The maker of Marlboro cigarettes is muscling in on the marijuana market
Altria Group Inc., the US maker of Marlboro cigarettes, is moving into the pot sector, paying $1.8 billion for a 45% stake in Canadian cannabis firm Cronos, according to reports from Bloomberg.
In the US, legal ambiguity over marijuana use makes domestic wheeling and dealing too risky for many national and multinational businesses. But north of the border, the newly legal weed market is open for business—and Altria is the latest company to make a move to Canada, joining other companies such as liquor giant Constellation Brands.
For Altria, once known as Phillip Morris, it’s an opportunity to get comfortable in a nascent market and position itself for the potential national legalization in the US. With cigarette sales plummeting, now can hardly be a bad time to diversify, and the company is reportedly also in talks to invest in vaping startup Juul.
For Cronos, as the company said in a press release, Altria’s long history in the industry means it offers “product development and commercialization capabilities, and deep regulatory expertise.” In the meantime, Altria is paring back some of its tobacco alternatives, discontinuing vaping products MarkTen and Green Smoke, with the objective of focusing on other “more compelling reduced-risk tobacco product opportunities.”
While Marlboro-branded “weed cigarettes” are not in the pipeline, the news comes after nearly 50 years of speculation to that end. As far back as the late 1960s, Business Week reported tales through the “underground grapevine” of major cigarette companies lying in wait of legalization “so they can start producing grass-laced smokes.” Those in the know alleged that names such as Acapulco Gold and Tijuana Gold were already copyrighted in anticipation, while an unnamed cigarette company had bought up swathes of pot-appropriate farmland in Louisiana, Mexico, and Central America.
A few months later, however, letters to the Rolling Stone editor from key players in the tobacco industry sought to put the record straight. ”Rumors about the cigarette industry’s involvement with marijuana are as persistent as they are false,” said a spokesman for the Tobacco Institute. The then-president of now-defunct tobacco company Brown & Williamson was clearer still: “We are unalterably opposed to the legalization of marijuana, and therefore disclaim any activity which would remotely involve marijuana.” The times, they are a changin’.
Tobacco giant Altria is making inroads into the world of legal cannabis, buying a 45% stake in Canadian pot company Cronos.
Here’s How Much a Pack of Marijuana Joints Could Eventually Cost
How much would a marijuana cigarette cost? Since legalization in Washington and Colorado, an old jokeВ вЂ” Marlboro GreensВ вЂ” has been making the rounds again, starting with an article in the satirical publicationВ Abril UnoВ that claimed Phillip Morris will be introducing Marlboro Marijuana smokes.
The smokes aren’t real, but it has people thinking about what the final retail price of such a product would be.В According to Fast Company, it would cost Phillip Morris somewhere in the neighborhood of $40 on the low end to make a pack of pure-marijuana cigarettes, while mixed marijuana-tobacco cigarettes might be as cheap as $20. A production cost of $40 means thatВ a pack of the good stuff could cost the consumer up to $70-80 at retail. Premium marijuana could run up to $120, while you could grab a pack of 50-50 marijuana-tobacco cigarettes for about $40.
Wait a second . В ButВ Forbes’ Tim Worstall points out that there’s a big hole inВ Fast Company’s analysis: they “model the tax take and likely retail prices given the current producers’ prices” вЂ” i.e., what it currently costs marijuana producers in the U.S. to grow and prepare a gram of weed.В “They’re not, in any manner, trying to model or calculate producers’ prices themselves: they’re simply an assumption going into their model.” That’s a big flaw, because the marijuana industry is “highly fragmented, very inefficient and it is both of these things because it is still illegal.”
If Big Tobacco decided to dive into the weed business, the very first thing they’d do is investigate how they can bring production costs down using the same techniques they used to make machine-rolled cigarettes so cheap. In Malawi, for example, growing a kilogram of weed costs just $3. And packaging and distribution costs would be somewhat similar to regular cigarette prices, resulting in a much different estimate of a production cost of 50 cents per pack. Worstall also predicts that after liberalization of the marijuana market, the price crash will be followed by tax changes and calls for protectionism in favor of U.S. producers. All told, marijuana cigarettes could be much cheaper than Fast Company’s analysis would imply.
Will this actually happen?В That said, Big Tobacco has no plans to get involved in the marijuana business anytime soon, seeing as weed remains very illegal on a federal level. And even if that particular barrier is breached, retailers will have to jump on board selling a very controversial product which might have 50 very different regulatory regimes for each state. Meanwhile, smokers might be suspicious of Big Tobacco-produced marijuana products when buying high-quality weed at a local dispensary is a good option, and options like e-cigarettes and vaporizersВ could prove to be more popular. There’s definitely a market for such a product, but if it happens at all, it’ll be decades from now.
How much would a marijuana cigarette cost? Since legalization in Washington and Colorado, an old jokeВ вЂ” Marlboro GreensВ вЂ” has been making the rounds again, starting with an article in the satirical publicationВ Abril UnoВ that claimed Phillip MorrisвЂ¦