If market hearsays are to be believed, Altria Group, Inc (MO - Free Report) is interested in entering the cannabis space. Apparently, this tobacco giant is eyeing a stake in Aphria Inc. , one of the major cannabis producers in Canada. However, as of now, the companies have made no official comments on this matter. Per media sources, Altria is likely to venture into this arena with minority holdings in Aphria and it may increase the stake gradually.
Why Altria Is Interested in the Buzz About Cannabis
With sustained regulatory assaults on tobacco consumption, combined with mass awareness of the negative impacts of nicotine, it is natural for Altria to explore other business advents for sustenance. Hence, it’s not much of surprise for this tobacco major to take an interest in venturing into cannabis.
Cannabidiol, or CBD, which is essentially a chemical compound extracted from the cannabis plant, is acclaimed to have several health benefits. This finding has been creating a buzz in the corporate space. Many companies have begun viewing cannabis-infused products as the next recreational alternative along with tobacco and alcohol.
Moreover, with Canada soon to legalize the use of recreational cannabis, many companies are foraying into this nascent industry. With growing commercial interests in this space, organizations are closely inspecting the health impacts of such ingredients and the effects of including the same in a range of products.
Although Altria is the first tobacco player to venture into Canada’s cannabis space, its move is belated to behemoths from the beverage arena. Of late, some renowned beverage companies have been tip-toeing into this space via interesting partnerships. Recently, Constellation Brands invested in Canada’s Canopy Growth Corp. Molson Coors’ Canadian unit entered into a joint venture with Hexo Corp for manufacturing cannabis-infused drinks.
In fact, Coca-Cola (KO - Free Report) is also eyeing prospects in this market and plans to make an entry through investment in Aurora Cannabis. There are also rounds that big-box retailer, Walmart (WMT - Free Report) , is exploring business opportunities surrounding cannabis-based products.
That said, it has yet to be seen what type of cannabis offerings Altria will come up with and how it markets them. Experts also believe that other tobacco players are likely to follow Altria’s suit.
Although many tobacco players have been grappling with several regulatory hurdles surrounding cigarette sales, few companies, such as Altria have managed to stay afloat through effective pricing and robust strides in the e-cigarette’s arena. In fact, backed by such efforts, this Zacks Rank #3 (Hold) stock has gained almost 10% in the past three months, while the industry inched up 0.1%.
Moreover, if Altria actually enters the cannabis space, it is likely to get a boost in terms of portfolio strength. All said, let’s wait and see if such market hearsay ultimately takes shape and how it impacts the company’s performance.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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