Al­tria look­ing at cannabis mar­ket­place

Rich­mond-based Marl­boro maker said to be in talks with Cana­dian med­i­cal mar­i­juana com­pany

The Progress-Index - - OBITUARIES -

The maker of Marl­boro cig­a­rettes is join­ing some of the big­gest names in beer in ex­plor­ing the bud­ding cannabis mar­ket­place.

Al­tria Group Inc., which owns Philip Mor­ris USA, is the lat­est big com­pany to show in­ter­est in mar­i­juana. Late Mon­day, Cana­dian med­i­cal mar­i­juana com­pany Cronos Group Inc. con­firmed talks with Al­tria about a pos­si­ble in­vest­ment.

Al­tria, based in Rich­mond, is one of the largest cig­a­rette mak­ers in the United States. The com­pany said it had no com­ment on Cronos’ an­nounce­ment.

Al­tria joins bev­er­age mak­ers like Mol­son Coors, Con­stel­la­tion Brands and Heineken that al­ready have an­nounced moves in the cannabis space. Other big com­pa­nies like Coca-Cola, Pepsi, An­heuser-Busch and Guin­ness brewer Di­a­geo haven’t acted yet, but have said they’re watch­ing closely as the mar­ket for mar­i­juana and its ex­tracts evolves.

Shares of Toron­to­based Cronos Group rose 6 per­cent Tues­day to close at $10.74. Al­tria shares fell 2 per­cent to $54.40.

The cannabis mar­ket is ex­pected to rapidly grow as le­gal­iza­tion ex­pands in the U.S. and so­cial norms change. On Tues­day, con­ser­va­tive Utah be­came the lat­est state to le­gal­ize mar­i­juana use for med­i­cal pur­poses.

Con­sumers are ex­pected to spend $57 bil­lion per year world­wide on le­gal cannabis by 2027, ac­cord­ing to Ar­cview Mar­ket Re­search, a cannabis-fo­cused in­vest­ment firm. In North Amer­ica, that spend­ing is ex­pected to grow from $9.2 bil­lion in 2017 to $47.3 bil­lion in 2027.

Cig­a­rette and bev­er­age mak­ers, in par­tic­u­lar, want a stake in a mar­ket that could eat into de­mand for their tra­di­tional prod­ucts. For ex­am­ple, a 2017 U.S. gov­ern­ment sur­vey showed daily mar­i­juana use was ex­ceed­ing daily cig­a­rette use among high school stu­dents.

“We think that this is an­other very aligned cat­e­gory that’s go­ing to de­velop very fast and very large and it sim­ply presents an­other op­por­tu­nity for growth,” Con­stel­la­tion Brands CEO Rob Sands said in a re­cent con­fer­ence call with in­vestors. In Au­gust, Con­stel­la­tion, which owns Corona beer and Manis­che­witz wine, in­vested $4 bil­lion in ex­change for a 38 per­cent stake in Cana­dian mar­i­juana grower Canopy Growth.

Canada le­gal­ized recre­ational mar­i­juana use this year, and it will al­low food and drinks con­tain­ing cannabis some­time next year. In the U.S., mar­i­juana still is il­le­gal at the fed­eral level, but 10 states and the District of Columbia have le­gal­ized recre­ational mar­i­juana for adults. Colorado and Wash­ing­ton were first in 2012 and Michi­gan is the lat­est af­ter vot­ers ap­proved the idea last month.

A farm bill be­fore Congress could also le­gal­ize in­dus­trial hemp at the fed­eral level, which would fur­ther open the mar­ket for food, bev­er­age and other com­pa­nies.

Like mar­i­juana, hemp comes from the cannabis plant but it con­tains less than 0.3 per­cent of THC, the com­pound that gives pot its high. But it does con­tain cannabid­iol, or CBD, which some claim has calm­ing and heal­ing af­fects.

Ear­lier this sum­mer, the U.S. gov­ern­ment ap­proved an anti-seizure drug that con­tains mar­i­juana-de­rived CBD. In some states, con­sumers can al­ready buy CBDin­fused cook­ing oils, drinks and gum­mies.

“You can’t name a big, na­tional-scale chain that isn’t in­volved al­ready or se­cretly get­ting in­volved,” said Ryan Stroud, the co-founder and COO of Xan­thic Bev­er­ages, an Ore­gonbased maker of bev­er­ages in­fused with CBD from ever­green bark. “They re­al­ize it’s a race and they don’t want to be left be­hind.”

While some com­pa­nies are qui­etly re­search­ing cannabis-in­fused prod­ucts, oth­ers are mak­ing their in­ten­tions clear.

Ear­lier this year, Til­ray Inc., a med­i­cal mar­i­juana com­pany in Bri­tish Columbia, be­came the first cannabis busi­ness to trade on a ma­jor U.S. stock ex­change. Its mar­ket value is quickly ap­proach­ing $10 bil­lion, about the same as The Gap or Macy’s.

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