Legal cannabis could cost alcohol and tobacco firms $55 billion per year

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Legal cannabis could cost alcohol and tobacco firms $55 billion per year

Bethan Rose Jenkins, Cannabis News Writer/Editorial

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Alcohol and tobacco companies across the globe could be letting a lot of money slip through their fingers if North America’s legal cannabis industry continues to evolve at such a rapid rate.

In fact, a new Altacorp report claims that global alcohol and tobacco giants may miss out on $55 billion annually as a result of widespread cannabis, legalization. Based on the details of the report by Toronto investment bank Altacorp Capital, the potential losses will encourage the industries to meld into one by merging their services.

Rather than competing, alcohol and tobacco companies need to learn how to work together in order to conquer the nascent, yet dominating legal weed industry.

“For these two industries, in particular, a move into the cannabis business is a necessity as a defensive move, to prevent loss of market share, as much as it is a play for growth, given the later stage these industries find themselves in,” the report states.

Author of the report and managing director of the life sciences Division at Altacorp, David Kideckel, believes that alcohol and tobacco will become the missing puzzle pieces to a swathe of trends that emerge from the cannabis industry in the future.

The entrance of these mature global businesses into the space, through acquisitions of, or partnerships with, existing cannabis firms, will afford the fledgling sector access to corporate infrastructure, best practices and industry-leading capabilities that these companies can offer,” Kideckel explained, “enabling cannabis businesses to expand their distribution, product development, and R&D capabilities.”

During an interview with Marijuana Business Daily, Kideckel said that more CPG (consumer packaged goods) giants will make an entrance in the cannabis space; particularly so once the U.S. federal government eventually shifts the laws on medical and recreational cannabis.

Those CPG companies may come from different avenues, such as Big Pharma, nutritional and wellness supplements, nonalcoholic beverages and personal care.

In the U.S., once we have more clarity with how the U.S. government is going to act, how the new attorney general will act, you may see companies be less timid to jump into the space,” he said.

Below, we touch upon some of the main points of the Altacorp report:

  • Sales revenue accrued from the Canadian recreational cannabis market will top CA$9.1 billion on an annual basis by the year 2025.
  • A further CA$1 billion is expected to be earned from the medical cannabis market.
  • Increased demand for legal weed in Canada’s newly legal industry is likely to cause supply issues.
  • Restrictions on branding and marketing may also arise in the coming years.
  • The Canadian cannabis market may be oversupplied by late 2020 after licensed cannabis cultivators complete their projects.

You can read the full report here.