Will cannabis be the product of the future for tobacco companies?

2nd August 2021

While tobacco companies were king in the mid 20th century, with huge advertising campaigns, celebrity sponsorships and an abundance of addicted customers, the prospects of the industry have been on the decline in recent decades. Increasing restrictions on the tobacco industry- in a backdrop of anti-smoking campaigns led by health and ethical concerns – has meant a significant drop in customers.

This change in attitude has left many tobacco companies looking for alternative products to add to their portfolio, away from traditional tobacco products – and cannabis could be one of them.

In March, one of the largest global tobacco firms, British American Tobacco (BAT) announced that it had taken a stake in Canadian medical cannabis manufacturer Organigram. The firm also announced that it had signed a deal to carry out research into a new range of adult-use cannabis products – initially focusing on the CBD sector.

Kingsley Wheaton, BAT’s Chief Marketing Officer, recently told BBC Radio 4’s Today Programme: “As we think about our portfolio for the future, certainly beyond nicotine products are interesting for us as another wave of future growth.”

Wheaton also revealed that the company is currently trialling a CBD vape product in Manchester, as it was revealed that the firm sees cannabis-related products as its future growth.

He continued: “I think [CBD vaping] is part of the future, but the present challenge is reduced harm in tobacco and nicotine alternatives, encouraging people to switch.”

These moves by British American Tobacco reflect a wider spread shift in the global tobacco industry, with big players putting an emphasis on moving away from cigarettes and smoking tobacco to less harmful alternatives.

For BAT, it was revealed that over a third of the company’s revenues now come from vaping brands such as Vuse, Velo, and glo, as opposed to traditional cigarette products.

Another of the world’s largest tobacco firms, Altria, has also made significant moves in the cannabis sector, spending $1.8 billion to buy a stake in Cronos Group – a multinational cannabis company – in 2018.

Ricardo Geada, Partner and Head of the Cannabis & Regulatory Team at Mackrell.Solicitors, commented on the prospect of tobacco companies embracing cannabis products: “The decision by British American Tobacco to invest in the CBD and cannabis industry is further evidence of the growing demand for these products and their growing entry into mainstream life.

“The fact that such a large and well-established company is researching this area is indicative of the promise felt within the sector and the research it is funding could help accelerate the adoption of cannabis-derived products.

“With such a significant purchasing power who knows what impact British American Tobacco may have on the industry‚Äôs future, particularly as they have a long history of lobbying for legislative change for their products around the world.”

While many in the tobacco industry will no doubt see this as a natural progression as consumers continue to turn away from traditional tobacco products, there will be plenty of critics of large tobacco firms aiming to capture a significant portion of the new industry.

There are increasing calls for lawmakers to ensure that the fledgling cannabis industry is used as an opportunity to make reparations for communities most impacted by the ongoing ‘War on Drugs’.

Further, allowing huge multinational firms, including tobacco companies, to move in on the cannabis market will inevitably crowd out smaller businesses who are looking to benefit from the new industry.

Nevertheless, it is likely that we will continue to see tobacco firms like British American Tobacco and Altria making moves in the cannabis space.

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