Sweetening the pot: Altria goes all in on the cannabis market

December 10, 2018

Is the Marlboro Man becoming a stoner? Altria— the parent company of Philip Morris USA and the manufacturer of market-leading Marlboro cigarettes—announced on December 7 that it has taken a 45% equity stake in Cronos Group, a Toronto-based cannabinoid company.

The deal, which will cost Altria about US$1.8 billion (CA$2.4 billion), is making news just two months after Canada became the first G7 country to nationally legalize recreational marijuana. Sales started on October 17—generating excitement and long queues at the shops, which are now reporting a cannabis shortage.

The acquisition of a stake in Cronos gives Altria a foothold in Canada. It also positions Altria to participate in the emerging global cannabis sector and creates a new growth opportunity in an adjacent category that is complementary to Altria’s core tobacco businesses.

Indeed, Altria has been struggling with the steady decline of the U.S. market for tobacco products—and sees potential to tap into a vital new segment as marijuana moves into the mainstream. In a formal statement CEO Howard Willard characterized the investment as “an exciting new growth opportunity.”

Meanwhile Cronos CEO Mike Gorenstein said the deal would “meaningfully accelerate our strategic growth.”

Word on the street is that this may only be a first step for Altria. According to Bloomberg, the company is in talks “to buy a stake in Juul, another fast-growing company threatening the traditional cigarette space. The possible expansions in more than one direction show it’s open to any number of approaches to resume growth.”

Research contact: @Altria News

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