Tobacco Companies Invested In Cannabis
In November of last year, the Centres for Disease Control and Prevention announced that smoking rates had fallen to the lowest levels in history. In 2017 only 14% of American adults smoked cigarettes. When you compare this to 1965, when 42% of American adults smoked, you see a big decline. This declining trend is great for public health but awful for tobacco companies’ bottom line.
Many tobacco companies see the writing on the wall as the tobacco market gets smaller and smaller each year. These companies are looking for new ways to diversify their holdings. Enter the marijuana business, where there is interest in the potential synergies between big tobacco and corporate cannabis and where there is a new growing market of consumers to tap into. Here are some of the tobacco companies playing in the cannabis space.
Altria (NYSE:MO) – Cowboys of the Wild Weed West
In December of 2018, Altria (NYSE:MO), parent company of Marlboro, Skoal and other tobacco brands, paid $1.8 billion for a stake worth almost half of Cronos Group (TSE:CRON) (a cannabis company based in Toronto). The deal included 45% equity of Cronos with the option for Altria to take a majority interest in Cronos in the future. Cronos intends to use the proceeds from Altria’s investment to expand, increase investments in R&D and branding.
Altria was also interested in snatching up a minority stake in another Canadian pot company, Aphria (TSE:APHA). According to an anonymous source to Forbes, Altria looked into purchasing stakes in Aphria and CannTrust (TSE:TRST) for multiple months.
Imperial Brands PLC (LON:IMB) – Venturing into Cannabis
Imperial Brands PLC (LON:IMB)(the world’s largest cigar producer, in case you’ve never heard of them) is the owner of cigarette brands Kool, Winston, and Salem. The company has continually evolved to changing market dynamics with their portfolio of “Next Generation Products.” Imperial has a venture subsidiary Imperial Brands Ventures. This subsidiary participated in a Series A financing round and took an equity stake in Oxford Cannabinoid Technologies (OCT).
OCT is licenced by the United Kingdom’s home office to develop cannabis-based medicines, compounds, and therapies. The Chief Development officer of Imperial, Matthew Phillips, said in a press release “cannabinoid products have significant potential and our investment enables Imperial to support OCT’s important research while building a deeper understanding of the medical cannabis market”.
The Marijuana Index (NYSEARCA: MJ) – Who Invited THEM?
With the view that companies in the business of serving the shrinking tobacco market will shift towards the cannabis industry, The Marijuana Index includes a number of tobacco stocks. Although some of these companies have yet to even dip a toe in the waters of the cannabis industry, the makers of MJ feel strongly enough to include them in the index (albeit, in small weightings). Included in the index are Philip Morris International (NYSE:PM), British American Tobacco (LON:BATS), Swedish Match (STO: SWMA), Scandinavian Tobacco (CPH: STG), Japan Tobacco (TYO: 2914), Vector Group (NYSE: VGR), and our friends Altria (NYSE:MO) and Imperial Brands (LON:IMB).
Featured image courtesy of Shutterstock.