As the cannabis industry is seemingly becoming the next hot market in a nation that is producing more relaxed legislation to allow the production and use of the substance, the world’s largest tobacco company, the Richmond, Virginia-based Altria Group, dove headfirst into the market last week. The Marlboro maker sunk $1.8 billion into Cronos Group (CRON), taking a 45 percent stake in the Canadian medical and recreational marijuana provider.
At the start of trading Friday morning, CRON jumped from $10.45 per share to $13.19, leveling off with nearly a 40 percent gain. Reportedly, Altria’s agreement includes the possibility to acquire additional shares over the next four years to give the cigarette giant a 55 percent ownership stake in the Toronto company.
Rapid growth in the cannabis market is expected to continue as legalization expands in the U.S. and social norms progress, with the Utah state legislature voting to loosen restrictions on medical marijuana on Tuesday of last week.
In the inaugural cannabis business competition in the Commonwealth, Virginia-based entrepreneurs vied for just a handful of openings to produce CBD (cannabidiol) or THC-A (tetrahydrocannabinolic acid) oil, both said by medical professionals to have therapeutic benefits without the psychoactive “high” that comes with smoking or ingesting the drug. In late September, the Virginia Board of Pharmacy announced the first five companies that will be allowed to dispense medical marijuana, laying the groundwork for establishing a business infrastructure throughout the state in the future.
Although Virginia law dictates that the products are not fully legal, certified patients who possess cannabis oils for medical reasons have an “affirmative defense” against prosecution.
The move from Altria signals a shift from being a sole purveyor of the traditional tobacco market. The company has been looking to diversify in the burgeoning cannabis market for a while now, while in a state that has not warmed up to the prospect of legalization or decriminalization yet.
In the 2018 General Assembly session, Senate Bill 597, Senate Bill 788, Senate Bill 726, Senate Bill 795, and House Bill 1251 were written to provide that a practitioner may issue a written certification for the use of the aforementioned substances to treat diagnosed medical conditions without being under penalty of the law.
AP reports that consumers worldwide are expected to spend $57 billion per year worldwide on legal cannabis by 2027, with spending expected to grow from $9.2 billion in 2017 to $47.3 billion in 2027 in North America.