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UK Tobacco Giant BAT Makes Third Cannabis Investment As It Moves Beyond Nicotine

UK tobacco giant BAT has followed up its £127m investment into Organigram with further investment in a Canadian cannabis company.

Research-based Trait Biosciences says it has completed a C$31m (£18m) Series A financing round led by the corporate venture unit of British American Tobacco (BAT) – Btomorrow Ventures.

Vancouver-based Trait says the money raised will be used to support its research and development activities in relation to the commercialization of its proprietary 2XGLY water-soluble, cannabinoid technology. 

The deal will see BAT help commercialize the technology, which could be used in beverages and has led to speculation that BAT may diversify into cannabis-infused drinks or even the cannabis alcohol market.

‘Beyond Nicotine’

Peter McDonough, Trait CEO, said in a press release: “Trait is focused on developing technology that provides our business partners with a superior extract to nano-emulsion solutions that are actively used throughout the industry today. 

“Our new technology, scheduled for market launch in 2022, will deliver premium quality, water-soluble cannabinoids for use in a broad range of novel CBD products encompassing, amongst others, beverages, edibles and health and wellness applications.”

BAT, which sells Dunhill, Lucky Strike and Benson & Hedges, disclosed its interest in moving ‘beyond nicotine’ last year with the launch of Btomorrow.

In March this year Btomorrow secured a 19.9% equity interest in the NASDAQ and Toronto Stock Exchanges-listed Organigram.

Organigram and BAT say they have entered into a Product Development Collaboration Agreement which will see the creation of a ‘Center of Excellence’ in Canada looking to develop ‘the next generation of cannabis products with an initial focus on CBD’. 

CBD Vapes

This followed BAT’s entry into the UK cannabis space with the launch of a new CBD vaping device – Vuse CBD Zone.

This is being tried in a number of Manchester convenience stores with a nationwide UK launch slated for later this year.

BAT says the Building A Better Tomorrow initiative is aimed at ‘reducing the health impact of its business through a greater choice of enjoyable and less risky products’.

On releasing its results last week Kingsley Wheaton, BAT’s chief marketing officer, said it saw cannabis related products as part of its future growth.

“I think [CBD vaping] is part of the future, but the present challenge is reduced harm in tobacco and nicotine alternatives, encouraging people to switch,” he told BBC Radio 4.

BAT’s half year to the end of June, saw an 8.1% rise in revenues to £12.18bn, with more than one third of its UK revenues now come from vaping brands such as Vuse, Velo and glo.

Its said users of non-combustible products – such as vapes – jumped by 2.6m to 16.1m.

Ricardo Geada, Partner and Head of the Cannabis & Regulatory Team at Mackrell Solicitors, welcomes BAT’s move as ‘further evidence cannabis is moving into the ‘mainstream’.

“The fact that such a large and well-established company is researching this area is indicative of the promise felt within the sector and the research it is funding could help accelerate the adoption of cannabis-derived products.

“With such a significant purchasing power who knows what impact British American Tobacco may have on the industry’s future, particularly as they have a long history of lobbying for legislative change for their products around the world,” he said.

Further Diversification

This is the latest move by a tobacco company into the cannabis space with fellow British company Imperial investing £75m into the Canadian Auxly Cannabis Group, allowing it access to Imperial’s vaping technology.

This follows its initial investment into fellow UK firm Oxford Cannabinoid Technologies in June, 2018.

In 2019, US multinational Altria – a Fortune 500 company whose brands include including Philip Morris USA – invested $1.8bn in Canadian cannabis firm the Cronos Group. 

Earlier this month Marlboro maker Philip Morris International – a separate firm to the US division – said it was now looking to a future beyond cigarettes.

In an interview with The Mail on Sunday its CEO Jacek Olczak said its iconic Marlboro brand ‘will disappear’, from the UK market.

He added: “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 the better alternatives.”

When Mr Olczak became the company’s CEO in May he said its mission is to find and provide ‘less harmful alternatives to cigarettes’ to the millions of people who would otherwise still smoke.

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