No. 282: Instagram’s CPG Problem

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Pictured: Cannuka, a CBD-based beauty brand from Ohio

Imagine launching a CPG brand. You spend your life savings on developing the product. You nail your branding and packaging. You setup distribution and hire a marketing agency to drive your message. Except, the strategy leans heavily on the types of media buys and influencer marketing typically employed by others in the DNVB / CPG space – and Facebook won’t cooperate.

CBD, short for cannabidiol, is growing in popularity among beauty and health consumers. It’s a THC-free substance known for treating everything from muscle relief to insomnia. In June, the first CBD-based drug won FDA approval for epilepsy treatment. And as it relates to this article, CBD has been popping up in high-end skincare products. But Facebook and Instagram’s rules have been uneven at best and it’s causing quite an issue in the CPG space. It falls under Facebook’s prohibited content category.

So when I met Michael Bumgarner, cofounder of Cannuka, I was surprised to hear that he was clashing with Facebook’s prohibited content policy. This, even though he sells a THC-free product that could be sold through sites like Popsugar. “They’ll acknowledge we have a 100 percent legal product, but they’re still not allowing us to post ads,” he said in a recent interview with Carrie Ghose of Business Journals.

While fairness is an altogether different issue, there is actually a valid reason why Facebook has positioned the platform to prohibit CBD-based products as a category: lack of regulation. While Facebook is perpetually targeted for how little they police the validity of news and gossip, they have maintained an opposition to unregulated products (supplements, etc).

CBD in consumer skin care is still a bit like the Wild West. A study published in the Journal of the American Medical Association found widespread mislabeling of CBD products sold online. “The problem is that there’s no study which indicates the proper dose,” says Bíró. Jacknin also cautions that “at this moment, CBD and marijuana products are totally unregulated and the ingredients in the jar don’t have to be the same as on the packaging because no one is checking.”

Karen Adelson | The Strategist 

However, it’s Cannuka’s quality among an industry of mislabeled products and shady sellers that have allowed them to achieve national traction and an early seed investment of $750,000. Despite a nation-wide, progressive push around cannabis’ 100% legal derivatives, Facebook (and Instagram) lag behind here. Will they reconsider how it influences the fates of CPG companies?

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Photo: Courtesy of Dirty Lemon

CPG drink brand “Dirty Lemon” has had quite the opposite experience despite similar product-dynamics and origins. With over 101,000 Instagram followers and droves of influencer backing, the drink brand has seen success by using Facebook and Instagram as an acquisition channel.

The potion—which is fit to tackle anxiety, diffuse stress, decrease muscle and joint pain, calm acne, and improve sleep quality—includes 20 milligrams of full-spectrum cannabidiol, sourced from luxury cannabis brand BEBOE; pure hemp oil; and a blend of pineapple, blood orange, and tangerine juices (cheekily called the “pineapple express blend”). Of course, the usual Dirty Lemon suspects are also included: filtered water, pure lemon juice, ocean minerals, Himalayan pink sea salt, Luo Han Guo, and L-theanine.

Kells McPhillips | Well and Good

While the brands have numerous similarities, its the approach to marketing that seems to be making the difference in the relationship between brand and Facebook. Priya Rao of Glossy reports:

In late June, Dirty Lemon first floated a new beverage drop on Instagram Stories and asked its community to guess the company’s latest ingredient in exchange for a free case of drinks. […] To date, [Dirty Lemon’s] +CBD launch in July has been the company’s strongest. Dirty Lemon sold out of its first production run, which is roughly 20,000 bottles, in two days, and a waitlist existed until last week. All Dirty Lemon beverages are sold in six-bottle cases and shipped to customers’ homes for $65.

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A whopping 66% of their referral traffic in July was through Yahoo.com’s paid channels, while, Facebook chatter generated nearly 8% of referral traffic via FB Messenger. While Dirty Lemon has avoided traditional Instagram advertising, their Instagram Stories have driven the most “direct” traffic: 27%. IG’s story platform seems to be where they most often blend organic promotion with influencer (paid) promotion. The ambiguity is serving them well. And the payoff could be worth billions.

The Data

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Estimated Growth of CBD products
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Estimated Revenue of CBD-based products (in millions)

The cannabis-driven CPG industry is an important one to track. Not only because of the estimated growth over the next four years but because it’s one of the few remaining product-based companies that seem to be navigating the last of Facebook’s archaic advertising rules. Facebook’s advertising system is lacking objectivity and consistency here. It’s accelerating some CPG startups while leaving others in its wake.

Read more of Issue 282 here.

By Web Smith | About 2PM

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