Biz Tips: How tobacco companies are becoming formidable competitors in the cannabis market
GROWTH:
How tobacco companies are becoming formidable competitors in the cannabis market
As cannabis is deregulated in many parts of the world, it has also led to a decline in teens who smoke cigarettes. A study conducted by the University of Michigan revealed that 22.9 percent of high school seniors had used cannabis in the last month with another 16.6 percent having vaped in the same time span, compared to just 9.7 percent who smoked cigarettes.
The study also shed light on the fact that other substance use such as alcohol and opioids had also decreased or remained at a similar level to the previous year. The National Institute on Drug Abuse deputy director Dr. Wilson Compton stated, “We’re impressed by the improvement in substance use by all teenagers.”
Along with the decreased use of substances in favor of cannabis, this has also led to the popularity of cannabis derivatives such as cannabidiol (CBD). Distributors such as PotNetwork Holdings, Inc. (OTCMKTS:POTN) use hemp-derived CBD oil in their product line featuring oils, creams, drinks, and capsules to help promote health through CBD’s capable medicinal efficacy.
One of the major advantages of CBD consumption is the lack of psychoactive sensations, allowing for a safe and non-toxic method of providing pain relief and treatment for common conditions such as anxiety and depression.
With just US-based cannabis sales projected to reach $75 billion in 2030, the cannabis market will outpace the $60 billion in wine sales, just trailing cigarette sales of $77 billion, with beer retail reaching $110 billion. That could even be a conservative estimate, as Constellation Brands currently pegs the cannabis market with a value of $50 billion.
The rapid and long-term explosion in the cannabis market has caught the attention of big names brands hailing from other markets such as tobacco, who can benefit from the integration of cannabis-based business.
Ripe for the picking
According to an investigation conducted by Rachel Ann Barry, Heikki Hiilamo, and Stanton A. Glantz on various unrevealed documents pertaining to tobacco companies, “Since at least the 1970s, tobacco companies have been interested in marijuana and marijuana legalization as both a potential and a rival product. As public opinion shifted and governments began relaxing laws pertaining to marijuana criminalization, the tobacco companies modified their corporate planning strategies to prepare for future consumer demand.”
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It would seem that tobacco brands have always had an eye on the cannabis market, and the opportunity to do just that has emerged with the loosening of cannabis restrictions.
With the strong market activity that has driven the cannabis sector to new levels, its allure has drawn in the presence of major conglomerates from businesses such as alcohol and tobacco. As both markets appear to be losing some steam in part due to rising cannabis sales, the emergence of several corporations may very well lead to a new segment in the market which would spur increased competition.
Canada’s decision to implement a legal cannabis system has caught the attention of various industries looking to delve into a cannabis business arm, including tobacco.
“Canada is the petri dish out there,” says Kenneth Shea, a senior equity analyst at Bloomberg Intelligence. “Beverage companies, tobacco companies and maybe even food companies may learn there how to cater to that market.”