WHAT’S BEING CLAIMED:
- Altria, the owner of Marlboro, invested $1.8 billion on Canadian marijuana company Cronos Group giving it 45% of shares in the company.
- The announcement was followed by a 2 percent rise in Altria’s shares and a 30 percent increase in Cronos.
- The CEOs of both companies expressed excitement over the partnership saying the investment will allow growth opportunities for their business.
As sales of traditional cigarettes become stagnant, Altria, owner of tobacco giant Marlboro has decided to invest in pot to help its business grow. The decision has resulted to Altria (MO) shares climbing up to 2 percent while Cronos (CRON) increased to more than 30%, according to early trading on Friday.
Partnering with Canadian cannabis company Cronos Group with an investment worth $1.8 billion, Altria is afforded a 45 percent stake in the company, with an option to up its stake to 55% for the next five years.
In a statement, Altria CEO Howard Willard said that having Cronos Group as an exclusive partner signifies an exciting new growth opportunity for the company.
CEO Mike Gorenstein also stated in a statement that “Altria is the ideal partner for Cronos Group.”
He added that Altria’s investment will be used to expand their distribution and infrastructure across the globe as well as boosting their investments in product research and development.
Following the legalization of recreational marijuana in Canada in October, and legalization of recreational and medical pot in various US states last month, cannabis stocks have been thrust into the spotlight over the past months. With many Democrats in the US House now, the Farm Bill may finally be passed. This bill legalizes the production of hemp which may open doors for more CBD or cannabidiol-containing products.
Other consumer products including alcoholic beverage and tobacco are expected to bet on cannabis as well. A multibillion-dollar investment from Constellation Brands (STZ) on Canadian marijuana company Canopy Growth (CGC) has been reported.
Although Coca Cola (KO) was rumored to be considering on investing on Aurora (ACB), its CEO James Quincey said Coke “doesn’t have any plans at this stage” to join the CBD market. As for Pepsi (PEP), CFO Hugh Johnson said “it’s fair to say we look at everything,” in response to analysts in October.
A joint venture of the Canadian subsidiary Molson Coors (TAP) with The Hydropothecary Corporation produces drinks infused with cannabis, while Heineken’s Lagunitas beer brand sells sparkling water infused with cannabis in California.