Altria, the Maker of Marlboro Cigarettes will be Dancing with the Tune of Cannabis

The Cannabis network including worldwide marijuana seeds market was shocked late last year by the report that Altria, the producer of Marlboro cigarettes, had acquired a 45% stake in Cronos Holdings for $1.8 billion (US). The contract includes a $1.05 billion possibility to purchase an additional 10% in the future. While Cronos had recognized that discussions were in process on December 3, the stock still hit up 28% when it was confirmed.

A work in progress

In hindsight, it was clear that Altria was working to make a step into the Cannabis market at some point. If you look at cigarettes, the corporation has covered fewer Americans smoking each year since the nineteen sixties. Lately, there has been a notable uptick in the vaping industry led by JUUL Labs, another company Altria had been bartering with for a stake. However, that does not change the long-term aims facing the company’s core industry in cigarettes.

While Altria can lean on regular smoking to render high cash flow and pay dividends for a long season to come, the company has been understood to look for plans to broaden its product base. By entering the cannabis market, particularly at this initial quarter, Altria can drive to take market share, research products, and setting itself in new markets as they open. In short, this is a reasonable proactive move for the firm, and it should coordinate well with their current practices, R&D and product lines. For investors in Altria, it is interesting to visualize a company with the kind of funds progress that exists today coupled with growth in cannabis and a high dividend. An appealing blend and one that Altria could not overlook for long. A move into the cannabis industry by Altria was inevitable.

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Choosing the perfect partner to dance with

So that points us to the following question of why they decided to partner with Cronos Group. A cannabis stock expert is arguing that it is reasonable to define the Canadian cannabis market as a limited competitor in the cannabis market led by only a few proficient players. The largest is the Canopy Growth, a company that is currently 38% owned by Constellation Brands with options to advances the ownership up to 51% in the expectation so they are addressed for. If you look at the remaining players, Cronos Group was the one who fit right to Altria’s style and structure in the tobacco market. Cronos favored developing new products and brands while converging on distribution and Research and Development (R&D) rather than concentrating on growing supply.

Cronos Group has worked hard to be at the front edge of medical marijuana, a place that is much nearer to moving towards legalization in global markets compared to recreational cannabis. Their partnership with Ginkgo Bioworks— a biotech company founded in 2009 by scientists from MIT who specialize in using genetic engineering to produce bacteria with industrial applications) is definitely focused on developing innovative products that could establish value to the medical side of the cannabis business.

Dancing to the tune of the potential of medical marijuana

There are primarily two chemicals in cannabis that most users are talking about nowadays, Tetrahydrocannabinol (THC) and Cannabidiol (CBD) cannabinoids. THC is the drug that gets a person high and is the reason people desire to use cannabis recreationally— mostly from a purple weed strain. CBD does not get a person high but has been displayed to potentially aid patients with epilepsy, inflammation, pain, psychosis and other concerns.

However, there are at least a hundred of other cannabinoids that have been secluded from cannabis whose results can cause a variety of positive results in everything from hunger suppression to diabetes medications. Many of these cannabinoids are only trace quantities in natural cannabis, but the research and studies of Cronos and Ginkgo Bioworks places them in a situation to create strains that highlight these cannabinoids for new treatments.

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And when the music plays, the dancing starts

This partnership indicates that Cronos gains access to Altria’s design, manufacturing, marketing, and distribution capacities. Using that, Cronos is in excellent condition to dance into a market leading status in the developing global market for medical cannabis. Altria has set a standard in the global medical marijuana market with this purchase.

Alternatively, they could create new products or treatments that concentrate entirely on addressing these other cannabinoids as we see with CBD oils nowadays. This would allow Cronos to deliver innovative products to market that are truly unprecedented.

It is fascinating that advances in the progress of many markets, investors and companies concentrate on metrics that will not matter in the future. For cannabis, the focus is on how much cannabis a partnership can produce. Long term, we would expect few partnerships to produce their own cannabis, much like few cigarette companies produce their own tobacco.

Guest Post from Natalie Gray

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