Is It Inevitable That Big Tobacco Will Shift To Big Marijuana?

Image courtesy of Paul Evans

Four states and Washington, D.C., have already legalized recreational marijuana use, while medical marijuana use is currently legal (or about to become legal) in around 20 states — not to mention the many states that have decriminalized the drug. At the same time, tobacco use continues to decline and the few remaining cigarette giants can only merge with each other so many times. So is Big Tobacco destined to become Big Marijuana?

The tobacco industry, for all its feigned ignorance about the health hazards of its products, is not stupid and has been thinking about dabbling in marijuana since at least the 1960s.

“We are in the business of relaxing people who are tense and providing a pick up for people who are bored or depressed. The human needs that our product fills will not go away,” reads an internal Philip Morris memo from 1970, making the argument that pot could be hazardous, not to the moral fabric of America, but to the tobacco industry’s bottom line. “Thus, the only real threat to our business is that society will find other means of satisfying these needs.”

In the decades since, we’ve seen tobacco use plummet in the U.S., with fewer than 20% of adults smoking cigarettes — though smoking is still the leading preventable cause of death, according to the Surgeon General.

To combat the shrinking domestic audience, the number of companies making cigarettes has been reduced to what is effectively a duopoly. In 1994, when then-Congressman Henry Waxman called the heads of the nation’s largest tobacco companies to testify before the House Energy and Commerce Subcommittee on Health and the Environment, there were executives from seven different companies there. If Congress were to hold that hearing today, there would be only three: Altria, Reynolds — which together comprise nearly 80% of the U.S. market — and the significantly smaller Liggett. Further consolidation stateside just isn’t an option.

Over at Bloomberg Gadfly, columnists Tara Lachapelle and Rani Molla make the argument that it’s not a matter of “if” the tobacco industry will get into the pot business, but “when” that change will happen.

They point out that there is a reported $45 billion a year consumer demand for marijuana in the U.S., more than chocolate or wine, and about half the demand for tobacco or beer.

However, the demand for tobacco is expected to continue to decline while alternatives like e-cigarettes are expected to grow in popularity.

Analysts tell Bloomberg that the demand for marijuana is too big for Big Tobacco to ignore, especially when you consider that these giant cigarette producers have some equipment and processes that could be easily repurposed for the production of commercial pot products.

While Altria and Reynolds have both previously denied any current interest in pursuing marijuana, it seems like they are fated to head that route as the nation moves toward legalization on the federal level.

Lachapelle and Molla conclude that the “reality of marijuana joints in big brand-name packaging may still seem far away. But it’s coming a lot sooner than you think. Companies doing the groundwork and getting ready to pounce will have a first-mover advantage.”