any oth­er indus­try “because of this patch­work of geog­ra­phy.”

“In a lot of cas­es, there are laws and restric­tions about only oper­at­ing with­in a spe­cif­ic state or city, so branch­ing out and sell­ing your prod­ucts in mul­ti­ple states and mar­kets has been dif­fi­cult if not impos­si­ble for com­pa­nies that actu­al­ly han­dle mar­i­jua­na,” Walsh said.

He notes com­pa­nies that instead pro­vide prod­ucts and ser­vices for the indus­try – like track­ing soft­ware, inven­to­ry tech­nol­o­gy or extrac­tion equip­ment – are in bet­ter posi­tions for the time being to devel­op indus­try-lead­ing prod­ucts on a nation­al scale.

How­ev­er, Walsh notes, com­pa­nies in the mar­i­jua­na indus­try are start­ing to fig­ure out ways to expand into new states and skirt the inabil­i­ty to trans­port prod­ucts across state lines by set­ting up licens­ing deals in oth­er states with local com­pa­nies, which then process the brands/formulas under their names.

This includes com­pa­nies like Dix­ie Elixirs, as well as GFar­maL­abs, which is also in the mar­i­jua­na-infused prod­ucts busi­ness, he said.

Anoth­er brand chal­lenge – and sign that marijuana’s so-called Green Rush was apt­ly named with its Wild West Gold Rush par­al­lels – is that lack of fed­er­al reg­u­la­tions to date means brands can more or less get away with mak­ing bold claims they may not be able to oth­er­wise.

Like the wine indus­try exam­ple, Krane notes there are so many dif­fer­ent types, but it is hard to know if a giv­en strain real­ly is what it says it is. Like, for exam­ple, a dis­pen­sary could car­ry Super Sil­ver Haze, but it might actu­al­ly be anoth­er kind of Haze that looks sim­i­lar and yet the dis­pen­sary calls it Super Sil­ver Haze because con­sumers are more like­ly to buy that name, Krane said.

How­ev­er, there have been some steps to tack­le this prob­lem in Colorado’s more mature mar­ket, where every plant is RFID tagged and brands must print genet­ic infor­ma­tion on labels, which “makes it hard­er for busi­ness­es to play those kind of shenani­gans,” Krane said.

Where do you see the biggest poten­tial, and biggest chal­lenges, as mar­i­jua­na legal­iza­tion grows?