How one agency is seizing on Chicago’s status as the ‘Silicon Valley of pot’

Chicago ad agencies for decades have fed off the heavy concentration of food and beverage clients based in the town, from Molson Coors to Kraft Heinz. Now a startup shop is trying to capitalize on what could be the Windy City’s next big industry cluster—cannabis. The agency, called Receptor Brands, is offering end-to-end services for cannabis brands—including strategy, branding, design, digital and content creation—as it tries to win business at a time when big holding company-owned shops are still cautious about doing work for a category that remains federally illegal. Single-product-focused shops are a rare breed in the agency industry because of long-standing practices that tend to preclude agencies from working for two brands that compete. But conflict rules seem to be easing as clients move more to short-term, project-focused work. This is especially true in the cannabis industry, where brands are operating in a fast-paced environment as they constantly adapt to new regulations as more states legalize pot. Receptor has been quietly operating for months and has lured project work from two Midwestern-based cannabis marketers: Cresco Labs, a large vertically integrated, publicly-traded company that is headquartered in Chicago and operates in multiple states; and Red Arrow Farm, a Michigan-based cannabis grower. Also on its client list is Chicago-based Spence Labs, which works with dispensaries to make cashless payment systems. Receptor has connections to Chicago-based sports marketing agency Revolution, including that Kent Thomas, Revolution’s former senior VP for business intelligence, is now running Receptor as its managing partner. Revolution was one of the first agencies to start a specialized unit for esports, a trend that other shops are now following. While esports and cannabis share similar traits—both are new and fast-rising industries in which digital marketing is critical—the pot market offers unique challenges, including the fact that it operates in a so-called grey market, meaning it is only legal in some states, and the playing field varies widely from state-to-state. But Chicago has emerged as fertile ground for pot marketers, which have grown up in the city in the wake of Illinois legalizing recreational marijuana effective Jan. 1, 2020. A rising crop of national and regional cannabis players now call the city home, including three of the five largest publicly traded marijuana companies in the U.S.: Cresco, Green Thumb Industries and Verano Holdings. The rise has led some experts to dub Chicago as “the Silicon Valley of pot,” as reported recently by Crain’s Chicago Business. “Chicago has been at the center of the cannabis industry,” Alan Brochstein, founder of Houston-based 420 Investor, which covers cannabis companies, told Crain’s. “It’s figuratively a bridge between all the capital on the East Coast and the legacy (cannabis industry) on the West Coast.” Many of the Midwest firms have poached marketing talent from Chicago-based consumer packaged goods firms as the industry attempts to professionalize its practices and move beyond its stoner culture past. Cresco’s chief commercial officer is Greg Butler, who previously ran Miller Lite marketing for Molson Coors; the company’s senior brand marketing VP is Cory Rothschild, who joined Cresco from PepsiCo-owned Gatorade, which is run from Chicago. Receptor is duplicating that talent acquisition strategy from the agency side. Running the agency along with Thomas is Allison Disney, an alum of Chicago-based Energy BBDO, whose Omnicom agency career included stints working for CPG giants including SC Johnson, Mars and Johnson & Johnson. Another Energy BBDO vet, Jake Setlak, oversees creative strategy and brand experience for Receptor. “The marketing talent in Chicago from the brand side and agency side is second to none,” Disney says. And “more and more folks are crossing over to the cannabis space.” Disney first got interested in the pot business during dinnertime conversations with her husband, Ryan Disney, who is a plant biologist and now does work for Red Arrow Farm. Cannabis “certainly got normalized in our household as a conversation topic after he got involved. Slowly but surely I started to see the opportunity,” Disney says. When it comes to marketing weed, Disney draws parallels with her previous work on behalf of big global clients, such as Mars, which had to navigate the different states of play in each country they operate, whether it be regulations or consumer tastes. With pot, those differences exist in each state. “Those brands that started in California but are moving East with legalization—they have very mature brands out West and they are launching as entirely new entities in the states where folks haven’t visited California,” she says. Receptor is attempting to get a running start in cannabis while most big holding company-owned shops remain at a standstill, awaiting federal legalization before diving in head-first. Among the hurdles faced by these shops is that some don’t want to get into hot water with big federal government clients. There are potential complications with moving money between state lines for revenue derived from a product that is illegal federally. Big publicly traded media companies like Facebook and Twitter have also remained on the sidelines when it comes to accepting marijuana ads, complicating media buys. “Every platform has its own policy around cannabis advertising and communications,” Disney says. “It’s forced us to be more innovative.” One of the agency’s projects for Cresco involves hiring local artists to paint murals inside the company’s Sunnyside brand of dispensaries, including in Rockford, Illinois and Philadelphia. Making pot project work profitable The biggest challenge for Receptor and other agencies trying to make money from cannabis clients is winning a consistent flow of work. “What most big accounts are doing at a big agency is campaign work, and fundamentally that is not what we need right now,” says Cresco’s Rothschild. “I haven’t found a full-service agency that meets our needs, and at a cost that makes sense.” In older categories, like soda, brands must run new campaigns every season to put a new spin on their long-held brand identities. It’s why Coke for years came up with a new summer twist for its “Share a Coke” platform, for instance. But cannabis brands are still trying to build their core identities. So “I think it’s a disservice to change our work on a really frequent basis because people don’t even know our brand and product yet,” Rothschild says. That leaves agencies with two ways to build their cannabis revenue—strategic consulting or trying to win bits and pieces of productions, like making a new video. Both are more suitable for project work. “It’s a dangerous industry to staff a big team and staff a big thing and hope for the revenue to come in the future,” Rothschild says. Receptor’s business model seems to concede this reality. The 10-person agency relies on freelancers, for instance, to keep overhead costs down. “With some of our bigger clients we’ll move into a retainer model if it’s efficient for them and makes sense for us,” says Disney. “But we are happy to be project-based because so many of our clients, given the life-stage of their business, are so different [and] not everyone is going to be ready or able or even interested in a retainer partnership at the moment.”

How one agency is seizing on Chicago’s status as the ‘Silicon Valley of pot’

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