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Big Tobacco: Diversification is rife as players eye alternative markets

With cannabis seen as a less-harmful alternative to cigarettes and a hugely lucrative market, investment amongst tobacco companies has been on the rise in recent years. This trend has only become more prevalent as legalization efforts have accelerated, particularly in the US which is currently harboring the most attention.

On March 11, 2021 British American Tobacco (BAT) stated that it will buy an almost 20% stake in Canada-based cannabis producer Organigram, for approximately GBP126m ($175.81m). The deal with Organigram will give BAT access to R&D technologies, product innovation and cannabis expertise and is the latest in a string of investments which have taken place in the last few years.

Big Tobacco firms have been gradually diversifying their businesses for a number of years, with the e-cigarette/vaping segment being the most prominent example. Investments in the segment alongside the commercialization of vaping has helped counter the decline of traditional tobacco products.
The five largest tobacco companies are Philip Morris International, Altria, British American Tobacco, Imperial Brands, and Japan Tobacco International. Despite the decline in smokers, leading players in the market have still managed to attain strong financial performances.

The percentage of the world population smoking cigarettes and other tobacco products has fallen dramatically over the past 20 years alone, from around 27% at the turn of the millennia to just 20% today, according to the World Health Organisation (WHO). The diversification of tobacco companies therefore comes as no surprise, as companies take action to create a business structure which can remain profitable, despite the decline in popularity of their primary product.