Will Altria Group Get Into the Cannabis Industry?

Shares of Cannabis company Cronos Group, Inc spiked a few times after the market opened this week after rumors leaked that the Altria Group, Inc had expressed interest in a takeover.  The stock grew by as much as 30 percent, at one point, but then stalled at the midday break before settling at 12 percent once trading resumed.

The Altria Group, of course, is known mostly as the maker of Marlboro brand cigarettes.  As such, it makes sense that the company would be looking at getting into the cannabis business, as well.  In fact, Altria Group had opened talks with marijuana producer Aphria, Inc about a month ago.

Aphria, Inc actually took a lot of hits, on Monday, before finally closing 23.4 percent down on the day.  This drop was mostly due to the publishing of a report that questioned the company’s legitimacy by a short seller.  Then, in after-hours trading, the stock took another 7 percent hit once Cronos confirmed the sale discussion.

While neither has officially commented on the potential deal Cronos did confirm, in a statement, it was amidst discussions with Altria, but Cronos did not say the two had come to an agreement.

Sales of tobacco products have consistently waned in recent years.  When something like this happens, in any industry, legacy companies have to look for new ways to attract customers.  In the case of Altria Group (and, more importantly, the tobacco industry), shifting the focus to a similar product in an emerging market—like marijuana—could be quite a smart move.  And if the rumors are true that Altria Group is also considering the acquisition of e-cigarette company Juul, diversification could certainly be their best strategy.

On the other hand, tobacco companies are actually a bit behind the times when it comes to exploring marijuana products. As a matter of fact, alcohol purveyors were among the first off the starting block to investigate diversifying into the cannabis industry.  Actually, Corona beer owner Constellation Brands has already invested several million dollars in Canadian marijuana company Canopy Growth.  Even Coca-Cola intimated that they might get into this business, though their focus is more on the potential for a “wellness” beverage than for a recreational product.

 

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