British tobacco giant helms business activity to include cannabis.

Earlier this year, British American Tobacco (BAT) acquired a stake in the Canadian cannabis operator OrganiGram. The tobacco behemoth recently also signed a research agreement that will look at different CBD-based cannabis products, with tests of a new CBD vape product already taking place in Manchester. 

BAT executives said over interviews they see cannabis as part of the firm's future. 

According to BBC, BAT said it wanted to "accelerate" its transformation, which will include reducing the health impact its products have. 

BAT's chief marketing executive Kingsley Wheaton told Radio 4's Today Programme, when they think of the firm's future, it's "certainly beyond nicotine products." For them, cannabis is interesting "as another wave of future growth," he said.

"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," Wheaton said. 

According to BAT half-year results released at the end of June, the firm had an 8.1% increase in revenues to £12.18bn. Over a third of BAT's revenues in the UK came from vaping brands such as glo, Velo and Vuse. Consumers of non-combustible products jumped from 2.6 million to a whopping 16.1 million.

Most of BAT's revenue still comes from tobacco sales, however. Popular cigarette brands such as Dunhill, Kent, Rothmans and Lucky Strike continue to generate huge profits for BAT at home and overseas in countries such as Brazil, Turkey and Pakistan. Although the overall revenue from BAT's cigarette and heated tobacco produce fell 3% to £10.5bn.

That we are entering an era where traditional cigarettes are gradually being replaced with safer products speaks the fact that other companies too turn to alternative product lines. Philip Morris International is another example where a company has announced it will reinvent its product line to include safer products, switching from combustibles to vaping and heated tobacco. 

For play-safe investors, big tobacco remains a stable investment opportunity as these companies almost always have more than one market to serve their products.