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Altria offers a taste of tobacco's future


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Altria offers a taste of tobacco's future

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Tobacco giant Altria Group Inc. on Dec. 7 gave the clearest indication of the industry's future direction with two major announcements.

The Marlboro-maker agreed to pay $1.8 billion for a 45% stake in Canadian cannabis producer Cronos Group Inc. The deal, which also gives Altria the option to increase its position to 55%, is the first major instance of a tobacco company investing in a marijuana business.

The same day, Altria said it would stop selling its Green Smoke and MarkTen e-cigarettes amid reports that it is eyeing an investment in Juul Labs Inc., the market leader in that space. Juul has drawn the ire of the FDA for its marketing practices. In November, Juul said it would restrict online sales and shut down some of its social media feeds in an attempt to prevent its products from ending up in the hands of minors, just days before the FDA announced it would seek to ban menthol cigarettes and limit e-cigarette sales.

The combination of the spreading legalization of cannabis and the regulatory crackdown on e-cigarettes looks set to drive a wave of M&A as tobacco companies reshape their portfolios. To further complicate matters, they are likely to face competition from food and drink producers as demand for and availability of edible and drinkable marijuana products grows, as Constellation Brands Inc.'s C$5 billion investment in Canopy Growth Corp. shows.

"We believe an investment of this magnitude provides overall legitimacy to the industry as a whole and should represent a positive catalyst for the sector, with the news likely to drive valuations higher," Canaccord Genuity analysts told S&P Global Market Intelligence with regard to the Cronos deal. Investment bankers would do well to pay close attention to this space.

Chart of the week: Where food waste occurs in supply chains by geography

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Kudlow: Chinese tariffs on US auto exports expected to drop to zero

National Economic Council Director Larry Kudlow's comments to reporters came after a temporary truce to a trade war was reached between the U.S. and China.

E-commerce car retailer has an Ally in vertically integrated financing model

A company seeking to disrupt the car-buying process is leaning on one of the most established players in the auto finance business to facilitate the expansion of its vertically integrated model.

Toyota focusing on hybrid, fuel-cell technology

An executive with the automaker said battery-electric vehicles must be improved to meet consumers' demands.

Volkswagen says recently announced profit push 'not enough,' sets tougher target

The German automaker now aims to hit a 6% operating margin by 2022 instead of the original target of 2025 announced in late September to generate capital for a push into electric cars.


Retailers look for sweet spot on shipping as Amazon ups the ante over holidays

Stores are the centerpiece of many retailers' approaches to competing with the Seattle-based behemoth.

Neiman Marcus faces off with creditors over debt restructuring

The retailer and its creditors remain divided on how to restructure its debt, including how much to raise the interest rate on a term loan worth $2.78 billion.

Hurricane damage, freight costs weigh on Dollar General's earnings, execs say

The discount retailer is trying to curb effects of tariffs while planning to open more stores in 2019 and grow the use of its mobile app.

French competition authority fines home appliances companies for price-rigging

The Autorité de la Concurrence found that AB Electrolux, Bosch-owner BSH Hausgeräte, Whirlpool Corp. and its unit Indesit, Candy Hoover and Eberhardt Frères agreed price increases on a number of white goods.

Food, Beverage & Tobacco

As global demand for food soars, fresh challenges arise

A World Research Institute study outlines the challenge of providing food for nearly 3 billion people in the next three decades while simultaneously trying to reduce deforestation rates and greenhouse gas emissions.

Altria-Cronos deal stands to benefit both parties, could spur more M&A

The tobacco giant's entry into cannabis could give it long-term advantages in a growing industry, analysts said.

Cannabis sales in Canada preview growth potential for consumer companies

U.S. consumer companies are showing increased interest in cannabis as Canada's legal market evolves and companies start to report sales figures.

Agriculture, energy seen as main winners in tenuous truce with China

China has agreed to increase purchases of American soybeans and energy, according to President Donald Trump, although many questions remain about the agreement.

Brown-Forman execs tease price increases as tariffs drag on gross margins

The wine and spirits company expects a harder hit to gross margins from tariffs on whiskey exports and U.S. tariffs on steel and aluminum imports in the second half of fiscal 2019, executives said Dec. 5.

Consumer Edge is a weekly collection of critical developments across the automotive; retail; and food, beverage, and tobacco industries that draws on exclusive analysis and value-added content from the Consumer News team at S&P Global Market Intelligence.