As Canada’s adult-use cannabis market matures and the US inches closer to weed reform, more and more alcohol and tobacco companies are investing their money in legal weed.
British American Tobacco (BAT), the world’s third-largest tobacco firm, is the latest cigarette conglomerate to invest in weed. Last week, BAT announced that it would spend over $175 million to buy a 19.9 percent stake in Organigram, a licensed Canadian cannabis producer. Once the deal goes through, BAT will become Organigram’s largest shareholder.
BAT currently owns American Spirit, Camel, Pall Mall, Newport, Lucky Strike, and many other popular cigarette brands, as well as several popular e-cigarette and chewing tobacco brands. The company also launched a pilot CBD vape in Manchester, England earlier this year. Organigram, based in Toronto and New Brunswick, has been making medical cannabis products since 2013, and began producing products for the recreational market once Canada legalized adult-use weed in 2018.
The two companies intend to establish a Center of Excellence in New Brunswick, which will be staffed by scientists, researchers, and product developers from both companies. The new research center will be focusing its initial efforts on developing new CBD products, and both companies will be free to market any products developed as part of this collaboration.
BAT’s investment in legal weed is actually quite small when compared to some other recent mergers between alcohol, tobacco, and weed companies. Altria, maker of Marlboro and other cigarette brands, bought up 45 percent of Canadian cannabis giant Cronos for a hefty $1.8 billion in 2018. Since then, Altria has filed two patents for weed vapes and hired a top cannabis lobbyist to advocate for CBD product regulation in Congress.
Big alcohol has also sunk a lot of money into the legal pot industry, which just might be one of its largest competitors. Constellation Brands, known for Corona beer and Svedka vodka, invested $4 billion in Canopy Growth, a major player in Canada’s legal pot market, in 2018. The wealthy heirs of the Jim Beam and Anheuser-Busch alcohol empires have even abandoned booze entirely and set up their own legal pot companies.
“As global cannabis deregulation gains pace, led by the US, we have been approached by an increasing number of Big Tobacco, Big Pharma and leading FMCG companies, looking to invest in the Cannabis sector,” said Tristan Gervais, Chrystal Capital’s Head of Cannabis advisory at Europe’s Cannabis Merchant Bank to CNBC.