The rapidly changing legal nature of the cannabis industry has not deterred mainstream investors. Altria, the maker of Marlboro cigarettes, has made a major leap by investing in a Canadian cannabis producer. Continue reading to find out how an investment of this scale could open up the floodgates for other companies and future partnerships.
The Cannabis Industry Is Attracting Mainstream Attention
This isn’t the first time the cannabis industry has caught the eye of mainstream companies looking for future opportunities. Industry leader Coca-Cola has expressed interest in developing a cannabinoid-based health drink, while the beverage supplier Constellation Brands has already invested millions into the international cannabis company Canopy Growth.
The appeal is being driven by a rapidly expanding legal cannabis market. At the forefront of this expansion is Canada, who began their legal market in fall 2018. With many analysts predicting unprecedented growth in this area, the move by Altria appears to be a calculated decision.
Altria Throws Its Hat Into The Legal Cannabis Market
And not just one hat, but $1.8 billion¹ of them. The investment was made as part of a deal to acquire a 45% stake in Canadian cannabis producer Cronos. Although not the largest producer, they have an extremely efficient and profitable operation. Given the volatility of the cannabis market, high returns are a must to offset some of the risk involved. It is also believed that the diversity of Cronos’ business model is a crucial factor in Altria’s decision. The cannabis company has shown an interest in exploring the full spectrum of cannabinoids, rather than just THC and CBD.
As stricter regulations thwart the viability of future tobacco markets, cannabis is seen as the next high growth opportunity. There is no denying that the combined expertise of both Altria and Cronos would make them dominant players in any new markets. The expectation is many countries are likely to follow Canada’s lead after the impact of the legal market is reviewed. The ability to test products in Canada before expanding globally makes the partnership pivotal.
Could This Mark The Beginning Of A Boom In Investments?
The timing of this deal is also a crucial factor. 2019 promises to be an unprecedented year for the cannabis industry. Companies bold enough to get there first will, of course, reap the most significant return. That is as long as legislation reform continues in the same vein as 2018. The question is no longer “will we see investment in cannabis?”, but rather, “what powerful partnerships will develop in 2019?”.
1. Jiang, Ethel. “The maker of Marlboro cigarettes is plowing $1.8 billion into the cannabis producer Cronos (MO, CRON)”. Markets Insider. https://markets.businessinsider.com/news/stocks/weed-stocks-marlboro-maker-altria-cronos-18-billion-investment-2018-12-1027790493.