Big Tobacco enters the Cannabis Space

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Big tobacco entered the cannabis market today with Altria, the maker of Marlboro cigarettes, investing $1.8 BILLION dollars in the cannabis company Cronos Group. This is a huge development for the industry as a whole. The alcohol industry has already recognized the long term implications of the the cannabis market for their business and started some strategic partnerships this summer.

Now the tobacco industry industry is doing the same thing. In my opinion, Big Pharma has a far amount to lose as well to cannabis through competition in the medical market. I could see Big Pharma as possibly a third player vying for partnerships with cannabis companies in the future.

But what does Altria bring to the table for Cronos?

  1. Experience and Expertise - Marlboro is one of the best selling cigarette brands in the industry. The expertise across the company is likely to translate well in the cannabis space from production to branding.

  2. Regulatory Knowledge - One of the biggest headwinds in the cannbais industry is regulation. Who has more experience dealing with regulations than the tobacco industry??

  3. Distribution - Tobacco companies have established distribution networks already in place. Granted, legal states and countries have varying laws for the sale of cannabis, but an established distribution network will no doubt be a long win.

All tobacco companies have been battling a steady decline in cigarette use for decades now. The cannabis market is a natural diversification product that could fit in easily to their supply chain. This type of large investment from a well established industry leader also supports the long term viability of cannabis as a mainstream product.

Sources: Bloomberg

Additional Disclosure: This post is NOT a recommendation to buy or sell Altria or Cronos Group.

NewsCharles Freeman