There’s a lot going for Big Tobacco these days. It’s not just that tobacco boasts the best historical performance of all U.S. industries. The industry’s future seems especially bright. As marijuana gradually becomes a legal drug, Big Tobacco is ready to dominate the market.
According to the 2015 edition of Credit Suisse’s Global Investment Returns Yearbook, a dollar invested in tobacco in 1900 would have turned into $6.3 million by the end of 2014, by far the best performance of all the industries that existed at the start of the 20th century.
Despite governments’ efforts to get people to quit smoking, a lot of them still do, and they represent a stable core market for Big Tobacco. In the U.S., for example, 21% of adults smoked in 2004 and 19% still had the habit in 2011. Markets for addictive products are less susceptible to economic crises than any others, and in part because they’re so politically toxic (they are less bubbly). So, investors tend to get a steady return.
Selling marijuana is still largely illegal in Europe and in the U.S., and it would be politically suicidal for companies that face as many regulatory barriers as tobacco companies do to suggest that they want to go into soft drug dealing. But they have long watched marijuana as a potential market.
In a 2014 paper entitled “Waiting for the Opportune Moment: The Tobacco Industry and Marijuana Legalization,” the political scientist Rachel Ann Barry and her colleagues quoted internal documents from Philip Morris expressing an interest in marijuana as a tobacco competitor.
These letters and memos date back to 1969. In 1970, an adviser to the board of British American Tobacco, Sir Charles Ellis, penned a proposal for a marijuana product to the company, claiming that “smoking such a cigarette is a natural expansion of current smoking habits which, if a more tolerant attitude were ever taken to cannabis, would be a change in habit comparable to moving over to cigars.”
More than 19 million Americans aged 12 and older reported using marijuana in 2012. If recreational marijuana is ever legalized beyond the four states where it’s currently permitted, the tobacco companies will be perfectly positioned to capture this vast market.
“Marijuana legalization advocates,” Barry and her colleagues wrote, “have not considered the potential effects of the multinational tobacco companies entering the market (or other corporations such as the food and beverage industries), with their substantial marketing power and capacity to engineer marijuana cigarettes to maximize efficacy as drug delivery systems, in the way that modern cigarettes are designed, whose primary objective is maximizing profits through higher sales.”
Companies listed on Marijuanastocks.com may survive on the fringes of the post-legalization industry, but many of them will be put out of business or acquired by the big-league players who have survived all the upheavals of the last 115 years while producing top returns for their investors.