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Legal Cannabis and the Tobacco Industry: Compelling Catalyst of Conversion

June 2019

Cannabis legalisation (especially in the context of wider use of alternative delivery platforms such as vapour) furnishes the industry a tobacco bridge from being primarily tobacco providers to providers of a range of pleasure substances - including but not limited to nicotine. In the future, current tobacco entities could find themselves supplying cannabis, stimulants, broad-based medication and even other currently illegal drugs.

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Key Findings

Cannabis legalisation is a USD166 billion opportunity

Today, on the cusp of wider global legalisation, total global demand for cannabis (legal and illegal) is estimated at around USD150 billion with legal sales accounting for less than 10%. Euromonitor predicts that wider legalisation and the advent of fresh consumers and consumption missions will drive the legal market to around 80% of the total, at USD166 billion in 2025.

Cannabis aligns with and strengthens tobacco’s strategic direction

Cannabis legalisation (especially in the context of wider use of alternative delivery platforms such as vapour) furnishes the industry a bridge from being primarily tobacco providers to providers of a range of substances (related to pleasure and mental wellbeing) through reduced risk delivery mechanisms - including but not limited to nicotine and cannabis.

Tobacco should see legal cannabis as both threat and opportunity

The potential for incremental cannibalisation arguably serves the tobacco industry with a need to play in legal cannabis but its scientific expertise, compliance and marketing focus along with its development of alternative format provides it with a right to win.

Biggest emerging regulatory issues include substance mixing and youth access

There are a range of emergent issues in the regulatory space including substance mixing, youth access (particularly in relation to mental health), e-commerce, sustainability, cannabinoid nuance and questions around cannabis’ role in the public’s daily lives.

Tobacco players should look to harness future cannabis trends

The key future trends in the legal industry - democratisation and permeation, technological innovation, industrialisation and biosynthesis, the customised addressing of consumer needs - are largely ones to which the tobacco industry can bring relevant expertise to bear.

Introduction

Scope
Key findings

Background and Context

Tobacco context: seeking new avenues for growth
Diverging user population trends parses the conundrum
What is the growth potential for legal cannabis?
What we talk about when we talk about cannabis

Anatomy of Conversion

Cannabis aligns with and strengthens tobacco’s strategic direction
Why (else) tobacco should be interested in legal cannabis
Barriers to legal cannabis entry for the tobacco industry
“Generation Burnout” turn away from tobacco, embrace cannabis
Will cannabis be accretive or cannibalistic for tobacco revenue?
The decline equation: more CBD = more cessation?
Last orders for the tobacco and alcohol co-dependence?
Adopting a position in the supply chain
Commercialising cannabis’ semi-conductor
The science of a 15,000 year-old substance is in its infancy
Push and pull of fragmentation in format decision-making
Vapourisation is tobacco’s engine of catalysis

The Weedscape: Companies and Innovation

Major tobacco company cannabis activity past and future
M&A activity in legal cannabis continues to ramp up
Canndescent MBC: high-functioning cannabis luxury
48North Cannabis Corp: resonant health and wellness focus
Curaleaf Holdings: world’s biggest by revenue
Harmony: THC-adjacent CBD market leader
Slang Worldwide Inc
Key issues for emerging innovation to address
Izzy Vapes: existing technology, progressive positioning
Beboe : luxury vapourisation
Cannadips : non-combustible overlap
Omura : heat-not-burn cannabis
Indose : controlled style
Medihale : fingerprint-operated, smart vapouriser
Aces Vapes: straight to the point
Lucid Mood

Emerging Regulatory Issues

The future of regulatory framework
Entry of big tobacco, big alcohol: how could it influence?
Regulating the interaction between cannabis and other substances
Differential regulation by cannabinoid: not likely but possible
Tell your children… what exactly?
Regulating e-commerce: potential issues ahead for www.eed

(Super)Critical Future Trends

The Martha Stewart effect: democratisation and permeation

Super)Critical Future Trends

Release the vats: industrialisation, synthetics and commoditisation
All in the mind: cannabis, terpenes, mood states and cognition
Hyper-customisation: cannabis contains multitudes
Cannabis legalisation is only the end of the beginning
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