Big Tobacco Becoming Big Marijuana? Just Talk For Now

Marijuana may one day be a natural step for Big Tobacco, but that day is a long way off and Big Tobacco's inevitable domination is anything but certain.

I went to Las Vegas last year with two other lawyers from my firm to attend the National Association of Tobacco Outlets’ (NATO) annual trade show. We thought it a good idea to go to such an event to gauge Big Tobacco’s interest in the emerging cannabis industry.

Walking from booth to booth, it was obvious that Big Tobacco was embracing (dare we say, grasping at?) the concept of vaporizing — branded as a new way to avoid actual cigarettes while still getting your tobacco fix, maybe even with a fruity flavor depending on your vape of choice. I could not help but think how most of the booths were nearly identical to the cannabis booths I have seen at various Canna-conventions and cannabis-oriented trade shows where vaping cannabis-based oils is already all the rage. There is a clear but uneasy synergy between marijuana and Big Tobacco, with the biggest differences being current laws and what goes into the vaporizers.

We talked with the Big Tobacco folks, hoping to learn more about their perspective. The feelings regarding cannabis among those with whom we spoke were decidedly mixed. Some actually requested that we not discuss marijuana with them, while others expressed mild to serious interest in investing in the cannabis marketplaces in some of the states in which we practice.

This past February, a Bloomberg News article by Leonid Bershidsky, entitled, Big Tobacco’s Future as Big Marijuana, got a lot of social media play in the cannabis community. The article is on the inevitability of Big Tobacco swallowing up or destroying “mom and pop” marijuana businesses across the country and dominating the marijuana industry, once legalization becomes more widespread.

I completely disagree.

Marijuana may one day be a natural step for Big Tobacco, but that day is a long way off and Big Tobacco’s inevitable domination is anything but certain.

Big Tobacco will not pull the trigger on marijuana until federal laws change, and such a change is highly unlikely in the next 3-5 years. Congress is not likely to legalize marijuana federally until at least half of the states have themselves done so. And until then, there is just no way Big Tobacco will bet its financial life on relatively unprofitable and federally illegal marijuana ventures.

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Even if Big Tobacco wanted to get into marijuana markets now, it would have trouble due to state law restrictions on who can and cannot participate in their cannabis industries. Barriers to entry like residency requirements, mandatory disclosures, and actual industry experience would all work to keep Big Tobacco out. I also question how many medical marijuana patients would purchase marijuana for medical use from an entity associated with Big Tobacco. The same holds true for recreational users, though probably to a lesser extent.

Most importantly, I believe that before Big Tobacco seriously considers jumping into marijuana, the moms and pops of the cannabis world will have expanded and become stronger despite federal prohibition. More and more individuals with real business acumen are getting into the cannabis industry, and their willingness to risk it all in the face of federal raids and asset forfeitures will give them tremendous operational and branding advantages over Big Tobacco when it comes to brand recognition and advanced product development.

Though I do not dispute that Big Tobacco will eventually make its way into the marijuana industry in some shape or form, it isn’t immediately pending, and a lot of the small marijuana businesses you see today will do just fine when the competition comes.

P.S. If you’re interested in starting a marijuana law practice — or if you’d like to learn about the steps it will take to open a dispensary legally in your state — please attend Above the Law’s Marijuana Law event this summer in Denver, Colorado, where I’ll be a panelist. I look forward to seeing you there and helping you learn the ins and outs of this complicated and rewarding practice area.

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Hilary Bricken is an attorney at Harris Moure, PLLC in Seattle and she chairs the firm’s Canna Law Group. Her practice consists of representing marijuana businesses of all sizes in multiple states on matters relating to licensing, corporate formation and contracts, commercial litigation, and intellectual property. Named one of the 100 most influential people in the cannabis industry in 2014, Hilary is also lead editor of the Canna Law Blog. You can reach her by email at hilary@harrismoure.com.