Demand for legal cannabis and cannabis-infused products is also growing in the US, where cannabidiol (CBD) product sales are expected to surpass $1 billion in 2018, according to Hemp Business Journal.
As well, the number of countries that have legalized medical cannabis continues to grow, with South Korea among the latest to give the green light. The decision by Altria to go ahead with an investment in Cronos shows that Altria is serious about investing in marijuana as a new growth area as sales of traditional cigarettes slow. This week, Aphria Inc., one of the country's largest cannabis growers, was defending itself against accusations of striking deals to enrich insiders made in a widely read short-sellers' report.
Altria's bet on Cronos could also prompt more similar deals in the sector, he added.
Big tobacco, meet Canadian cannabis. Pot producer Canopy Growth Corp's shares in Toronto rose 3.5 per cent to close at $41.75.
Atria, formerly Philip Morris, makes the move after watching its stock tumble 25 percent this year and outlook on the company's growth projected at about one percent this year and 2019.
The exclusive partnership will give Cronos additional financial resources, regulatory expertise and product development and commercialization capabilities to tap worldwide cannabis opportunities, the company said in the announcement. Juul could compliment the cannabis business, she said.
Cronos plans to focus on cannabis genetics, innovation and branding, while contracting with farmers to grow the product and working with retailers.
Altria had been assessing market opportunities in the cannabis industry since at least September. As part of the deal, Constellation also received new warrants which, if exercised along with its existing warrants, would increase its ownership in Canopy beyond 50 per cent. This initial equity investment equates to a noteworthy 45% ownership stake in Cronos.
"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria", Howard Willard, Altria's chairman and chief executive officer said in a statement.
Not surprisingly, investors are cheering this game-changing partnership, bidding up Cronos's shares by as much as 38% in premarket trading today. Altria shares that vision, Mr. Gorenstein said.
Cronos said it will use the capital to accelerate its global growth and expansion, as well as research and development. It's a logical fit, because "big tobacco knows how to cultivate crop, knows how to deal with regulators, they are at the forefront of vaporization technology, and they also arguably have less reputational risk than other fast-moving consumer goods", he said.
With smoking rates in the USA falling fast, Altria is under pressure to find new sources of revenue. It.