Big Pharma, Tobacco and Alcohol to invest heavily in legal Cannabis

Big Pharma, Tobacco and Alcohol to invest heavily in legal Cannabis (1)

The big news of cannabis in recent weeks has been the announcement that Altria, the world’s largest tobacco company and owner of the Philip Morris and Marlboro cigarettes, has invested $ 1.8 billion in Canadian cannabis producer Cronos for a 45% stake. The agreement comes with mandates for Altria to provide an additional $ 1.05 billion for a 55% stake in Cronos.

Then, Tilray announced an expanded strategic partnership with Novartis, the pharmaceutical giant, to work on medical cannabis products in legal markets. Of course, these developments follow another big news at the beginning of the year, when the alcohol giant Constellation Brands acquired 38% of the capital of the largest Canadian cannabis company, Canopy Growth, for $ 4 billion dollars. The deal, which had been preceded by a smaller investment by Constellation in Canopy in October 2017, also included mandates allowing Constellation, the maker of Corona beer and Svedka vodka, to acquire a majority stake in Canopy. The ramifications of this are clear and sharp.

Big Alcohol and Pharma moving in on Cannabis

By the end of 2019, there is a good chance that two of the largest cannabis companies in the world will be owned by two of the largest alcohol and tobacco companies in the world. The era of big business entry into cannabis officially began in 2018. The year was also marked by the downfall of other important companies in the cannabis market. Molson (a subsidiary of Coors) announced a partnership with Hydropothecary to create a line of non-alcoholic cannabis-injected beer.

According to rumors, Coca-Cola would explore a partnership with Aurora that would allow them to make CBD-infused drinks, which could be closer to reality with the legalization of CBD hemp production and extraction in the Farm Bill recently adopted. A significant increase in mergers and acquisitions among US cannabis operators over the past year, which could also signal the entry of major players in the cannabis industry, as governments are positioning themselves as attractive acquisition targets for wholesale customers outside the industry, has also been witnessed.

This year alone, there have been announcements of mergers of industry heavyweights, MedMen and Pharmacann, iAnthus and MPX, as well as my own 4Front company with Cannex. This occurred during a wave of smaller and more popular operators being acquired by larger multi-state companies. Going forward, this consolidation makes sense. On the operational side, companies are able to achieve economies of scale with more licenses in more states and are largely rewarded by investors and government procurement.

Vying for The American Market Once Federal Legalization Is Finalized

But these companies are also well positioned to be taken over by much larger companies in other sectors once the federal ban on cannabis is lifted and they feel comfortable entering the US cannabis market, which represents billions of dollars. When companies with billions of dollars to invest in acquisitions decide to enter the US cannabis market, some of them may not want to do the hard work of bringing together dozens of small operators across several states. Instead, many will likely search for large companies with existing brands, capabilities, and distribution networks.

Alcohol and tobacco have already taken hold in Canada, and there is no doubt that they keep the same tab in the United States. Altria may have been the first tobacco company to buy a stake in a cannabis licensed company, but one can be sure that its competitors will make sure they are not the last. Similarly, Constellation and Molson will certainly be joined by other alcohol companies to form partnerships with US cannabis companies and acquire them once the federal law has been amended. But alcohol and tobacco are not the only industries poised to grow in the growing cannabis economy. Other industries, like pharmaceuticals, agriculture and soft drinks, are all set to tap into cannabis.

About Anand Sai 84 Articles
Anand Sai has worked in the field of market research as an analyst and a consultant and has also operated at several leadership positions. He has an enormous experience with respect to the compilation of high-quality market research reports and boasts over six years of experience in end-to-end project management. Anand is a dependable voice in the market research field and has been named in some of the top industry publications. He is also a travel junkie and loves to explore new places with his friends.