The Good, The Bad, The Investment: Cronos Group and Altria

March 26, 2019 05:08 pm ET
The Good, The Bad, The Investment: Cronos Group and Altria

Altria Group and Cronos Group are two names making headlines in the medical marijuana industry. Cronos announced on 7 December that they have agreed to a $2.4 billion (Canadian dollars) investment from Altria Group. Shareholders approved of this agreement on 21 February of this year. This deal has a few implications for the budding field of medical cannabis, but before we get into that, we need to look at who these groups are and why they may—or may not be—major players.

Who Are Cronos and Altria?

According to the Cronos website, they “are a geographically diversified and vertically integrated cannabis group” from Canada that “operates within Health Canada’s Access to Cannabis for Medical Purposes Regulations and distributes globally.” That is a wordy way to say that they grow cannabis and create marijuana products within Canada’s legal framework.

Altria, on the other hand, is a United States tobacco corporation. They are a massive producer of tobacco products—one of the largest in the world. Most people know the name Philip Morris. That was Altria before the rebranding that took place in 2003.

Now that we have taken a brief look at the players, what are the implications of this investment?

A Deeper Look

Right off the bat, the knee-jerk reaction is to be upset that a cannabis group sold out to a tobacco company. Altria is not just any tobacco company either. Like others, they have a history that is peppered with shady activity.

In 2006 Altria was found guilty of racketeering and civil fraud. While they got off the chopping block—which should not come as a surprise given that Philip Morris spends millions on lobbying—this did nothing to garner faith in their brand. People view them as an evil corporation. That’s because they are an evil corporation. For decades now they have manufactured, supplied, and marketed cigarettes. There is no question that tobacco cigarettes are harmful, to say the least. However, the investment into Cronos could see some benefits for both parties.

Due to the investment, Cronos will have access to more funds for development, marketing, and research. The investment also comes with brand recognition that looks strong to potential investors. Altria’s stocks do well enough, and other investors will see the investment as a power move.

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We reached out to both parties, but both declined to offer quotes on the investment. Regardless, both sides seem to be excited.

Mike Gorenstein, CEO of Cronos Group, said that Altria’s “expertise and complementary capabilities will better position Cronos Group to support our efforts in cannabinoid innovation, as well as the creation of differentiated products and brands across medical and recreational channels and throughout our global network.” It seems that the plan is in some way to use the funds and brand recognition to develop new cannabis products.

It is clear that the products will be focused not only on recreational use—as Philip Morris has been known to focus on, the recreational use of tobacco—but also on medical marijuana products. This is a massive upside to the whole deal.

Seeing new, innovative medical cannabis products means that more ways to help patients in pain will be sought. Just about any investment into the safe, natural, and smart relief of pain, illness, and suffering is a good investment. This is because companies should be considering that people are people, not products. Bottom lines will still be met if the focus switches from pure profit to compassion. Companies can grow souls—they just need to work harder at it.

In Summation

Overall, the investment from Altria Group into Cronos Group looks to be interesting, if not great. The possibilities are there for amazing work to be done, but that will fall into the hands of those at the top of both companies.

As long as they each strive to pursue avenues of genuine progress there will be no issue. That is a tall order for Altria Group. But Cronos is still a relatively new company. Their brand is smaller than other cannabis companies, but their potential is unlimited. The ball is in their court at this point.

No matter the initial implications of this investment, time will shed some light on the outcome. Let’s hope it’s a bright light.

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