TORONTO — Marijuana producer Cronos Group Inc.'s recent purchase of a maker of high-end cannabidiol (CBD) products may have convenience implications, because tobacco manufacturer Altria Group bought a minority stake in Cronos last year.
Among those implications are medicinal products geared to the convenience-store channel, with Richmond, Va.-based Altria having a ready supply network in c-stores, says Bethany Gomez, managing director of Brightfield Group, a Chicago-based retail marketing firm.
“The brand [Cronos] acquired, Lord Jones, is a high-end, premium luxury CBD brand, but it doesn’t jibe with [Altria’s] distribution network,” Gomez told CSP Daily News. “That indicates there are additional pieces to the deal, [possibly] developing other products at lower price points that are mass-produced.”
Last month, Toronto-based Cronos acquired the CBD businesses of Studio City, Calif.-based Redwood Holding Group, which includes the high-end brand Lord Jones, for $300 million in cash and shares in four companies, Bloomberg reported.
Founded in 2017, Redwood sells CBD-infused body lotion, bath salts and candies under the Lord Jones brand online and through many U.S. retail channels.
Last fall, the federal government took hemp off the list of Schedule I drugs, creating a legal pathway for the production and sale of hemp-derived CBD products. These products come from the cannabis family but contain 0.3% or less of the tetrahydrocannabinol (THC), a psychoactive element in marijuana.
Many companies are developing cannabis- and hemp-based products, Gomez said, but no one is doing it to scale. “That’s what tobacco companies can do well,” she said. “Keep an eye out for the development of strong budget brands brought by tobacco or other large CPG companies.”
Another trend that will emerge are more major consumer packaged goods manufacturers buying into Canadian companies in the cannabis business, Gomez said. A company with an established distribution channel ready to serve a particular consumer segment, as with c-store customers, has the potential to capture the market “at a low barrier to entry,” she said.