On December 7, 2018, Altria Group, makers of Marlboro, announced a $2.6 Billion (CND) dollar deal with Toronto-based cannabis company, Cronos. The deal marks Big Tobacco’s first investment in the rapidly growing cannabis market and their move toward the CBD industry.

 

Canada is the first industrialized nation to federally legalize the adult use of recreational marijuana. Producers in the ‘Great White North’ already struck billion-dollar deals with major companies like Constellation Brands and Molson/Coors.

 

Why Canada?

Marijuana is federally legal. So that’s a no-brainer.

 

Canada is highly governmentally regulated. Take alcohol, for example. Sales and distribution are controlled by provincial liquor boards and commissions.

 

  1. The Canadian dollar

 

Dealing in a currency that is not as valuable as the one you are paying with is a massive benefit. You get more for your money.

 

  1. Location.

 

Geographically, it’s favorably located between Europe and the United States.

 

Most important is Altria’s diversification of their portfolio investments. Cigarette smoking is rapidly declining, so other investment options make sense for the tobacco giant.

 

  1. It’s a platform for both Altria and Cronos to expand to any market as the recreational cannabis industry grows.

 

 

Why Cronos?

 

Cronos is on the cutting edge of genetically engineered cannabinoids, the active compound in marijuana.

 

The potential for financial gain is undeniable. Both Cronos and Altria are betting to make billions on this deal.

 

But is Big Tobacco, makers of the world’s deadliest consumer products, entering the marijuana market a good thing? I get we will have to wait and see.