Biz Tips: How tobacco companies are becoming formidable competitors in the cannabis market

Biz Tips: How tobacco companies are becoming formidable competitors in the cannabis market


How tobacco companies are becoming formidable competitors in the cannabis market

(Photo by Lindsay Fox at via Flickr. CC BY 2.0)

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.”

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.”

Major players

Many tobacco companies have their sights set on the burgeoning cannabis market (Photo by Hans via Pixabay)

Tobacco company Britain’s Imperial Brands made an investment into Oxford Cannabinoid Technologies, which conducts research on cannabis compounds for medicinal purposes. The addition of Canadian cannabis executive Simon Langelier and ventures into pharmaceuticals and vaporizers further signaled the tobacco giant’s entry into the cannabis business.

Altria Group is another well-known brand that could shake up the industry. The owner of Phillips Morris, the company recently announced that they are making an impressive $1.8 billion investment to Canadian cannabis firm, Cronos Group.

This is not its first foray into the cannabis trade. In 2016, Phillip Morris fueled $20 million into Israel cannabis product manufacturer Syqe Medical, the developer of a medical cannabis inhaler that helps facilitate proper cannabis dosages for the user’s convenience.

Turning Point Brands could make a seamless transition into the cannabis segment as the tobacco product developer is most known for their Zig Zag rolling papers. While they are also used for handmade cigarettes, its primary use is involved in rolling marijuana joints for cannabis consumers, and they could make a major breakthrough depending on how cannabis regulations play out.

The benefits

Stanton Glantz, a professor of medicine at the University of California, San Francisco, highlights the major advantage that tobacco companies have over others in their quest to dominate the cannabis market: “They could be in the marijuana business in a second, and they certainly know how to make the products,” he says.

Professor Glantz believes that the incorporation of new and innovative technology from the increased amounts of business delving into cannabis operations will transform the industry like never before.

As they are already equipped with the research and development infrastructure to create new and efficient ways of tobacco consumption, this can effortlessly help the company transition into cannabis products and goods. The technology and development that has already been established will give them a major advantage in terms of knowledge and the tools to manufacture breakthroughs in cannabis use.

For example, vaping is a popular method for smokers as it outpaces cigarettes as a method of tobacco consumption. Tobacco companies could easily capitalize on the vaping market for cannabis users with their already successful brand of vaping products and technology.

Delving into medicinal use of cannabis can also help promote a healthier public image for tobacco companies who are constantly in the public crosshairs. Studies on cannabinoids found in cannabis such as CBD have helped shed light on its diverse health benefits, and by providing access to such medicinal cannabis goods, tobacco companies can get involved in a commodity that can produce positive effects on well-being and health.

It will be interesting to see who develops the very first tobacco cannabis brand to get a head start on other corporations. Despite all the activity and buzz surrounding tobacco companies and their clear signaling of a cannabis venture, everything still remains uncertain as to growth projections until cannabis regulations hit the ultimate milestone of becoming fully legalized in major countries.

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