Source: Seeking Alpha Mar. 19, 2015 7:34 AM ET |
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)
- Tobacco stocks stand to benefit better than any other big business from the highest potential growth industry in America, that of hemp.
- From production and packaging to marketing, Big Tobacco is already equipped to own and operate the promising and swiftly legalizing cannabis industry.
- Hemp is the largest opportunity because hemp has historically been the lifeblood of the world economy, including America from its colonial days to 1937 and then during WW II.
- Legislation filed in both houses of Congress would exclude hemp from the legal definition of marijuana.
- PM is most in need of a strategy overhaul due to currency losses.
While tobacco stocks have relatively lofty valuations, they stand to benefit better than any other big business from the highest potential growth industry in America, that of hemp, cousin to marijuana, which had a 74% growth rate in 2014, to $2.7bn. The benefit of industrial hemp, which is non-psychoactive, and marijuana, both part of the cannabis family, is economic as well as health for people and planet. Some estimate that the global market for hemp consists of more than an astounding 250,000 products. China, Russia and South Korea account for 70% of the world’s industrial hemp supply, with 30 other nations accounting for the remaining 30% share. Meanwhile, due to Federal law, America is the only industrialized nation with no industrial hemp production (outside of research uses), and is therefore dependent on imports with a negligible $300 million in annual retail sales.
From production and packaging to marketing, Big Tobacco is already equipped to own and operate the promising and swiftly legalizing cannabis industry. Further, tobacco has been researching and developing its entry into the market, once legalized on a national level, for decades. National legalization is now only a matter of time with over half of states already legalizing cannabis in some shape or form, including four states and DC in the recreational space, bills under discussion in Congress for national legalization, substantial lobbying and funding from the likes of George Soros, and over half of Americans voting for legalization, 51% to 58% in recent polls. Cannabis legalization is as simple as a presidential order to the DEA, or a Congressional vote, to remove cannabis from the drug schedule. Indeed, in an interview with VICE News on 16th Mar., President Obama said, “At a certain point, if enough states end up decriminalizing, then Congress may then reschedule marijuana.”
“Hemp is of first necessity for the wealth and protection of the nation.” – Thomas Jefferson.
Tobacco researching hemp?
A piece in the most recent issue of the Millbank Quarterly, a health policy journal, says:
“Policymakers and public health advocates must be aware that the tobacco industry or comparable multinational organizations (e.g., food and beverage industries) are prepared to enter the cannabis market with the intention of increasing its already widespread use,”
Representatives from both various tobacco companies say they currently have no plans for expansion into the cannabis market. But the Millbank report – citing recently unearthed documents – found that major cigarette brands began researching cannabis opportunities in the late 1960s and early 1970s despite denying it at the time.
Hemp could be the lifeblood of the economy once again
While at least one Street analyst strictly focuses on the cannabis opportunity for the tobacco companies, hemp is the largest opportunity because hemp has historically been the lifeblood of the world economy, including America from its colonial days to 1937 and then during WW II. Since WW II, hemp has been illegal to grow in America under Federal law because of its relation to marijuana, and any imported hemp products must meet a zero tolerance level. For a concise history of how hemp managed to become illegal in 1937, via a DuPont ally on the House Ways and Means Committee, under the Marijuana Tax Act bill, see this.
Some states have made the cultivation of industrial hemp legal, but farmers in ten states have not yet begun to grow it because of resistance from the DEA. In 2013, in concert with the legalization of recreational marijuana in the state, several farmers in Colorado planted and harvested several acres of hemp, bringing in the first hemp crop in the US in over 50 years. In Feb-2014, Congress passed an agriculture bill that eased restrictions on cultivation in 10 states.
Legislation filed in both houses of Congress would exclude hemp from the legal definition of marijuana. The major risk to the hemp Federal legalization process is that its efficiency and value threaten the models that Big Business have developed over the centuries, particularly since 1937, when hemp became illegal with marijuana, though hemp has less than 0.3% THC content, versus 5-30%+ in pot. You can smoke hemp, like most any plant, but you certainly cannot get high from it.