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Big Tobacco Is Dipping Its Toes In The Marijuana Industry

Last month, a subsidiary of UK-based tobacco company Imperial Brands took Big Tobacco’s first leap into the cannabis industry.

The company behind the Winston and Kool cigarette brands announced that it has joined with venture capital firm Casa Verde to invest in British medical marijuana research firm Oxford Cannabinoid Technologies. 

The $10 million investment is not just one of the largest yet for Oxford Cannabinoid Technologies, it's also one of the largest for Imperial Brands' co-investor Casa Verde. The cannabis investment firm - which is backed by rapper Snoop Dogg and actor Patrick Stewart - tends to keep their seed investments within the $1-3 million range. Imperial Brands’ stake in the deal has not yet been disclosed.

This action comes on the heels of a particularly bad first-quarter for global tobacco giant Phillip Morris International, which saw their cigarette shipment volume fall by 9.3 billion units, demonstrating that interest in their products continue to wane, despite the dependably addictive nature of nicotine.

As demand for tobacco shrinks, companies will have to make an ongoing effort to innovate and expand.

Imperial Brands, the fourth-largest international cigarette company, has been making a push to expand their scope for some time now, changing their name from Imperial Tobacco Group in 2016, even though the company still primarily sells tobacco and tobacco-adjacent products.

While this investment is not expected to pay off any time soon, since it is unlikely that any compounds will hit the clinical stage even within the next few years, it marks the beginning of what could be an ongoing relationship with Big Tobacco and the growing cannabis industry.

As inevitable as this partnership may seem, it remains to be seen whether this will have a positive impact, or serve to envelop the industry into tobacco's aging and stigmatized business model, which could hurt the cannabis legalization movement in the long run. Right now, the anti-cannabis group Smart Approaches to Marijuana boosts support for cannabis prohibition with claims that legalization will pave the way for another Big Tobacco. This step by Imperial Brands could lend credence to those fears.

h/t Motley Fool


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