Whacky Tobaccy, Big Tobacco Eyes the Regulated Cannabis Market

Written by Erin Miller March 8, 2019
The History

My favorite colloquialism for weed has always been “whacky tobaccy.” It’s quite obviously the one that’s the most fun to say, but it also feels so easy to draw parallels between weed and tobacco. For me, the inclination to compare the two mainly lies in the similarity of their methods of consumption: users can roll cigarettes just as easily as joints, smoke both from pipes, and now vaporize both of these products. Tobacco and weed are often consumed together, rolled into spliffs and shared on a porch between friends on a warm summer night. However, it is not just within the confines of our rolling papers that tobacco and weed intermingle—this duo is making headlines as small-time cannabis businesses are partnering with the big tobacco companies.

Tobacco companies have been keeping their eyes on the cannabis market for decades now. There are documents that show that, as early as the 1970s, tobacco companies were looking into cannabis to better understand whether this product was an opportunity that they could capitalize on or if cannabis was potential competition. Phillip Morris, a subsidiary of tobacco giant Altria, was reported then saying that the company should, “at this time, cooperate with the government”—something that, thus far, tobacco companies are staying true to. It is easy to understand why they would be hesitant to enter the cannabis market, seeing as tobacco companies in the United States know all too well the wrath of the federal government. In 1998, the Master Settlement Agreement was signed by the U.S. government and five major tobacco companies. The Master Settlement Agreement essentially forced tobacco companies to pay states billions of dollars a year to cover the costs associated with the health effects of smoking. Given this history, it’s clear why big tobacco brands have been proceeding with caution.

Yet, slowly but surely, proceed they must. It seems that big tobacco companies are investing in weed opportunities predominantly outside of the United States, particularly in Canada. Altria has recently made headlines for partnering with the Canadian grower Cronos, a buy-in that saw Cronos’ stocks surge 25%. Additionally, a Canadian subsidiary of Alliance One, another big tobacco company, has purchased a 75% stake in Canadian company Island Garden Inc., as well as an 80% stake in Goldleaf Pharm Inc. Canada is thought to be an interesting trial run for big tobacco companies. Since recreational cannabis has been legalized in Canada, tobacco companies can experiment with products and learn the ins and outs of this industry before putting these tests into action in the United States as soon as recreational use is legalized here.

Big tobacco companies are in a good position to capitalize on the cannabis industry and, potentially, dominate it. There has been a huge usage decline in tobacco products over the past few decades, from 42% of U.S. adults smoking cigarettes in the mid 1960s to around 15.5% in 2016. Despite this reduction of smoking adults, companies like Phillip Morris have still been able to grow their revenue by 8.3%. However, it is true that, in order to maintain this growth, and especially in light of such a staggering usage decline, companies must become innovative and be willing to invest in new opportunities. With the money at hand to be able to invest in the cannabis industry, it’s no wonder many tobacco giants are starting to do so. It also stands that tobacco companies will be able to thrive in this market simply because cannabis is often consumed so similarly to tobacco. This means that the tobacco industry will not be deviating so far from the product that they are already selling.

Big tobacco’s interest in the cannabis industry will be beneficial for themselves, but it also has the potential to be an exciting opportunity for development within the cannabis industry. Tobacco companies have been around for decades and have the benefit of time and experience when it comes to knowing what does and does not work when making a smokable product. Tobacco companies also know how to make a product that is consistent across the board. So long as weed growers can produce high quality weed, tobacco companies can standardize the taste and feel of the product. Additionally, with more money invested in the cannabis business, there could potentially be more lobbying in favor of the legalization of cannabis in the United States on behalf of larger tobacco companies. Companies like Phillip Morris are also investing in cannabis GMO patents that could improve grow methods for weed, thus producing a higher yield—a technology that could potentially go on to be used outside of the recreational realm.

There are obviously valid concerns that come with big tobacco's interest in cannabis, namely that folks who have been working towards and been proponents of the legalization of weed could get “shut out from the sudden wealth creation set off by mass-market products.” However, this concern may be assuaged with the less intuitive, but nevertheless comforting, comparison of the cannabis market to the beer market. In the beer industry, there are large companies that dominate the market with a consistent product, but there are also craft and specialty brewers who still thrive within their niches. This could hold true for cannabis as the promise of legalization is on the horizon. There are also concerns that, if big tobacco companies start selling cannabis products, there will be an association between tobacco and cannabis that, due to tobacco’s sordid history as a cancer causer, will potentially undermine and delegitimize cannabis’s medicinal value.

Nothing but time will tell just how heavy of a hand big tobacco will have in the cannabis market. There are a lot of uncertainties, and, although there is a lot of promise for benefits to the cannabis industry, it may be best to remain skeptical and hesitant about big tobacco’s involvement in the cannabis industry.

Disclaimer: Keep out of reach of children. For use only by adults 21 years of age and older.

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