The tobacco industry has made some splashy moves into cannabis, which has folks in the pot business wondering how to react.
The latest entrant is the British giant Imperial Tobacco, which last week announced a $93 million investment in Canada's Auxly Cannabis Group, giving Imperial nearly a fifth of that company. That comes on top of a massive investment by Altria, the parent of Philip Morris USA, which took a 45 percent stake in another Canadian firm, Cronos Group, last March. The price tag: $1.8 billion. Add to this the investments made by booze companies like Constellation Brands, and noises about big pharma moving in, and it becomes understandable that a lot of people are worried that cannabis is going to become just another heartless American industry, not only taking some of the fun out of the whole thing and potentially hurting consumers, but also presenting dangers to small businesses, the environment, and public health.
Perhaps surprisingly, Hezekiah Allen takes a circumspect view of the situation. As the head of the California grower co-op Emerald Grown, Allen speaks on behalf of small cannabis farmers. "As a representative of growers, I'm not terribly worried," he said. "As a human I am quite concerned."
If big tobacco were to start buying up farmland around California, that might hurt some of the larger growers around the state, but it likely wouldn't pose a threat to the smaller ones, Allen said. They'll still have their market, while, perhaps, the bigger growers — whether or not they include big tobacco — will have theirs. It might end up looking like the beer business, where huge, multinational operators supply the mainstream, while smaller craft brewers thrive by serving people with more discriminating tastes (and fatter wallets).
Allen does regret that, when it was implementing legalization, the California legislature decided not to cap the amount of land controlled by each grower, a measure he lobbied for at the time when he was head of the California Growers Association. If acreage caps had been implemented, the specter of huge farms owned by giant corporations wouldn't even be a problem. But since that didn't happen, Allen said, the best approach is to make the most of the situation. In one sense, that might even mean welcoming big tobacco, while remaining deeply cautious and skeptical. The "pragmatic" way to look at it, he said, is that "having tobacco on our side is better than having them fighting us." So, when it comes to pressing for federal legalization or other industry-beneficial laws and regulations, the lobbying might of tobacco and other big industries might actually help.
And yet, the tobacco industry in particular has repeatedly proved itself to be rapacious, and often outright evil. "The tobacco industry has made billions putting their profitability ahead of public health," Allen said. "The cannabis industry that I envision, that so many hardworking small growers envision, is built on the culture of compassion that has gotten us here. Profitability should not be preeminent to public health and the wellbeing of our consumers." While California has passed a lot of laws aimed at protecting the environment and human health — for example, laws regulating the use of fungicides and pesticides — it's easy to imagine giant corporations lobbying to change or repeal those laws or preventing future ones from being passed.
"We need to be especially vigilant as it is a near certainty that these unscrupulous industries will attempt a strategy of regulatory capture and will seek to erode critical policies," Allen said.
On its website, the National Cannabis Industry Association says the following about its values: "NCIA uses our platform as the largest trade association in the cannabis sector to advocate for responsible business practices, corporate responsibility and stewardship, so that our emerging industry never becomes another big tobacco."
That sounds good, but what if big tobacco itself becomes a part of the cannabis industry? "Anyone who can legitimately embrace those values is welcome," said Morgan Fox, the NCIA's media relations director. "However," he added, "we also have a responsibility to help repair the harms caused by prohibition, particularly to the people and communities that have been most harmed by those policies, as well as a duty to ensure open and competitive markets that support small businesses. Other industries entering the cannabis space need to actively work toward these goals."
Fox said it was "inevitable" that giant industries would descend upon cannabis. And while it was "unfortunate that more of them weren't willing to get involved" earlier in the process of legalization (and in fact often fought against it), now that they're piling in "it is important that we make sure we hold them accountable, learn from the mistakes of some of these industries and make sure we don't let them be repeated."
In general, it seems that the cannabis industry has resigned itself to the situation. While the ideal would be the creation of a robust market filled with small and medium-sized players, creating more opportunities for entrepreneurs and workers and more choices for consumers, the fact of the matter is that cannabis is a crop. As such, it's subject to the same economic forces that shape all agricultural industries; that is, economies of scale, and some degree of commodification.