Cannabis Has its Sights Set on Alcohol and Tobacco, Spurring Investment

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

In American culture, alcohol and tobacco loom large. Many people drink most days of the week: a beer with the game, a glass of wine with dinner, an old-fashioned to cap off the night. It is ingrained in the fabric of our social lives, even central to many religious ceremonies. According to the Centers for Disease Control (CDC), ⅔ of American adults consumed alcohol on a weekly basis, and 14 million Americans still consider themselves smokers.

This has meant big business for the alcohol and tobacco industries. In 2019, the alcohol industry raked in $252.82 billion, according to market and consumer data research firm Statista. That’s up 30% since 2011. The U.S. tobacco market was worth $12.35 billion in 2020. And just a few companies like Philip Morris International Inc. PM and Vector Group Ltd. VGR are responsible for the vast majority of sales.

These industries are ripe for disruption and competition. Recreational cannabis looks to do just that. On Nov. 6, 2012, Washington and Colorado became the first states to legalize marijuana for recreational use. And as of September, marijuana use is legal in 18 states and decriminalized in 13 more. This move toward legalization is driving an industry with massive growth potential.

Marijuana is the most commonly used, federally illegal substance in the United States. About 22.2 million Americans use it on a monthly basis, according to the CDC. This presents a huge opportunity for legal cannabis. In 2020, the legal market brought in $17.5 billion. That’s a 46% increase from 2019. By 2025 the industry should pull in revenues of $43 billion with a compound annual growth rate (CAGR) of 16%,  according to the research firm New Frontier Data. 

The potential of the market is clear, and alcohol and tobacco companies have taken notice. Not wanting to be left out of the profits, they have begun heavily investing in the industry. Constellation Brands Inc. STZ, the company behind Corona beers, bought a $4 billion stake in Canopy Growth Corp. CGC, a major player in the cannabis space. And Altria Group Inc. MO, owner of Marlboro, has invested $1.8 billion in Cronos Group Inc. CRON, a large-scale Canadian producer.

All this could bode well for the cannabis industry. It’s also a rapidly evolving space, however, it can be difficult to parse for many investors. One company that is trying to increase investor access is Foothill Capital Management. It has created an actively managed exchange-traded fund (ETF) — Cannabis Growth ETF BUDX — to capitalize on the opportunities in the market and provide an investment vehicle for individuals looking for an ETF option.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.