Altria Steps into the Cannabis MarketA predictable future comes to fruition.
As no surprise to anyone, tobacco giant Altria is making more moves within the cannabis space by filing two new patents this summer. According to investigative reporter Chris Roberts in a piece for Forbes, Altria filed two additional cannabis vaporizer patents, which expands its small cannabis patent portfolio.
Robert’s reporting on this move is sure to turn heads in the sector. What are Altria’s motives for getting into cannabis? Especially with Altria’s big tobacco roots and the recent negative press over the vape crisis fallout, how does this company fit into cannabis’s public image?
Altria’s subtle shift into cannabis didn’t just happen this year. This seems to be a part of a long-term vision to adapt to more product categories. In time, Altria may add cannabis vapor products into their lineup, right alongside Marlboro cigarettes, JUUL vape pods, and several alcohol brands.
As Canada Begins Recreational Sales, Altria Buys into Cronos
Although Altria had purchased two cannabis patents in 2017, the big move came in 2018, with its $2.4 billion investment into Canadian cannabis company Cronos. For many in the industry, this came as a shock, especially following on the heels of the vape crisis. Is the company behind the problematic JUUL vape products suddenly getting into cannabis? This was foreboding. But, taking a step back, the Altria investment followed a pattern. Several other multinational parent companies have begun getting involved in cannabis, notably Constellation Brands.
Roughly two years into Altria’s initial purchase of a 45 percent stake in Cronos, it’s clear this first foray into the market hasn’t gone as planned. Cronos’s stock price has also tumbled, from 17.06 per share at the time of Altria’s investment down to a worrisome 7.48 at the time of this writing. It’s lost more than twice its December 2018 value, which doesn’t bode well for Altria getting back its initial buy-in.
Altria Begins Slowly Collecting Cannabis Patents
The Cronos investment wasn’t the first foray into cannabis Altria made. In 2017 they purchased two patents, which are specific for their use with cannabis. Now, two years later, they have filed two additional patents for similar vaporizer devices. All four patents now filed by Altria come from the same inventor, Yossef Raichman.
Each of the filed patents describes a similar vaporizer device, which uses an internal heating element to vaporize the desirable contents from plant material without incineration. Within one of the 2020 filing notes, they describe the application for a device called “vaporizer 20.”
In the patent, they explain, “Vaporizer 20 may be used to vaporize the constituent cannabinoids of cannabis (e.g., tetrahydrocannabinol (THC) and/or cannabidiol (CBD)).” But also, they leave themselves open for other plant materials, stating, “Alternatively or additionally, the vaporizer may be used to vaporize tobacco, and/or other plant or chemical substances that contain an active ingredient that becomes vaporized upon the substance being heated.”
Altria seems to be quickly building a cannabis portfolio, with little indication of the ultimate goal.
End Goal Unclear, Ongoing Speculation
Robert was not able to get Altria on the record about any moves they’ve made concerning cannabis. Furthermore, Altria’s CEO has discussed little if anything about cannabis with the media, beyond reassurances that they are happy with the Cronos acquisition.
But there is ongoing speculation about where the company plans to go with their many green acquisitions and investments. Some believe this is a long-term plan to shift away from a dying industry. The number of people smoking cigarettes hit an all-time low in 2017. Considering most of the company’s holdings remain in cigarette and tobacco products, they are right to branch out.
Most experts also assume the Drug Enforcement Agency (DEA) will eventually move to legalize cannabis in some capacity. At that time, the US will go through a cannabis bubble like the world witnessed in Canada. Altria could be banking on the financial payoffs from a changing DEA opinion. Altria could be playing the long game.
Will Consumers Trust Big Tobacco’s Transition to Big Cannabis?
As Roberts fairly pointed out, thus far, national and international cannabis companies have suffered substantial losses over the last few years. Following the hype around Canada’s transition into recreational sales, few large cannabis companies have achieved profitability and continue to experience record losses.
Should Altria start pursuing the cannabis market in any real way, it remains to be seen whether they could accomplish anything where their competitors could not. Altria will first need to wait for a DEA decision, but even then, the expectations for the market are no longer what they once were. As a reminder, Aurora, Tilray, and others haven’t hit bottom yet.
As an added complication, as a big tobacco company, will Altria fit into cannabis to earn consumer trust? Unlike other recreational substances such as alcohol and tobacco, the cannabis sector comes from very recent illicit roots. The people within the industry have a lingering underlying fear of the ‘big guys.’ Patients shun Big Pharma for medical cannabis solutions, while recreational consumers continue to buy from small black market dealers despite access to more prominent, more recognizable names.
As many markets continue to see, the big players struggle to get a foothold and consumer recognition. Thus far, few national brands have captured customer attention and loyalty.
Whatever cannabis game plan Altria has in their back pocket, it will likely remain there for the foreseeable future. They could be awaiting federal cannabis legislation, or perhaps they are waiting to see when the market bottoms out. Whatever the case, Altria’s slow evolution into more than a tobacco company, is an ongoing concern for many.