Cannabis

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The tobacco industry has long-standing interest in cannabis as a potential product. Internal industry documents reveal that since 1970, Philip Morris International (PMI), British American Tobacco (BAT) and RJ Reynolds (now owned by BAT) have been interested in commercial cannabis manufacture.1

Background

In a 1970 memo on cannabis, George Weissman, President of Philip Morris wrote: “While I am opposed to its use, I recognize that it may be legalized in the near future[…] Thus, with these great auspices, we should be in a position to examine: 1. A potential competition, 2. A possible product, 3. At this time, cooperate with the government.”2   

Cannabis legalisation and decriminalisation has become more prevalent in recent years.3 In the US, where recreational cannabis is now legal in 11 states,4 tobacco companies have leant their support to pro-cannabis groups lobbying for legalisation.5

With falling cigarette sales in developed markets, and the relaxation of cannabis laws, there is an increased “legal demand” for cannabis products.6 This is an opportunity for tobacco companies to invest in a market worth an estimated US$200 billion worldwide (Euromonitor data).7 There are several reasons for tobacco companies’ interest: the functional similarities of cannabis production; its use with tobacco in roll-your-own (RYO) cigarettes; the ability to extract its active ingredients (tetrahydrocannabinol (THC) and cannabidiol (CBD)) for use in e-cigarettes; and its medicinal potential.8 The tobacco industry is keen to promote its associations with harm reduction and pharmaceuticals over conventional cigarettes and cannabis offers an opportunity to do so.

As cannabis moves from a model of prohibition to one of legal regulation and as tobacco companies invest in the sector, the industry may start to mirror the tactics of Big Tobacco, including “pushing governments to crack down on smaller competitors, funding research which fits their own commercial and reputational interests, or exploiting traditional cannabis growers in lower-income countries, and lobbying against public-health oriented regulations and in favour of more industry-friendly ones.”9, according to illict trade expert Benoit Gomis.

Transnational Tobacco Company Investments in Cannabis

Philip Morris International

In 2016, PMI invested US$20 million in Syqe Medical, an Israeli company developing a medical cannabis inhaler. This was the second largest cannabis investment in 2016.10 PMI has not publicly spoken about the investment.

Altria

In December 2017, Altria made an investment of US$1.8 billion for 45% of Cronos Group, a Canadian cannabis company.11 In its 2020 “10 Year Vision”, Altria said it wants to “Help position Cronos as a leader in a highly responsible, regulated and legalized U.S. cannabis market.”12 However, in November 2019 Altria declared its investment had reduced in value by US$731 million, because of the complicated regulatory procedures surrounding cannabis products.13

Imperial Brands

In April 2018 Imperial invested in Oxford Cannabinoid Technologies (OCT) which describes itself as managing “a wide-ranging research program that investigates the medical potential of cannabinoids across different therapeutic areas.”14 OCT is licensed by the Home Office.

Matthew Phillips, Chief Development Officer at Imperial, said: “We are pleased to be partnering with OCT. Cannabinoid products have significant potential and our investment enables Imperial to support OCT’s important research while building a deeper understanding of the medical cannabis market.”1516 In an interview in April 2019, Imperial’s then Chief Executive Officer Alison Cooper refused to disclose the amount invested in OCT but said that it was an “interesting area to look at”.17

In June 2018, Imperial Brands invested in UK based Oxford Cannabinoid Technologies, a biotech company researching medicinal cannabis. Imperial said its investment would give it “a deeper understanding of the medical cannabis market.”18 As of November 2020, the size of investment is unknown. In 2019, Imperial increased its stake in the cannabis market, investing GB£75 million in Auxly, a Canadian “global leader in branded cannabis products”.19 Imperial described the move as an expansion of its “next generation product” portfolio.20

In September 2019, a “partnership agreement” was finalised between Imperial and Canadian cannabis producer Auxly Cannabis Group.2122 As part of the deal, Imperial paid GB£85 million to acquire 19.9% stake in Auxly. Imperial will also give Auxly “worldwide licences for its vaporization technology” and access to its subsidiary Nerudia.21 Auxly has also become “an exclusive partner for Imperial’s cannabis-related business activities”.21 It is unclear whether this arrangement precludes Imperial from making further partnership deals with cannabis companies.

British American Tobacco

In February 2020, BAT announced that they were researching CBD and THC flavourings for its Vype and Vuse e-cigarettes at its research facility in Southampton, but not “actively pursuing” these flavours for sale.23 However, in January 2021, BAT began test-marketing a range of CBD products called the “VUSE CBD Zone in Manchester, UK, saying this was part of its efforts to go “beyond nicotine”. BAT referred to a potential nationwide roll-out of VUSE CBD Zone later on in 2021.24

Via BTomorrow Ventures, set up in 2020, BAT invested in start-ups working on cannabis, CBD and other “wellness” products.25 By July 2021, the dedicated website listed the following companies in its portfolio:26

  • Trait Biosciences – “Innovative Science advancing cannabinoid production technology”.262728
  • Cannopeaia – “Proprietary cannabis vaping technology”.2629
  • Unrooted – “Functional beverages boosted by African baobab”.26 Unrooted’s website stated that it used CBD in one of its products.30

In March 2021, BAT bought a 20% stake in OrganiGram, a Canadian cannabis producer with plans to produce “next-generation” CBD based cannabis products. The C$221 million investment includes an agreement to build an R&D Center of Excellence in New Brunswick.3132

In September 2022, BAT acquired a non-controlling minority stake in the German cannabis company Sanity Group.33 BAT said that this added “a European dimension to one of the many BAT explorations beyond nicotine”.33 Sanity Group’s portfolio includes CBD products and medical cannabis.33 On 27 September Sanity Group announced that its latest funding round was “led by BAT Group.”34

For more see British American Tobacco: Btomorrow Ventures and Tobacco Company Investments in Pharmaceutical & NRT Products.

Tobacco staff migration

Several tobacco company employees and people associated with the tobacco industry have been taking roles in the growing cannabis industry. 

  • In 2020, Boldt Runners Corp., seller of Cannadips CBD pouches (similar to snus-style nicotine pouches), appointed former Altria executives Peter Diatelevi and Maura Scott as CEO35 and CSO respectively.36
  • Taat Lifestyle and Wellness, producer of the ‘Beyond Tobacco’ hemp cigarette (not yet launched as of October 2020), appointed former PMI commercialization executive Tim Corkum as Chief Revenue Officer in 2020.37
  • PharmaCielo, a Canadian cannabis oil company with operations in Colombia, has a number of tobacco industry executives, and industry-linked scientists, on its Board of Directors. These include:

Relevant Links

TobaccoTactics Resources

 

References

  1. R.A. Barry, H. Hiilamo, S.A. Glantz. Waiting for the opportune moment: the tobacco industry and marijuana legalization. Milbank Q. 2014;92(2):207-242. doi:10.1111/1468-0009.12055
  2. G. Weissman, Unknown, Truth Tobacco Industry Documents, February 1970, znpy0002
  3. J. Collins, Why are so many countries now saying cannabis is OK?, BBC News, 11 December 2018, accessed November 2020
  4. NORML.org website, Cannabis State Laws, NORML¸ accessed November 2020
  5. K.A. Sabet, Marijuana Lobby Admits Tobacco Industry Executives Pay-to-Play, Huffington Post, 6 June 2017, accessed November 2020
  6. A. Konrad, Legal Marijuana Co. Privateer Holdings Scores Millions From Peter Thiel’s Founders Fund, Forbes, 8 January 2015, accessed November 2020
  7. S. MacGuill, Legal Cannabis: The Billion Dollar Market Set to Disrupt Consumer Goods, Euromonitor, 6 June 2019, accessed November 2020
  8. R. Pollock, Three Biggest Reasons Tobacco Giants Eye Lucrative $50 Billion Marijuana Market, The Daily Caller, 1 April 2016, accessed November 2020
  9. B. Gomis, Why we can’t let cannabis become the next Big TobaccoBMJ Opinion, 23 September 2021, accessed October 2021
  10. S. Solomon, Philip Morris investment in Syqe was 2nd-largest 2016 cannabis deal – report, The Times of Israel, 9 January 2018, accessed November 2020
  11. J. Warner, Vaping or cannabis: where’s the growth for Big Tobacco?, IG, 17 February 2020, accessed November 2020
  12. Altria, Our 10-Year Vision, Altria website, May 2020, accessed November 2020
  13. S. Williams, Here’s How Much Altria Has Lost on Its Cronos Investment, The Motley Fool, 29 November 2019, accessed November 2020
  14. Oxford Cannabinoid Technologies, About Us, undated, accessed April 2019
  15. Imperial Brands, Imperial Brands Ventures Ltd announces investment in Oxford Cannaboid Technologies, Press Release 28 June 2018, accessed October 2019
  16. Tobacco giant Imperial Brands invests in medical cannabis, BBC News, 28 June 2018, accessed October 2019
  17. S. Meddings, Interview: Imperial Brands’ Alison Cooper sees light at the end of tobacco road, The Sunday Times, 14 April 2019, accessed April 2019
  18. Tobacco giant Imperial Brands invests in medical cannabis, BBC News, 28 June 2018, accessed November 2020
  19. This is Auxly, Auxly website, accessed November 2020
  20. Imperial Brands PLC, Imperial Brands PLC Diversifies Next Generation Product Portfolio to Provide Further Options for Future Growth, Imperial Brands website, 25 July 2019, accessed November 2020
  21. abcR. Harris, Tobacco companies invest in cannabis, Time Bulletin, 29 September 2019, accessed October 2019
  22. Auxly Cannabis Group, Auxly Closes C$123 Million Investment and R&D Partnership with Imperial Brands and Strengthens its Board, 25 September 2019, accessed October 2019
  23. Press Association, British American Tobacco looking into cannabis vape flavours, Daily Mail:This is Money, 10 February 2020, accessed November 2020
  24. British American Tobacco, BAT launches first CBD vaping product, BAT website, undated, archived 12 January 2021, accessed January 2021
  25. British American Tobacco, BTomorrow Ventures: About, website, accessed September 2021
  26. abcdBritish American Tobacco, BTomorrow Ventures: Portfolio, website, undated, archived 20 July 2021, accessed September 2021
  27. Trait Biosciences Receives Strategic Investment From Btomorrow Ventures As Lead Investor In A C$31 Million Series A Financing, PR Newswire, 16 June 2021, accessed September 2021
  28. N. Zdinjak, CBD Company Trait Biosciences Completes CA$31M Series A Round Led By Btomorrow Ventures (Benzinga), press release, 16 June 2021, accessed September 2021
  29. com, website under construction in September 2021
  30. Unrooted Drinks: FAQs, website, undated, accessed September 2021
  31. S. Khan, S. Cavale, BAT looks beyond tobacco to Canadian marijuana, Reuters, 11 March 2021, accessed October 2021
  32. Organigram and BAT Form Product Development Collaboration – Includes Strategic Investment from BAT for 19.9% Equity Interest, 11 March 2021, accessed October 2021
  33. abcBritish American Tobacco, BAT announces Sanity Group investment, press release, 26 September 2022, accessed September 2022
  34. Sanity Group, German Cannabis company Sanity Group announces $37.6 Million Series B funding round, press release, 27 September 2022, accessed September 2022
  35. Boldt Runners Corporation, Cannadips CBD Secures Funding and Announces Former Altria Senior Executive, Peter Diatelevi, as New CEO, Cision PR Newswire, 18 August 2020, accessed November 2020
  36. T. Edward, CBD Company Boldt Runners Corp. Brings Former Tobacco Executive To Their Team, High Times, 1 September 2020, accessed November 2020
  37. TAAT Lifestyle & Wellness Ltd., “Going Beyond”: Seasoned Ex-Philip Morris Commercialization Executive Tim Corkum Appointed Chief Revenue Officer of Taat, GlobalNewswire, 21 August 2020, accessed November 2020
  38. PharmaCielo, UK Tobacco Giant Gets Medicinal Cannabis Expertise, 13 June 2017, accessed April 2019
  39. Imperial Brands, Simon Langelier: Non-Executive Director, undated, accessed April 2019
  40. PharmaCielo, Global Business Executive Joins PharmaCielo Ltd. Board of Directors, PharmaCielo website, 10 April 2017, accessed April 2019
  41. PharmaCielo, Matteo Pellegrini, Director, undated, accessed April 2019
  42. PharmaCielo, PharmaCielo Ltd. Appoints Medical & Scientific Advisory Board, 30 November 2016, accessed April 2019
  43. PharmaCielo, PharmaCielo Appoints New and Extended Medical and Scientific Advisory Board, 9 April 2019, accessed April 2019
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