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Marlboro-maker Philip Morris International is eyeing a possible entry into the marijuana market as cigarette-makers struggle to grow sales amid increasing nicotine regulation.
Philip Morris CEO Andre Calantzopoulos said in an interview with Bloomberg that it’s watching the industry closely, though it hasn’t jumped in yet because of how young the market is and uncertainty about how pot sales will be regulated.
“We are doing all this work and will determine one day what avenues to pursue,” he said. “But our priority is what we’re doing with our smoke-free products, and that’s where I would stay on cannabis.”
A couple of pot stocks appeared to rise on the hint from Philip Morris. Canopy Growth was up about 1.5 percent in premarket trading after finishing the day down more than 2 percent on Tuesday. Aurora Cannabis was up almost 1 percent in premarket.
Once-mighty cigarette giants have been looking for more sources of revenue for years as cigarettes have fallen out of favor amid mounting regulation and behavioral changes. Altria, which sells Marlboros in the US, for example, took a 35 percent stake in nicotine-vape retailer Juul in 2018 as a bet on the future of vaping, which has since itself struggled, largely thanks to new restrictions on the products.
The marijuana market could be an increasingly attractive alternative to selling cigarettes for the traditional tobacco retailers. While the federal government has yet to move to legalize marijuana in the US, states are increasingly moving in that direction. New York Gov. Andrew Cuomo, for example, signed a law earlier this year that legalized the recreational use of marijuana, opening up a potentially massive market to growers, sellers and others in the industry.
Philip Morris has been the most cautious among its peers to enter the playing field. Altria, for example, invested in Canadian marijuana producer Cronos in 2018. And earlier this year, British American Tobacco took a stake in Organigram, another Canadian marijuana grower.
Philip Morris, for its part, invested in Syqe Medical, an Israeli medical cannabis company, five years ago. That company doesn’t focus exclusively on medical cannabis, but rather has developed an underlying technology that allows for inhalation of some drugs.
The company has long embraced a need to move beyond traditional cigarettes. Its recent campaign is called “delivering a smoke-free future” and states a goal of “creating less harmful alternatives to cigarettes.”
It has rolled out its smoke-free vape device Iqos in 66 markets, according to the company’s site.
And at the company’s investor day in February, executives said adding botanical products like cloves and chamomile to help with sleep and calmness could be areas of opportunity.