Big Tobacco is buying into pot, and Wall Street analysts are loving it

Big Tobacco is buying into pot, and Wall Street analysts are loving it

The birth of "Big Cannabis" is nigh...

VicesDecember 11, 2018 By Will Brendza

We all knew this was coming. As soon as the recreational legalization of marijuana began sweeping the nation (and then the continent) it was always only a matter of time before Big Tobacco stuck their greedy fingers in the pot pie. Only a matter of time before companies responsible for roughly 480,000 deaths in America annually started running train on Mary Jane,  corrupting cannabis to satisfy their own gluttony.

Well, that day has finally come. And Wall Street analysts can hardly conceal their boners.

The same company that makes Marlboro cigarettes, Altria, recently made a $1.8 billion investment in the fourth most valuable publicly listed marijuana company in the world, Cronos Group. The cigarette behemoth bought a 45 percent stake in the Canadian cannabis company and the genie is officially out of the bottle. Now that Big Tobacco’s scaly tentacles are entangled in the cannabis industry, there will be no untangling them.

This move comes in the wake of a consistent decline in cigarette sales across the US. People are finally breaking out of the death-grip that Big Tobacco has had on this country for the better part of a century, and those companies are looking for footholds. They’re reaching out and grasping at anything that might save them from drowning in the fluids of their own lungs.

And the most obvious, realistic industry for cigarette companies to look to given the circumstances is cannabis.  

“Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria,” Altria CEO, Howard Willard, told CNBC. “We believe that Cronos Group's excellent management team has built capabilities necessary to compete globally, and we look forward to helping Cronos Group realize its significant growth potential.”

With the financial power of Big Tobacco backing them, Cronos Group is set to make some huge strides in studying the many different endocannabinoids and their different effects on human health. With the influx of resources that Cronos will soon see, they will be able to take cannabis research and development further than it’s ever been.

Which, has Wall Street’s top pot analyst, Vivian Azer, all hot and bothered.

While the potential uses of cannabinoids are vast, Cronos believes the key to successfully bringing cannabinoid-based products to market is in creating reliable, consistent and scalable production of a full spectrum of the roughly 100 cannabinoids, not just THC and CBD,” Azer wrote to CNBC. “Together, Cronos can leverage Altria's operational capabilities and expertise in order create value-added form factors while focusing on ingredient composition without reliance on a massive cultivation (farming) infrastructure.”

So, it’s not all bad. In fact, a lot of good could come from a cannabis company using Big Tobacco’s wallet to push research and development. And undoubtedly, it’s going to make both Altria and Cronos very rich.  

This investment could also foreshadow the widespread corporatization of cannabis. Now that Big Tobacco is meddling in the cannabis industry, the whole enterprise is about to change — small pot shops and grow ops will soon have to fight to maintain relevancy as bigger and bigger business players emerge on the scene.

And let’s not understate the dangers of corporate America commercializing a drug, with the sole intention of making as big a profit as possible. When corporations start pushing drugs on the general population like that, things can take a sinister turn.  

However, that’s not what Cronos Group CEO Mike Gorenstein is thinking about. He’s thinking about how this newfound business relationship might be able to help him and his company navigate the strange and unfamiliar waters of global infrastructure, governmental regulation and distribution logistics.

Altria has decades of experience in regulatory, government affairs, compliance, product development and brand management that we expect to leverage, particularly as new markets for cannabis open around the world,” Gorenstein told CNBC. They’ll be tapping into the massive expertise and network that Altria already has established to spread their business, and study cannabis on a greater scale than ever before.

This merging of the cannabis industry and Big Tobacco is as unsettling as it is promising, as dangerous as it is potentially beneficial. Altria’s investment in Cronos Group marks the beginning of a new era: the birth of “Big Cannabis.”

Whether or not that’s going to be a positive thing remains to be seen. But what’s certain is that it’s going to be a massive money maker — and that has Wall Street analysts, businessmen and corporations all very excited.

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