The tobacco industry conquers the cannabis market

The tobacco industry is not beating about the bush: some governments' anti-smoking campaign and the new competition from the cannabis industry profits. In response, tobacco companies are beginning to invest in and develop products related to the cannabis industry.

An industry in decline

The global tobacco giant Phillip Morris International had announced a 9.3 billion unit drop in their cargo volume for the first quarter of this year. This trend is typical of the tobacco industry in general, which is suffering from a global decline in interest in their products. For the same period, Altria had announced a 4.2% drop in cigarette volumes and British American Tobacco forecast a first-half decline of 3.5%.

With the nascent cannabis industry estimated to be worth hundreds of millions of euros within the next year, tobacco companies have little choice but to innovate and partner with the new cannabis companies to keep investors on their side. All the more so as the alcohol industry has already begun to invest in cannabis: last October, Constellation Brands, which produces the beer Corona has invested 190 million in Canopy Growth Corp and plans to launch a brand of cannabis-infused beer.

Imperial Brands invests in medical cannabis research

Imperial Brands, which markets the Kool and Winston cigarette brands, has just invested in the British start-up Oxford Cannabinoid Technologies licensed by the Department of the Interior to research and develop cannabis-based medicines. This investment came three days after the FDA (Food and Drug Administration) of United States approves Epidiolex, a drug created by GW Pharmaceuticals, as epilepsy treatment.

The $10 million investment far exceeds the standards of’Oxford Cannabinoid Technologies and the associated consulting firm, Casa Verde, supported by Snoop Dog and actor Patrick Stewart. Imperial Brands last summer also recruited the president of the medical cannabis company PharmaCielo, Simon Langelier, on his administrative board.

This is the first time a major tobacco company has invested in cannabis, but smaller companies such as Alliance One which has invested in Goldleaf Pharm Inc., another medical cannabis company, in January. For the time being Phillip Morris, Altria and British American Tobacco have not taken the plunge, but may simply be waiting for the market to develop in line with legal regulations. Philip Morris International had, however, invested $20 million in an Israeli start-up developing alternative inhalation methods.

Once the market has matured and the players are in place, the tobacco industry, whose four global leaders alone represent $341 billion in capital, will simply have to select who to buy and where to invest. By way of comparison, the four leaders alone are in a position to buy up half of today's Canadian cannabis market.

Discretion and interest

In 2010, while the California was considering legalizing recreational cannabis, A rumour about the purchase of land by the big tobacco companies led to fears of the emergence of a monopoly, and the law was rejected. Consequently, it seems that tobacco companies, when they invest in cannabis, do so with discretion and according to specific interests that would not tarnish an already very negative image, if not improve it.

In fact, it seems that the tobacco industry prefers to invest in the medical marijuana and consumables rather than production per se. The investment of Imperial Brands confirms this trend. At a time when recreational cannabis consumption is already saturated with players and risks experiencing an excess of supply over demand, the pharmaceutical patents are insured to be sustainable, profitable investments, albeit over the longer term. What's more, in terms of communication, investing in the medical sector could help restore the industry's image.