Big Tobacco just bought a huge chunk of the cannabis industry
Not even 6 months have gone by since Big Alcohol proclaimed it was moving into the cannabis industry. Now, it appears, Big Tobacco is following closely behind.
Last October, Constellation Brands (the massive booze distributor responsible for Corona, Modelo, Svedka vodka and dozens more) announced it would pay almost $200 million for a 10 percent stake in Canopy Growth Corp., a large Canadian seller of medical marijuana.
The move wasn't only a money-mover from one vice to another, it was what will soon be considered the cornerstone of an investment trend that will shape cannabis moving forward.
Because once one company does it, others follow.
And follow they did. Just this week, Alliance One International (one of two publicly held independent leaf tobacco merchants in the world) announced it was buying not just one, but two Canadian cannabis companies.
"Within three years, Alliance One expects the two companies to have cannabis growing greenhouses totaling 1 million square feet," says Ian Wyatt of Wyatt Investment Research.
This marks the first time Big Tobaco has made a move into weed, a long-held rumor dating back to the mid-20th century.
As we've reported before, tobacco companies wanting a piece of the pot-pie isn't anything new. Even though most claim publicy to have never even thought about it, uncovered memos say differently. Most have wanted to pounce on it for decades.
“Just living among young people, I can predict that marihuana smoking will have grown to immense proportion with a decade and will probably be legalized,” one scientist working with Philip Morris wrote to his bosses in 1969. “The company that will bring out the first marijuana smoking devices will capture the market.”
It's not just a simple coincidence the companies are moving in now, either.
Trends in smoking have been dropping for years, the most recent of which showing teens are choosing to vape now more than ever (or just not smoking overall). This spells catastrophic for mega-corporations that have long relied on the addictive nature of cigarettes to be their golden egg.
Scott Gottlieb, FDA commissioner and cancer survivor, has other plans, however.
In September of last year, Gottlieb tweeted that he was over it. Since, the organization has been working tirelessly on figuring out ways to get people unhooked from the sticks and on to healthier (though still not without risk) options. In under a few years, things like Very Low Nicotine cigarettes and safer smoking devices will be the norm.
Seems like a no-brainer, right? Get people off cigarettes and the world is a happy place again. Except ... it isn't exactly that easy.
The government has its balls tied together with the taxes Big Tobacco pulls in. According to recent estimates, $14 billion is still pulled in from smokers. For any agency to simply wash its hands of that without something to replace it with would be disastrous. Gottlieb and his team have had to navigate this very problem carefully.
This is where weed will come in (not maybe, not might, not even possibly). Weed will replace tobacco, and it's only a matter of time before we see such a thing. Mark this post.
Constellation brands and Alliance One International get it, and will soon reap the rewards of being the first two to take the plunge — Jeff Sessions and his little minions be damned.