By Tim Beck, Safer Michigan Coalition Chairman
Many years ago, way before herb ever became legal in the U.S., my peers and I closeted together, sitting in circles, sometimes toking on stubby roaches and exercising our prophetic skills. A burning question back then was what would happen if marijuana were legalized. Would it be controlled by the government? Big Pharma? Big alcohol? Cigarette makers? The Coca-Cola Company? Could we just grow it like tomatoes someday?
The answer to this question, so far, is none of the above; especially when it comes to the Marlboro Man.
On December 19, 2022, news broke on the Dow Jones Newswire that multibillion dollar tobacco giant Altria, owner of Marlboro and other big cigarette brands, was terminating its funding of Canadian cannabis company Cronos Group and taking a tax loss of $483 million. Altria, which owns 45% of Cronos, abandoned its warrant to purchase any future shares of Cronos, at $19 per share. Cronos share price the day Altria made its announcement was $3.81. The stock had not traded above $6 in the last 12 months.
“Given the Cronos trading levels and the March 2023 expiry of the warrant, Altria has elected to abandon the warrant,” said an Altria spokesman. Altria shares rose 2% on the announcement.
With the exception of the marijuana media outlet Cannabis.net, which published a piece titled “Altria Walks From Cronos,” there was very little coverage of this major business news in the mainstream media or even the cannabis industry business press.
“While this is not the final bell in the ‘cannabis vs. big tobacco war’, it is certainly disheartening to see your opponent walk away with a smirk and say, ‘Yeah you just aren’t that interesting as a business model, we will cut our losses . . . and just walk away, thank you very much’,” Cannabis.net eulogized.
The publication went on to say, “With hundreds of analysts crunching numbers and looking at how to salvage this cannabis investment for the future, they [Altria] came to the conclusion [that to] ‘stop the bleeding’ . . . it is better to lose $500 million now than wait for upside in the future.”
Altria continues to own 45% of Cronos stock, for which it paid a collective total of $1.8 billion in 2018. At current share prices of $2.45, the company has seen an erosion of over $1 billion in market capitation, which it will likely never recover. When Altria first made its move to capture the world cannabis market in December 2018, the news was frightening to some and an exciting, even breathtaking, development for others.
For Cronos shareholders, it was a good day. The stock price soared over 30%. Altria and Cronos executives were effusive about what seemed like a brilliant business move.
“Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria,” said its CEO Howard Willard.
Cronos’s top brass was even more excited. “Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth,” proclaimed Cronos chairman Mike Gorenstein. He went on to say, “The proceeds from Altria’s investment will enable us to more quickly expand our global infrastructure and distribution footprint, while also increasing investments in R&D and brands that resonate with our consumers. . . . It helps make sure we’re getting in front of the
regulators.”
Gorenstein’s reference to “the regulators” reflected the belief that Altria’s legendary ability to protect its tobacco business from aggressive government agencies like the Food and Drug Administration, the Federal Trade Commission and hostile members of Congress could also get marijuana legalized in the U.S.—and give the Cronos Group a competitive advantage.
On the other hand, Altria’s move was met with fear and horror from both smalltime cannabis entrepreneurs and cannabis prohibitionists alike.
Arch prohibitionist Kevin Sabet, founder of Project Smart Approaches to Marijuana (SAM), immediately went on the attack. He asserted that cannabis culture was becoming a sinister dupe of the cigarette industry, which was guilty of killing millions of people with its products over the years. SAM’s new slogan in its antimarijuana crusade became “preventing another big tobacco.”
National Review Online columnist J.J. McCullough wrote a long column making comparisons between cannabis and big tobacco. “We know the tobacco industry funded studies and swayed results to fit their narrative that cigarettes won’t kill you,” he said.
“As was the case with smoking tobacco, smoking marijuana is said to prove you’re sociable, hip, and modern,” McCollough continued. “As with tobacco, marijuana is portrayed not only as largely harmless, but as objectively good for you, with a credible function as self-medication for all sorts of ailments. . . .
And as with the tobacco industry, a cash-flush marijuana industry is eager to use its wealth to slant scientific study and political debate, lest its flattering claims begin to sire organized suspicion.”
Well, dear readers, some dark fantasies do not come true.
Kevin Sabet and his acolytes are now minus a talking point.
Those of us in our community who have been alarmed by the possibility of some kind of cannabis monopoly, rigged to benefit those who already have way too much money and control, can rest easier.
Altria could have continued for years burning cash to prop up Cronos Group. Let’s give them credit for their commonsense decision to exit the market. The political paralysis in Washington, D.C., over cannabis regulation will go on for years. The illegal cannabis market in the U.S. will be thriving for a very long time. These realities are the equivalent of a death sentence for big companies who dream of monopolies.
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