Big Tobacco Makes Biggest Move Yet Into Cannabis With $2.4 Billion Investment
After a great deal of speculation, tobacco giant Altria Group — the manufacturers behind Marlboro cigarettes—confirmed that they would be inventing a whopping $2.4 billion into Canadian cannabis producer Cronos Group in exchange for a 45-percent ownership stake in the company.
The company also reserves the right to invest an additional $1.4 billion in the Toronto-based Cronos over four years to increase their ownership to 55 percent, if they so choose.
By far the most substantial move yet made on behalf of Big Tobacco to enter the burgeoning marijuana industry, this announcement as the potential to drastically alter the cannabis sector as a whole. Jay Rosenthal, president of Business of Cannabis, predicts that this is only the beginning.
“For at least a year, there have been whispers in the industry that Big Tobacco companies were waiting for the right moment to enter the fray,” he said. “The first move has now been made. But not the last.”
For some, this news has stoked some nascent fears about the industry, and how it will be run. Dr. Kevin Sabet, president of anti-cannabis advocacy group Smart Approaches to Marijuana, says he is worried about what this deal will bring.
“We’ve long said the tobacco industry is salivating at the chance to jump on the bandwagon that is recreational marijuana. This latest news proves it,” he said. “By investing in pot, tobacco will employ the same tricks as it did when it was king to hook users.”
“Companies like Altria are hoping to invest in marijuana to create new monopolies and marketing avenues that will force pot producers to sell their products through them,” he warned. “Supporting recreational marijuana today means one also supports Big tobacco (and Big alcohol), which puts private profit ahead of public health.”
According to Rosenthal, however, this move shouldn’t be thought of as an invasion, but rather an opportunity for growth.
“Pharma, beverage/alcohol, tobacco, CPG companies, food, nutraceuticals — all these industries are being disrupted through cannabis — and in disruption there is opportunity,” he said. “I expect this will be a catalyst for the sector similar to what Constellation was for Canopy.”
In the meantime, Cronos will remain a Canadian company, with its headquarters staying in Toronto.