Marlboro cigarettes' parent company delves into marijuana market

Marlboro cigarettes' parent company delves into marijuana market

The Virginia-based parent of the company behind Marlboro, Parliament and other cigarette brands will acquire a 45-per-cent ownership stake in Cronos with the initial investment, announced Friday. "This is big for everyone", Cronos CEO Mike Gorenstein said in an interview with Marijuana Business Daily.

Separately Altria also said it would discontinue some of its e-cigarette brands, including all of MarkTen and Green Smoke e-vaper products, based on their financial performance and will take a related pretax charge of US$200 million in the fourth quarter. Doing so would lift Altria's status to a majority shareholder as it would own around 55 percent of the company.

The value of publicly-traded Canadian cannabis companies had soared leading up to October 17, when sales of cannabis became legal under rules and regulations established by Ottawa and the provinces. Altria is in talks to acquire a stake in e-cigarette start-up Juul Labs Inc., according to reports by US media outlets.

The Denver-based brewing company said earlier this year that its Canadian unit would partner with the Hydropothecary Corporation "to pursue opportunities to develop non-alcoholic, cannabis-infused beverages for the Canadian market following legalization". It has entered into joint ventures to boost its presence and capacity in Canada and overseas, including in Israel and Australia.

Cronos plans to focus on cannabis genetics, innovation and branding, while contracting with farmers to grow the product and working with retailers.

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Cronos has partnered with Boston biotech firm Ginkgo Bioworks Inc.to genetically engineer the active compounds of cannabis. Cronos's stock, therefore, may indeed be worth buying following this landmark partnership with Altria. "We think that that model of growing your own plants is very hard to scale and execute well".

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.

Altria will nominate four directors to Cronos's board, which will increase to seven directors from five. Bank of America Merrill Lynch financed Constellation's deal with Canopy.

Cronos confirmed last Friday that it was in talks with Altria after a Reuters report.

Cronos shares were up 23% in pre-market trading, while Altria's stock gained 2%, according to CNBC. Demand for legal cannabis and cannabis-infused products is also growing in the USA, where cannabidiol (CBD) product sales are expected to surpass $1 billion in 2018, according to Hemp Business Journal. "This puts a bid under the market for the next year".

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