Avicanna: Philip Morris' latest foray into cannabis

Avicanna, a Canadian cannabis company, recently entered into a research project with Vectura Fertin Pharma, a subsidiary of Philip Morris International (PMI) which focuses on cannabinoid-based products.

This is not the first time PMI has invested in the’cannabis industry. In 2023, PMI has negotiated an acquisition of Syqe for $650 million, subject to successful completion of the inhaler's clinical trials.

A long-standing interest in cannabis

While the recent collaboration with Avicanna marks an important milestone, PMI's interest in cannabis products goes back several decades. Internal documents dating from 1969 and 1970 reveal that PMI was already studying the cannabis legalization as a potential competitor and future business opportunity.

And Philip Morris is not alone in seeking opportunities in cannabis. Others are tobacco conglomerates did the same:

• Altria Group, the parent company of Philip Morris USA, has invested CAD 2.4 billion in Cronos Group in 2019, acquiring a participation of 45% in the Canadian cannabis producer. Despite the regulatory hurdles, this transaction demonstrated Altria's intention to diversify beyond cigarettes.
• British American Tobacco (BAT) entered the cannabis space in 2021 with an investment of 221 million in Organigram Holdings Inc., a company Canada's leading cannabis company. BAT continues to expand its research and development efforts, including trials of CBD-infused products under its Vuse and Vype e-cigarette brands, while’Organigram itself has invested in Europe in Germany's Sanity Group.
• Imperial Brands has invested 123 million in Auxly Cannabis Group in 2019, securing a foothold in the cannabis market in Canada.

Why big tobacco is betting on cannabis

The decline of traditional cigarettes has forced tobacco giants to explore other sources of revenue. According to the World Health Organization, smoking-related illnesses cause around 8 million deaths a year, which has led to tighter regulation and falling sales. On the other hand, cannabis consumption is on the rise, particularly among young people. younger generations turning away from tobacco and alcohol.

PMI's investment in Vectura Fertin Pharma marks a turning point in the company's development. cannabinoid-based pharmaceutical products, in line with its strategy of transitioning to a health and wellness company. The company's slogan, «Moving Beyond Smoking», reflects this evolution, as PMI and its peers attempt to reshape their public image and business model.

If PMI's involvement in the’cannabis industry remains relatively discreet, its progressive investments indicate a long-term strategy rather than a short-term trend. The company's collaboration with Avicanna and its previous agreements with Syqe Medical are steps towards presence wider on the cannabis market.

As the cannabis legalization making headway worldwide, Big Tobacco will likely continue to expand through acquisitions, research partnerships and strategic investments. In the years to come, these companies could leverage their vast supply chains, distribution networks and regulatory expertise to dominate the cannabis sector, as they have done with cigarettes in the past.