Saturday, January 28, 2023

Will Tobacco Companies Get Involved With Legal Marijuana?

Now that marijuana has been made legal at the national level in Canada, alcohol companies are claiming their stake in what has the potential to become a $22 billion marketplace. Nearly all of the major brewing companies aside from Anheuser-Busch have joined forces with cannabis firms to produce their version of THC-infused beverages. Hell, there are even rumors that the maker of Budweiser is presently in talk about doing the same.

Yet, so far, we have not heard much from the one sector that was expected to get in on the ganja game before any other – the tobacco companies. But make no mistake about it Big Tobacco is searching for a way into the cannabis space. It is just a matter of time before those developments are made public.

So far only Imperial Brands, maker of the Kool and Winston cigarette brands, has announced an investment in medical marijuana. The company was recently part of a round of funding for Oxford Cannabinoid Technologies, raising nearly $10 million for the development of non-smokeable cannabis products.

More of these types of business arrangements are expected to happen in the near future.

In fact, Peter Luongo, managing director of Rothmans, Benson & Hedges Inc., which is affiliated with Philip Morris International Inc., told Bloomberg that smoke-free cannabis products are the most “logical entry point” for tobacco firms to get into the business of legal weed. But he stopped short of admitting that the company was exploring this option.

Market analyst Nigram Arora believes tobacco firms will inevitably find a way to weasel into the cannabis space. After all, the two business sectors are “complementary” to each other, and with cigarette markers experiencing diminishing sales over the past few years, these companies “are looking for growth levers” like legal weed.

Further, the tobacco companies have the financial girth to get into the cannabis space and do it right, not to mention they already have the infrastructure necessary to “develop successful brands” and handle strict regulatory controls,” Arora said in his column.

But it really doesn’t seem likely that cannabis consumers will one day be able to walk into a pot dispensary and buy a pack of Marlboro pre-rolls. Some of the latest research suggests smoking marijuana is a dying trend. And the tobacco companies are well aware. The future of cannabis is edibles, vaporizers and other more socially acceptable products. These are the products most likely to receive investment dollars.

It is for this reason that experts like Shane MacGuill, head of tobacco research at Euromonitor International, says tobacco companies will likely use legal cannabis as a way to shift gears and become “more of a pleasure substance provider than a tobacco and nicotine provider.”

Investment professionals like Robert Fagan, who works as an analyst at GMP Securities in Montreal, says tobacco companies are not rushing to get in on legal weed. “If anything, they’re waiting for regulations to be crystal clear before diving in,” he told Marijuana Business Daily.

This appears to be true.

Murray Garnick, executive vice president at Altria Group, which owns Philip Morris, maker of the Marlboro cigarette brand, recently said that while “cannabis remains illegal” in the United States, the company is “mindful of the possibility” that the nation’s pot law could change. So “we’re studying and evaluating market opportunities,” in the cannabis space.



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