British American Tobacco, the maker of Lucky Strike and Dunhill cigarettes, has moved further into t12 Mar 2021 21:01
British American Tobacco, the maker of Lucky Strike and Dunhill cigarettes, has moved further into the cannabis market through a ÂŁ126 million investment and strategic collaboration with a Canadian company amid a boom in the sector.
BAT, one of the world’s largest tobacco groups, said that its partnership with Organigram, listed on the Nasdaq and Toronto stock exchanges, would focus on research and product development of adult cannabis products, initially on cannabidiol (CBD).
The tie-up follows BAT trialling its first CBD vaping product in Manchester in January under its Vuse brand as it seeks to expand its non-tobacco business beyond nicotine products. CBD is an active ingredient that does not make you high.
Big tobacco is seeking to diversify from its core tobacco business as cigarette sales come under pressure in the developed world. Imperial Brands, BAT’s UK-based tobacco rival, agreed a £75 million research and development partnership with Auxly Cannabis Group, another Canadian company, in 2019.
There has been a surge in investment, takeovers and product launches from companies developing medicinal and recreational cannabis products, supported by an easing and clarity around regulations. Analysts at Jefferies said cannabis provides a “natural fit for tobacco and a big incremental growth opportunity”, adding: “It comes before possible entry of [Organigram] into the world’s biggest market, the US.”
In addition, Jefferies said that big tobacco knows how to operate in a regulated environment, has experience around growing a crop and can help shift tobacco farmers over to cannabis. It also has some of the most advanced vapour technology and the growth in the cannabis market “would be largely incremental, with little threat of cannibalisation of nicotine products”.
BAT’s shares traded up 7p, or nearly 0.3 per cent, at £26.27.
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