Philip Morris Stays Out Of Cannabis - For Now

December 26, 2018

The head of Philip Morris International has said the cannabis market remains too risky for it to follow rival cigarette maker Altria by making a significant investment in the nascent sector.

 

André Calantzopoulos, chief executive, stressed that there was a paucity of scientific data on the long-term impact of cannabis. Because international regulators were adopting different approaches to the drug, there could be logistical and reputational risks, he said. “We need better scientific understanding of [cannabis],” he told the Financial Times on the sidelines of the World Economic Forum in Davos. “We need to remember that we are operating in an international environment with different [policy] approaches.” 

 

His comments came at a time when a host of consumer goods companies are diving into the cannabis sector, which is dominated by Canadian groups. Last year, Altria agreed to take a 45 per cent stake in Cronos for C$2.4bn ($1.86bn), Corona beer maker Constellation Brands has pumped about $4bn into Canopy Growth, and the world’s largest brewer, Anheuser-Busch InBev, has teamed with Tilray to research cannabis-infused drinks.

By contrast, Coca-Cola, which had studied whether to invest in cannabis, has decided to eschew the pot business.  Muhtar Kent, outgoing chairman of Coca-Cola, told the FT last month that “the jury is still out” on the health risks of cannabis. “We’re in non-alcoholic beverages and we’re not interested in putting anything other than good things into our beverages,” he said. 

 

A legalization wave has given a quarter of the US population access to recreational marijuana — and two-thirds access to medical marijuana — creating a $10bn industry. With states such as New York and New Jersey considering whether to legalise the drug — and countries such as Canada having recently introduced legalization — pressure is rising for consumer goods companies to devise a marijuana strategy. 

 

Mr Calantzopoulos said, however, that his main focus was to persuade global regulators to drop their opposition to the marketing and promotion of smokeless, non-combustible nicotine products, such as the IQOS product made by Philip Morris, or those of rival Juul, a vaping company that is part-owned by Altria. 

 

 

Philip Morris’s chief said a key reason why he was attending WEF — after years of absence — was to convince regulators and non-governmental groups that smokeless nicotine products are a less harmful alternative to cigarettes and should be promoted as a replacement.  “We don’t want to normalise nicotine use but we want to replace the delivery method,” said Mr Calantzopoulos. 

Regulators around the world have taken different approaches to smokeless nicotine products. Although some countries have adopted a lenient stance — such as Japan, where the smokeless market accounts for almost a quarter of all nicotine use — others have been tougher. In the US, Scott Gottlieb, head of the Food and Drug Administration, has threatened to crack down on what he has labelled “epidemic” levels of underage vaping amid the rapid uptake of Juul smokeless products.

 

Mr Calantzopoulos said he was open to acquisitions and deals with industry partners to develop the smokeless market and other new products. “We are looking at a combination of acquisitions and internal development now — it’s all to develop technology,” he said. 

 

He ruled out a merger with Altria, even though the two groups have a licensing agreement in the US.  “We do not envisage a merger,” he said, noting the hype over Juul. “I do not think that Juul has any technology advantage [compared with IQOS]. What they have done is a lot of marketing and branding.”

 

 

 

Please reload