In July 2021, Jacek Olczak, CEO of tobacco giant Philip Morris International (PMI), told the Mail on Sunday that the company would stop selling cigarettes in Britain within the next ten years. In the same interview he said that PMI were working towards phasing out traditional cigarette smoking in the UK completely.
But why would a company that relies on the sale of tobacco make such a statement? In this article we’ll take a look at the ways in which big tobacco are shifting their business models and what that might mean for the CBD market.
The Change in Consumer Smoking Habits
The government has set an ambition for England to be smoke-free by 2030, and has given the tobacco industry an ultimatum to make smoked tobacco obsolete by then, which goes some way to explaining Olczak’s comments. However, the popularity of smoking has already been on the wane for several decades. According to research quoted by the charity ASH (Action on Smoking and Health) the number of adults who smoke in the UK dropped from 45% in the mid-1970s to 14.1% in 2019. The same charity released a report about the number of people in the UK who vape, which in 2021 is 7.1% of the population. Of those, 64% have switched to vaping from smoking tobacco. Consumer habits are changing and tobacco companies need to change their focus.
In the Mail on Sunday article Olczak is quoted as saying: “I want to allow this company to leave smoking behind. I think in the UK, ten years from now maximum, you can completely solve the problem of smoking.” When asked if PMI would stop selling traditional cigarettes in the UK within that time, Olczak said: “Absolutely.” But if tobacco companies aren’t selling cigarettes, how will they make money?
Is Cannabis the Future for Tobacco Companies?
PMI isn’t the only tobacco manufacturer looking to reinvent itself. British American Tobacco (BAT), best known for brands such as Camel and Dunhill, is also making the move away from traditional cigarettes. In March 2021, BAT made a £127 million investment in a Canadian medical cannabis company Organigram. Earlier in the year BAT launched its first CBD vaping product called Vuse CBD Zone.
BATs chief marketing executive Kingsley Wheaton told Radio Four’s Today programme that the company views cannabis related products as part of its future. He said: “As we think about our portfolio for the future, certainly beyond nicotine products are interesting for us as another wave for future growth.” BAT has already been successful in moving away from selling traditional cigarettes, with more than a third of its UK revenues now coming from vaping brands.
PMI and BAT aren’t alone in dipping their toes into the CBD market. In 2019 FTSE 100 tobacco manufacturer Imperial Brands invested £75m in the Auxly Cannabis Group, allowing the Canadian company access to Imperial’s vaping technology. This follows a previous investment Imperial Brands made in June 2019 into biopharmaceutical company Oxford Cannabinoid Technologies, which focuses on researching, developing and licensing cannabinoid-based compounds and therapies.
Taking CBD Vaping into the Mainstream
Big tobacco’s interest in the cannabis market is nothing new, despite the fact that they have only recently started to invest. In 1970, Philip Morris president George Weissman wrote of marijuana in an internal memo: ‘While I am opposed to its use I recognise that it may be legalised in the near future… we should be in a position to examine 1. A potential competition, 2. A possible product. 3. At this time cooperate with the government.’
As more US states legalise cannabis and support for the legalisation of cannabis grows in the UK it makes sense for tobacco companies to get a piece of the action.
The same is true for vaping. Where it once was dismissed as a fad or a niche interest, it has become clear that vaping is the future for smokers. When asked whether the iconic Marlboro brand would disappear from Britain, Jacek Olczak said: “Absolutely. It will disappear. The first choice for consumers is they should quit smoking. But if they don’t, the second best choice is to let them switch to better alternatives.” By offering it as an alternative to smoking traditional cigarettes, these large companies are well placed to take CBD vaping into the mainstream.
Will Tobacco Companies Go Beyond Smoking?
Another of British American Tobacco’s investments in 2021 has been in Trait Biosciences Inc, an emerging cannabis biotechnology company. Bloomberg reported that ‘Trait’s strongest patents are for a technology that makes CBD water soluble. That suggests BAT… could move into other formats for cannabis consumption’.
Does this mean that BAT could start producing products that have nothing to do with smoking? According to the Bloomberg article, BAT has hinted that this might be the case, with David O’Reilly, the company’s head of scientific research, saying that if consumer’s needs are better met with products other than vaping and heated tobacco technology ‘we’ll develop new products, which could be anything’.
The CBD industry already sells a wide range of products that don’t conform to traditional methods of consuming cannabis, including food, drinks, gummies and skincare products. Could it be the case that the future of big tobacco lies in products that have nothing to do with smoking at all?Tobacco will remain profitable for some time yet, but cigarette companies are increasingly aware of the need to diversify and reinvent themselves in order to survive. Due to the continuing growth of the CBD market, especially in the wake of Covid, alongside the trend towards a liberalisation of attitudes and legislation around cannabis, CBD is likely to be a big part of the future of big tobacco.
Since January 2019 CBD has been considered a ‘novel food’, meaning that you need to apply to the FSA for authorisation to sell it in the UK. At JM Wholesale, all the CBD products we stock are Novel food compliant, meaning you can buy with confidence, knowing they’re fully approved by the Food Standards Agency.