Last month one of the biggest tobacco companies bought a stake in a German cannabis company, leading headlines to question whether big tobacco was moving into the cannabis market. But signs that the industry is ready to pivot to marijuana have been apparent for some time.
In late September, tobacco giant British American Tobacco (BAT) announced that it was investing $37 million in German cannabis company Sanity Group GmbH. Sanity said the decision was part of the largest round of cannabis investment in Europe to date. Germany legalized medical cannabis in 2017, and the German government is currently in the process of legalizing adult-use marijuana. BAT said the investment gives it a noncontrolling minority stake in Sanity.
“This funding is an important milestone for us and a strong signal towards the future of cannabis in Germany and Europe,” said Max Narr, chief investment officer at Sanity Group. “Against the backdrop of a challenging global economy, we are proud to have achieved a funding round of this magnitude.”
Switching to Pot
An August Gallop poll found that for the first time ever, more people smoke cannabis than cigarettes. The percentage of people who smoke cannabis was the highest it had been since the question was first asked in 2013. According to the poll, 16 percent of Americans currently use cannabis, while only 11 percent reported smoking a tobacco cigarette in the week prior. It was also discovered that cannabis use in the U.S. had grown by a third in the year since the last poll.
Meanwhile, the e-cigarette market has grown leaps and bounds in the last decade. Market research firm Euromonitor International estimated that between 2013 and 2019, the e-cigarette market quadrupled in value from less than $5 billion to more than $20 billion.
As recently as 2016, the world’s five largest tobacco companies—Philip Morris International (PMI), Japan Tobacco, Imperial Brands, Altria and the aforementioned BAT—reportedly sold $150 billion worth of tobacco products and made $35 billion in profits. While it’s still too early to say how much the industry has potentially lost as consumers turn to smokeless nicotine products and cannabis, the amount is surely significant.
Under these conditions, it’s no surprise that big tobacco is setting its sights on burgeoning cannabis markets. It already has the infrastructure in place to mass produce smokeable products while having the money to invest in new technologies and experienced talent.
In 2016, PMI invested $20 million in Israeli tech company Syqe Medical, which notably developed a cannabis inhaler. In 2021, PMI Chief Executive Officer Andre Calantzopoulos told Bloomberg in an interview, “Our priority is what we’re doing with our smoke-free products, and that’s where I would stay on cannabis.”