British American Tobacco launches recreational cannabis business

British American Tobacco (BAT) announced on Thursday, March 11, that it is entering the cannabis market, through an investment in Canada. Far from being an isolated case, this investment is part of the tobacco industry's diversification strategy, faced with the decline of its main sector of activity, tobacco cigarettes.

British American Tobacco will pay 126 million pounds (147 million euros) to take control of 19.9% of the shares of the Canadian company Organigram, specialized in recreational and medical cannabis. Between March 10 and 12, the shares of the Canadian company increased by more than 50%.

With this investment, BAT will now be the largest shareholder in Organigram. Under the agreement, the two companies will work together to develop new products, including CBD. The acquisition will also give BAT access to Organigram’s research and development technologies and expertise. Earlier this year, the tobacco company had already launched a CBD vaping liquid in Manchester for testing.[1].

A bet on global regulatory developments

In recent years, the tobacco industry has seen the cannabis sector as an opportunity for diversification and growth. As a result, tobacco companies have increased their investments in various cannabis companies, while lobbying hard to ease regulatory barriers. In the United States, this public relations operation is about to succeed: Chuck Summer, the new Democratic majority leader in the Senate, has affirmed that the legalization of cannabis is now a "priority" for Congress.

A crucial investment for the tobacco industry

Faced with the continued decline in global tobacco consumption, the tobacco industry is forced to diversify its activities in order to survive. As such, the cannabis and CBD market represents a particularly strong economic challenge: according to Owen Bennett, vice president of investment bank Jefferies, the American CBD market alone is expected to reach 16 billion by 2025. However, the tobacco industry is not the only sector to see growth potential in cannabis: the alcohol company Corona Constellation Brands holds a stake in Canopy Growth, the world's largest cannabis company by market value.[2].

[1] The Figaro, British cigarette maker BAT invests in cannabis in Canada, March 11, 2021 (accessed 03/15/2021)

[2] Reuters, BAT looks beyond tobacco to Canadian marijuana, March 11, 2021 (accessed 03/15/2021)