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Why The Marijuana Business Should be Watching Big Tobacco

Most of us in the marijuana business enjoy some nice laws which create barriers to entry into the market from large national competitors.

Although we can debate when the federal barriers will fall, I think we can all agree that it will probably be sooner rather than later. All of us should start to think about the day when large multi-national corporations enter our market.

Most of us recognize this eventuality and are positioning ourselves to compete, but how do we keep tabs on the big boys? How can we monitor their progress?

I would argue that the industry we most need to watch is Big Tobacco, and specifically, what the Big Tobacco companies are doing.

Tobacco is far and away the biggest threat to our developing marijuana industry. Consider this:

  • They already have large “grow” operations that they either own or directly control.
  • They have processing facilities around the world to process raw product; and,
  • They have a very significant distribution channel.

If federal laws changed today, Big Tobacco would enter the marijuana market with a vengeance.  But, the great thing is that they cannot — yet.

Clearly, we all need to monitor the national political climate, but watching Big Tobacco and the moves they make will indicate when they are planning to enter the marijuana market.

According to several experts at the Marijuana Business Conference and Expo in Las Vegas earlier this month, tobacco companies are looking to get into the marijuana industry and plan to capitalize on the leverage that those already in the cannabis space have already built.

“The inconvenient truth is that Big Tobacco is coming for you and — surprise, surprise — she plans on giving it to you good and hard,” said Patrick Basham, director of the non-partisan public policy research organization based in Washington DC and London, during a speech at the conference

Want more evidence of Big Tobacco’s plans? Altria and Brown & Williamson have both registered domain names that include the words “marijuana” and “cannabis”.  Clearly, these are precursors to some type of product launch.

One thing I have learned while operating in the e-cigarette industry is that while Big Tobacco is certainly a formidable player, it can be monitored and give us enough lead time to react. In fact, I believe that the marijuana industry will follow a similar path as the e-cig industry.

The marijuana industry has, almost, grown and progressed to the point that Big Tobacco would struggle to enter the market. Acquisitions would still be possible, but would clearly indicate their planned direction, and at the retail level, the marijuana market would be hard to penetrate.

But growing and processing is still very much in play. Watch for Big Tobacco companies to purchase grow operations outside of the U.S. Also watch for Big Tobacco to enter the market via acquisition. But, it will take them months, if not years, to penetrate the market, and this will allow time to react.

My bellwether for the e-cig industry, as it should be for the marijuana industry, is when Big Tobacco makes an acquisition or acquires a retail presence. This would represent a significant threat to our position – whether it is in e-cigs or marijuana

Chip Paul is co-owner and CEO of Palm Beach Vapors (www.palmbeachvapors.com) the nation’s leading e-cigarette retail franchise concept. Additionally, Paul is CEO of Native Grow LLC (www.nativegrowllc.com) which holds intellectual property targeted toward the marijuana industry. Paul and his wife Cindy have the 501c4 non-profit (www.oklahomansforhealth.com) which sponsored the medical marijuana petition that circulated throughout Oklahoma last summer.

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