Last year, I went to Las Vegas with two other cannabis business lawyers from my firm. We were there to attend the National Association of Tobacco Outlets’ (NATO) annual trade show held at The Paris Hotel. We at Canna Law Group thought it might be a good idea to go to such an event to try to gauge Big Tobacco’s interest in the emerging cannabis industry. Walking from booth to booth, it was obvious that Big Tobacco was embracing (dare we say, gripping onto?) the concept of vaporizing — branded as a new way to avoid actual cigarettes while still getting your tobacco fix, maybe even with a fruity flavor depending on your vape of choice. I could not help but think how most of the booths were virtually identical to the cannabis booths I have seen at various Canna-conventions and cannabis-oriented trade shows where vaping cannabis-based oils is already all the rage. There is a clear but uneasy synergy between marijuana and Big Tobacco, with the biggest differences being current laws and what goes into the vaporizers.
Wanting to learn more, my colleagues and I began networking with the Big Tobacco folks. From your basic tobacco company representative there to pedal product to the big-wig executives with real decision-making power, the feelings regarding cannabis among those with whom we spoke were mixed at best. Some actually requested that we not discuss marijuana with them while others expressed mild to serious interest in investing in the Washington and Colorado cannabis marketplaces. Big Tobacco does not have much interest in getting into the marijuana industry.
This past week a Bloomberg News article by Leonid Bershidsky, entitled, Big Tobacco’s Future as Big Marijuana, has been showing up on countless news sites on the web. The article is on the inevitability of Big Tobacco swallowing-up or destroying “mom and pop” marijuana businesses across the country and eventually totally dominating the marijuana industry, once legalization becomes more widespread. I vehemently disagree. Marijuana may one day be a natural step for Big Tobacco, but that day is a long way off and Big Tobacco’s inevitable domination is anything but certain.
Big Tobacco will not pull the trigger on marijuana until federal laws change and such a change is at least 3-5 years off. Congress is not likely to legalize marijuana federally until at least half of the states have themselves done so. Until that time there is just no way Big Tobacco investors will bet their financial lives on relatively unprofitable and federally illegal marijuana ventures.
Even if Big Tobacco wanted to get into marijuana markets right now, they would have trouble due to the various states’ tough restrictions on who can and cannot participate in the cannabis industry. Barriers to entry like residency requirements, investment caps, and actual industry experience would all work to keep out almost anyone from Big Tobacco. I also question how many cannabis medical patients would purchase marijuana for medical use from an entity associated with or backed by Big Tobacco. The same holds true for recreational users, though probably to a somewhat lesser extent.
Most importantly, I have faith that before Big Tobacco seriously considers jumping into marijuana, the moms and pops of the cannabis world will have expanded and become stronger despite federal prohibition. More and more individuals with serious business acumen are getting into the industry and their willingness to risk it all in the face of federal raids and asset forfeitures will give them all sorts of operational and branding advantages over Big Tobacco when it comes to brand recognition and advanced product development. Though I do not dispute that Big Tobacco will eventually make its way into the marijuana industry in some shape or form, it will not be anytime soon and the small marijuana businesses you see today will do just fine when that time eventually comes.