Make Way for Big Tobacco in the Cannabis Industry

Altria’s billion dollar bet on cannabis marks a potential point of no return.

There’s a clock that’s been ticking since 1996.

It started when California voters decided to legalize medical cannabis. From that moment forward — as more and more states joined the party, with medical and later recreational cannabis — some have wondered just how long it would be before Big Tobacco took an active interest in its green cousin.

Canadian legalization this past October seems to have turned the tide. Only last month, Altria — the parent company of Marlboro-maker Philip Morris — shelled out $1.8 billion for a 45-percent stake in the Toronto pot company Cronos Group.

While staggering in its scope, Altria’s move actually follows the actions of U.K. tobacco titan Imperial Brands, who teamed with Casa Verde — a cannabis investment firm founded by rapper Snoop Dogg — to stake $10 million on the British research outfit Oxford Cannabinoid Technologies. In terms of dollars, both deals pale in comparison to the $4 billion spent by Constellation Brands (parent of Corona beer) for a 38-percent stake in Canada’s largest medical cannabis producer, Canopy Growth.

Why so many megadeals? Canada is now the only industrialized nation to federally legalize recreational pot sales. Throw in the added bonus of being able to export to other nations as they too go legal with cannabis, and you’ve got one seriously tantalizing opportunity.

However, there are other motives as well.

In the past 50 years, the rate of U.S. adults who smoke has fallen by roughly 35 percent. That’s good news for us but troubling news for companies like Altria, and thanks to the recent advent of e-cigarettes, a new and lucrative avenue for profit has emerged. According to a 2018 study conducted by the Centers for Disease Control, e-cigarette use increased “900 percent among U.S. high school students from 2011 to 2015.”

Many of the teens who account for that explosive spike were probably using a Juul — an e-cigarette brand so popular that it’s now a verb. Clearly, the suits at Altria agree, because Cronos Group was not the only major investment they made in 2018. Less than two weeks ago, Altria spent $12.8 billion to acquire a 35-percent stake in Juul — a move that confirms that tobacco giants are looking to move beyond the old guard of combustible “analog” cigarettes.

Simultaneously, it appears that cannabis companies are only too happy to partner with heavyweights from outside industries. With decades of experience lobbying on behalf of alcohol and tobacco respectively, Constellation Brands and Altria are both veterans in their fields. Their knowledge in navigating and capitalizing within a regulatory marketplace is something that a freshman class of cannabis companies would love to add to their arsenals.

In all likelihood, more sharks will soon be drawn to the fresh blood that is Canada.

Pharmaceutical corporations are chomping at the bit over the chance to patent an endless array of medications that use THC, CBD, and other cannabinoids. The agricultural potential of cannabis looms large as well, suggesting the somewhat chilling prospect of ethically ambivalent behemoths like Monsanto eventually entering the fray as well. Even soda companies are looking to make a move — numerous outlets reported last fall on rumors of Coca-Cola partnering with Aurora Cannabis to create a CBD-wellness drink.

So what does it all mean?

It seems safe to declare that big business is officially out of the shadows when it comes to cannabis. The bong is out of the bag — they’re interested and ready to put their money where their mouth is. One can also easily imagine a future in which the pot industry functions in a fashion similar to the modern day beer market, with costlier, artisanal options fighting for shelf space opposite mass-produced, more affordable alternatives. As consumers, the day has arrived when we can no longer assume our favorite gummy bears and infused teas are made by a loving couple with a ranch in Mendocino.

Like it or not, the clock has finally struck midnight. The question we now face is whether the sound we’re hearing is the ring of nuptial bells announcing the marriage of cannabis and tobacco or an alarm meant to warn us of what’s yet to come.

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