When news first broke that Drake's next collab wasn't with Kanye or Rihanna—but instead with Canopy Growth Corporation (TSX:WEED) (NYSE:CGC)—cannabis investors all over the industry took notice.
Details of the Drake/Canopy Deal
As a celebrity endorsement alone, Drake's partnership with Canopy is important. With over 170 million records sold worldwide, he is one of the most successful musicians in history. On top of that, he's a global cultural icon and has already launched successful brands in fashion, whiskey, sports media, and more.
But this deal between the world's biggest hip-hop star and the world's biggest cannabis company isn't just a celebrity endorsement. It's something much more important—something that could help cannabis investors who've been waiting for a rising tide.
Drake isn't just lending his image or his name to Canopy. He's partnering with the company on a joint venture called More Life Growth Co.
As per the deal, Drake will own 60% of More Life, and Canopy Growth will control the remaining 40%. The company will focus on cannabis-centric wellness, discovery, and personal growth, and will promote "connections and shared experiences."
More details will be released about the JV in the coming weeks, but there's already enough information to see why this is such a monumental deal.
Why Drake May Have Just Outmaneuvered Health Canada
Part 1, Section 17 of the Canadian Cannabis Act prohibits the promotion of cannabis "by means of a testimonial or endorsement." This same section prevents cannabis from being connected to a particular individual or from being glamorized in an way.
This means that celebrity endorsements are, essentially, forbidden. Many have called these regulations too strict and believe they will hurt cannabis companies and cannabis investors.
But Drake isn't endorsing More Life. He's going to own it, which means he can talk about the company like any owner can. If he talks about More Life, and even about Canopy, on Instagram or Twitter, he won't be in violation of Health Canada's regulations.
Anything Drake talks about becomes a part of the cultural zeitgeist. He has more than 38 million followers on Twitter and over 61 million on Instagram. His YouTube channel has more than 13 billion views. This man is a star, and his promotional methods are revolutionary for the cannabis industry.
To raise awareness of More Life Growth on day one, the "Hotline Bling" singer had people delivering flowers to influences in Toronto. These people immediately took to social media to talk about the company. As of this writing, the More Life Instagram account itself has nearly 20,000 followers.
More Life Growth—and, by extension, Canopy Growth—has the potential to break into the public consciousness like no other cannabis company. Even more importantly, it can return public attention to the cannabis space and bolster the confidence of cannabis investors.
Other Companies Courting Celebrity Cannabis Investors
Canopy Growth is the industry leader in celebrity partnerships.
In addition to the Drake deal, it's also teamed up with cannabis icons like:
- Snoop Dogg (through its subsidiary Tweed);
- Seth Rogen (through the brand Houseplant, of which Rogen and his writing partner Evan Goldberg hold a significant share);
- Martha Stewart (granted, Stewart isn't exactly a cannabis icon, though the wellness guru is an adviser for CGC to help the company develop cannabis-based health products for humans and animals).
But Canopy is by no means the only company in the sector establishing partnerships with household names. Cannabis investors can diversify their portfolios with some more celebrity-supporting companies.
Tilray Inc. (NASDAQ:TLRY) has an exclusive partnership with perhaps the greatest cannabis icon of all time: Bob Marley. Tilray's parent company, Privateer Holdings, also controls Marley Natural in coordination with Bob Marley's estate.
Though Marley Natural was founded as a US brand, Tilray has brought it to the Canadian market. As the brand already enjoys tremendous name recognition, it will have a serious advantage over other cannabis lines starting from scratch.
The partnership will see Organigram and the Trailer Park boys work together to develop a product portfolio to target recreational marijuana consumers.
As news of the Drake partnership caused CGC stock to skyrocket 12.7%, cannabis investors should expect to see more celebrity partnership/ownership deals. This might just be what the sector needs to get out of the doldrums.
Featured image: Flickr © NRK P3