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Purveyor, Fine Asian Porn
Industry Role:
Join Date: Jul 2004
Location: San Francisco Bay Area
Posts: 38,323
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As legalization spreads, it looks like one of these two industries will likely sweep in with their political clout and police muscle to overtake the industry, if they can:
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Pharmaceuticals
The most obvious choice to take on the sale of marijuana is the drug industry. It makes complete sense, since companies like Dow-30 giants Pfizer (NYSE: PFE) and Merck (NYSE: MRK), among many others, are already used to dealing with controlled substances, heavy regulation, and legal checks and balances. Indeed, these two large industry players could easily, and quite logically, begin to deal in marijuana, particularly based on their broad sales and distribution teams.
Moreover, the drug industry has been dealing with patent losses that have taken billions off of their top lines, including such massive losses as Pfizer's Lipitor, once a multi-billion dollar drug. Merck, meanwhile, saw the patent expiration of billion dollar drugs like Singulair. These hits have been hard on the pharmaceuticals industry and left many companies scrambling for new sources of revenue. Marijuana sales could more than handily fill holes lefts by patent expirations.
Adding to the intrigue of this idea is the giant research arms the drug companies possess. Professional and well-funded research effort could turn what are now odd-ball marijuana varieties created growers (going under names such as Sweet Island Skunk and Sweet Dutch) and turn them into legitimate, documents varieties of a drug type.
Big Tobacco
The problem that the drug industry would have, however, is that marijuana would, at its core, be a commodity item. While this could lead the real benefit to fall to generic drug companies like Israel's Teva Pharmaceuticals (NYSE: TEVA), that may not be as realistic an outcome.
For starters, even generics focused companies have been migrating to branded drugs. Secondly, and perhaps more importantly, marijuana is a plant. It needs to be farmed, not created in a lab. The one industry that has a history of dealing with a commodity plant is the tobacco industry.
Moreover, thanks to Altria's (NYSE: MO) Phillip Morris and its push to get tobacco regulated by the U.S. Food and Drug Administration, Big Tobacco is now completely accustomed to dealing with the government regulation that would likely surround the growing, harvesting, and sale of marijuana and marijuana based products.
In addition, the companies in this industry have massive distribution networks that could easily be adapted to handle a new product going to new customers. And, like the drug companies, tobacco companies, particularly in a mature market like the United States, are looking for ways to deal with the slow decline of their main product, cigarettes.
While Altria may not be a first mover, it isn't beyond imagination to see a smaller player testing the waters. Or, perhaps, new entrants that eventually get swallowed by the big guys once the stigma of marijuana fades.
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At least in California, they will face heavy opposition to the current decentralized model, and it is hard to imagine that they will be able to outlaw growing for personal consumption now that it is well-established throughout the state (currently individuals with a Medical Marijuana card can grow 6 mature or 12 immature plants, and personal consumption is considered a 1/2 lb of processed cannabis, 8 oz).
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