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Apr 16

Will Big Tobacco become Big Marijuana?

While federal law makes their entire industry illegal, many marijuana store owners, growers and retailers fear something completely different: Big Tobacco.

Today, most legal recreational marijuana operations are small, limited to a single state and barred from ever getting large by regulators who want to keep a close eye on the fast-growing industry. But those small operators struggle to get bank loans for expansion, often produce an inconsistent product and sometimes have no idea how to balance supply and demand for their crops.

And many fear that tobacco companies, with their deep pockets, longstanding experience dealing with heavy government regulation, and relationships with generations of farmers will jump into the burgeoning marijuana market. At marijuana business conventions and in private conversations, it sometimes seems like everyone has heard a rumor about Big Tobacco getting in.

“I think there’s a ton of paranoia that they’re buying up warehouses and signing secret deals,” said Chris Walsh, the editor of Marijuana Business Daily, an industry publication.

It’s not just paranoia: Tobacco companies for generations have talked privately about getting into the weed business.

This past summer, researchers poring through more than 80 million pages of previously secret tobacco industry documents found that Big Tobacco has long had interest in pot.

“Since at least the 1970s, tobacco companies have been interested in marijuana and marijuana legalization as both a potential and a rival product,” researchers Rachel Ann Barry, Heikki Hiilamo and Stanton Glantz wrote in a June 2014 paper published in the Milbank Quarterly, which focuses on population health and health policy. “As public opinion shifted and governments began relaxing laws pertaining to marijuana criminalization, the tobacco companies modified their corporate planning strategies to prepare for future consumer demand.

“In many ways, the marijuana market of 2014 resembles the tobacco market before 1880, before cigarettes were mass produced using mechanization and marketed using national brands and modern mass media,” they wrote. “Legalizing marijuana opens the market to major corporations, including tobacco companies, which have the financial resources, product design technology to optimize puff-by-puff delivery of a psychoactive drug (nicotine), marketing muscle, and political clout to transform the marijuana market.”

The researchers entitled their paper “Waiting for the Opportune Moment: The Tobacco Industry and Marijuana Legalization.”

Today, spokesmen for Altria Group (MO) and R.J. Reynolds (RAI) said their companies have no plans to enter the legal pot marketplace. Altria is the new name for Philip Morris.

“We continually evaluate opportunities for portfolio enhancement but focus our efforts on companies and products designed to meet the preferences of adult tobacco consumers and companies where we feel we could add value,” said Richard Smith of RJR. “None of Reynolds American’s operating companies is evaluating entering the U.S. market with commercial brands of marijuana.”

Jeffrey Friedland, chief executive of the international cannabis investment and development company INTIVA, said it’s unlikely tobacco companies ever seriously considered marijuana as a product. The tobacco documents archive, turned over to the public following the 1998 national tobacco settlement, show that cigarette companies periodically discussed marijuana as both a potential threat and possible product, including combining pot with menthol cigarettes.

 

 

Read the full article here