Altria (Marlboro) in negotiations to acquire Canadian cannabis producer Cronos Group

Tobacco company Altria, which owns Philip Morris USA and the Marlboro brand, is currently in negotiations with Canadian cannabis producer Cronos, which it plans to acquire. according to CNBC. A few months earlier, the company entered into negotiations with the Aphria Group but the two companies were unable to reach an agreement. If Altria acquires Cronos Group, the deal would mark the first significant link between the tobacco and cannabis industries.

Tobacco industry under pressure

The tobacco industry is increasingly interested in the cannabis industry. And with good reason: the tobacco business is no longer so profitable. Altria's share price fell by more than 20% over the course of 2018 and, more globally, cigarette sales have fallen considerably in recent years. According to data from the U.S. Centers for Disease Control and Prevention, they have reached an all-time record of 14% in 2017. By comparison, in 1965, 42.4% of American adults smoked.

At the same time, the e-cigarette and cannabis industries are booming. According to Marijuana Business Daily, Including both legal and illegal sales, total demand is currently estimated at around $52.5 billion in the United States. The e-cigarette market is estimated at $6.6 billion in the U.S. this year, by analyst Bonnie Herzog. Juul Labs dominates the sector. It accounted for 75% of market share at the beginning of October and is estimated at over $15 billion. Altria is currently under negotiation with the manufacturer to acquire a minority stake of between 20 and 40% in Juul Labs.

The cannabise industry is on a roll

The tobacco industry isn't the only one interested in the cannabis business. The alcohol and beverage giants are also keeping a close eye on this new market full of opportunities. The biggest investment to date is undoubtedly Constellation Brands which invested $4 billion in August to acquire 38% of Canopy Growth shares.

However, not all negotiations result in agreements. This was not the case with the alleged discussions between Coca Cola and Aurora for example. It is not yet known whether the negotiations between Altria and Cronos will result in a concrete agreement.

The news has nevertheless been confirmed by Cronos Group, which told Marijuana Business DailyWe confirm that we have entered into negotiations concerning a potential investment by the Altria group. No agreement has yet been reached on this transaction and there is no guarantee that these discussions will lead to an investment or other transactions involving these companies«.

Negotiations are likely to last a few more weeks and nothing is certain, but speculation is already running high. Shares in Cronos Group, listed on Nasdaq and the Toronto Stock Exchange, have risen by between 10 and 11%, and the company's market capitalization is almost $2 billion. Altria shares, listed on Wall Street, rose by just 1.64%.