British American Tobacco strengthens its foothold in the recreational cannabis sector

By increasing its stake in the company Organigram from 19 % to 45 %, British American Tobacco (BAT) confirms its anchoring in the cannabis sector, initiated in 2021. This diversification of activities confirms both the decline in the smoked tobacco business and the search for other markets through these new products.

In March 2021 British American Tobacco (BAT) has acquired a £126 million (€145 million) stake in Canadian recreational cannabis company Organigram, taking control of the company with 19,133,000 shares.

On 6 November 2023, BAT announced that it would increase its stake in Organigram to 45 % of the shares, while holding only 30 % of the voting rights. It will pay £74 million (€85 million) in three tranches between January 2024 and January 2025.[1].

New cannabis-based products under study

This "transformative transaction," as the tobacco company calls it, is expected to accelerate its presence in the cannabis market. The bulk of these investments are expected to result in a new "strategic investment hub," as the tobacco company puts it, worth CAD$83 million (€56 million) and called Jupiter. Its function will be to target investments in emerging cannabis markets.

Since 2021, BAT's collaboration with Organigram has also been carried out in terms of research and development. It should result in the appearance of new products, which would be in the final phase of development. Among these, there would be "emulsions", new forms of vaping, and innovations in terms of flavors as well as packaging.[2]. These new products would all fall outside the scope of smoked products.

A diversification strategy for tobacco manufacturers

BAT's continued investment confirms tobacco majors' interest in the cannabis sector:

• Altria (owner of Marlboro in the United States) had started this trend in 2018, by acquiring 45 % shares in Cronos for US$1.8 billion (€1.67 billion). Altria had also started lobbying US policymakers on cannabis regulation, and purchased two vaporizer patents, one for cannabis (psychoactive), the other for cannabidiol (CBD, non-psychoactive).
• Imperial Brands invested in Canadian Auxly Cannabis Group in 2019.
• BAT followed in 2021, first taking a stake in Organigram, then another the same year in the company Trait Biosciences, which developed a CBD patent. soluble in water.
• In 2021, Philip Morris International (PMI) also acquired Carlyle, a cannabis specialist, and then the British Vectura, which notably manufactures inhalers. In 2023, PMI has bought another inhaler producer, the Israeli Syqe Medical, confirming the interest of cigarette manufacturers in this mode of consumption.

As a result of consumers’ relative disinterest in tobacco products, investments in the recreational cannabis and CBD sector are part of the tobacco industry’s current diversification strategy. As is the case with the new tobacco and nicotine products they are developing, this interest in cannabis favors non-smoked forms of the products. The vaporization, use in e-liquids and other forms of oral products (sachets, tablets, inhalers) of cannabis and CBD thus coincide with the trends at work in the tobacco and nicotine segments.

However, as with tobacco, the market for smoked forms of cannabis and CBD currently still remains predominant. With this in mind, tobacco manufacturers aim to maintain the markets for smoked tobacco products for as long as possible, while renewing the offer with new products.

©Tobacco Free Generation

M.F.