For big tobacco and brewers, grass is greener

Longtime cannabis advocates are being left in the wings

Proponents of legal marijuana spent decades fighting a slow battle for mainstream acceptance. Now, with recreational use legal in Canada and many states in the United States, big business is suddenly swooping in.

Altria, the maker of Marlboro and other cigarettes, last week paid $1.8 billion (U.S.) for almost half of Cronos Group, a cannabis company in Toronto.

In August, Constellation Brands, which owns Corona and others, paid $4 billion for a major stake in Canopy Growth, another Canadian marijuana company. That month, Molson Coors, another brewer, formed a joint venture with a cannabis company in Quebec.

“There’s always been the expectation that big business was going to come in; we’ve been hearing rumours about ‘Marlboro Greens’ for decades now,” said Bethany Gomez, director of research at Brightfield Group, a cannabis market research group. “Now we’re past the point of no return.”

The arrival of large multinational corporations portends sweeping changes for an industry that, until recently, operated in the shadows.

As billions of dollars pour into product development, marketing and manufacturing, these companies will be looking to create big brands with the market share to match. Brightfield estimates that global legal cannabis sales will reach more than $31 billion in 2021, up from less than $8 billion last year.

But while large-scale investments suggest that the mainstream acceptance of marijuana has reached a tipping point, longtime cannabis advocates are worried that the idealistic entrepreneurs who made this moment possible may get left behind.

Despite the flurry of dealmaking, the market for legal cannabis products remains fragmented. Canada legalized the sale of marijuana flowers and oils this year, but edible products and drinks made with marijuana concentrates are not yet legal.

In the United States, several states have legalized recreational consumption, although it remains illegal at a federal level. That patchwork of regulation is keeping several big companies that are interested in the industry on the sidelines for now.

In September, Target.com began selling products that contained CBD, a non-psychoactive cannabis derivative. But within days, the company changed its mind and removed the products.

James Quincey, the chief executive of Coca-Cola, said the company was not yet entering the market. “It needs to be legal, it needs to be safe, and it needs to be consumable,” he said on CNBC on Tuesday. “It’s not there yet.”

But earlier in the year, CocaCola representatives acknowledged that the company was watching the industry closely. They’re not the only ones.

Diageo, the spirits conglomerate, was widely rumoured to be on the verge of striking a deal with a Canadian cannabis company in August, but nothing has been announced. And Walmart Canada acknowledged that it too was looking into the industry but had no plans to start selling products containing CBD or THC, marijuana’s psychoactive component.

Nonetheless, boosters say the cannabis industry will only attract more from big corporations from here.

“This is what legal cannabis looks like,” said F. Aaron Smith, executive director of the National Cannabis Industry Association, a trade group based in Washington.

“You’ve got some of the larger players taking interest, and that’s a good thing. It’s going to create more economic vitality, more jobs.”