Marijuana Business Magazine November December 2018

COLUMN: TRENDS AND HOT TOPICS B ring up the entry of Big Alcohol and Big Tobacco into the marijuana space with some well-versed industry watchers, and it’s like asking for a replay of that classic scene from Poltergeist. “They’re heeeeerrrre.” Over the course of 2018, there’s been a flurry of business activity by several multibillion-dollar companies in the alcohol and tobacco space looking to capitalize on opportunities in legal marijuana. As of mid-September: • Alcohol giant Constellation Brands, producer of well-known spirits such as Corona beer and Robert Mon- davi wine, has invested $3.8 billion into Canadian MJ company Canopy Growth. The investment followed an initial stake Constellation purchased in Canopy in 2017. • Molson Coors Brewing has joined forces with another Canadian MJ producer, The Hydropothecary Corp., to manufacture nonalcoholic, marijuana-infused beverages. • Heineken’s Lagunitas Brewing, a craft beermaker in California, released a THC-infused sparkling water. • American tobacco company Pyxus International (formerly Alliance One International) bought control- ling stakes in two more Canadian MJ companies – Island Garden and Goldleaf Pharm – and invested in a North Carolina hemp grower. • British tobacco company Impe- rial Brands invested in a United Kingdom-based cannabis startup, Oxford Cannabinoid Technologies, a biotech research firm that’s looking into medicinal uses for marijuana. • Altria Group, the owner of Marl- boro maker Philip Morris USA and an investor in alcohol colossus Anheuser-Busch InBev, is “evaluat- ing market opportunities” in the marijuana sector. That may scare the proverbial beje- sus out of small business owners in the U.S. marijuana industry, since the entire market has been built by tiny companies with relatively little access to serious capital with which to scale operations. These pioneers could be worried – and rightly so – about their market share shrinking with the arrival of heavyweights such as Constellation and the rest. But just because they’re here doesn’t mean they’re going to dominate anytime soon. At least not in the U.S. market. Here’s why: Ongoing Federal Obstacles The bottom line for big companies such as Constellation, Altria and Pyxus is simple: Marijuana is still illegal at the federal level in the United States. That’s going to keep them largely sidelined for now, said Electrum Part- ners chairman Leslie Bocskor, who has a history in investment banking. “This is the beginning. They’re start- ing to position themselves,” Bocskor said when I asked him about the rami- fications of such immense companies dipping their toes in cannabis. “But I don’t imagine that we’re going to see the immediate effect of it in any dramatic way, other than stock prices and public companies being affected in a positive way. … On a fundamental basis, the structural challenges have not changed.” Those structural challenges also include the lack of access to bank- ing in the U.S. marijuana industry, the 280E section of the federal tax code and the 1961 United Nations treaty known as the Single Convention on Narcotic Drugs, Bocskor said. However, he added a big caveat. If the U.S. Congress approves the States Act to recognize existing cannabis legislation before the end of the year – an event he expects to happen – that could open the doors much wider to Big Booze and Big Tobacco Aren’t Coming – They’re Here By John Schroyer John Schroyer But that doesn’t mean they’re going to dominate anytime soon – at least not in the United States 48 • Marijuana Business Magazine • November/December 2018