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The Bayer-Monsanto Deal Won’t Eat the Cannabis Industry…Yet

September 15, 2016
Eine Brausetablette Aspirin des Pharma-Konzerns Bayer liegt am 26.05.2015 in Köln (Nordrhein-Westfalen) in einer Verpackung. Die Aktionäre der Bayer AG kommen am 27.05.2015 zur Hauptversammlung zusammen. Photo by: Oliver Berg/picture-alliance/dpa/AP Images
The news that Monsanto is being bought by Bayer probably won’t be well received in the cannabis sector. The deal brings together two research powerhouses that, reportedly, have long eyed cannabis as a possible new business. The worry is that the combined firm will have the financial and political influence to do to cannabis what it has already done to corn, tobacco, and other cash crops—namely, use pricy patented cannabis seeds (Roundup Ready Blue Dream, anyone?) that favor large-scale operators and rigidly control how all cannabis farmers farm. The merger, in other words, could be the first step toward Big Cannabis.

In truth, it’s far from certain just how worried “small cannabis” should be. On the one hand, Bayer clearly has designs on the multi-billion-dollar cannabis market. The German firm has been working with GW Pharmaceuticals on a cannabis-based medicinal extract since 2003. And while Monsanto says it “has not and is not working on GMO marijuana,” the company will soon enjoy access to Bayer’s cannabis expertise, which, given Monsanto’s control-through-litigation tactics, might lead one to imagine some pretty bleak scenarios.

That said, it’s hardly clear that this merger makes those scenarios—or Big Cannabis generally—any more plausible.

First, as a practical matter, the merger itself is still just a theory. Monsanto’s shareholders accepted Bayer’s $66 billion buyout offer, but the mega-deal needs approval from American and German regulators. And given the firms’ massive market share (it would control more than a quarter of the world’s seed and fertilizer business) on top of strong antitrust sentiment worldwide, that approval is hardly assured. And, as a side note, 60 to 80 percent of all mergers fail.

Second, even if approved, a Bayer-Monsanto enterprise likely wouldn’t launch a cannabis product until federal prohibition is lifted. It’s the same reason Big Tobacco hasn’t completely taken over cannabis, despite a decades-old interest in doing so: Massive corporations need massive volume sales, which, in the case of cannabis, is hard to do without a fully open national marketplace. Yes, some in Big Pharma are now reportedly lobbying in favor of legalization—but there’s hardly a sector-wide consensus, as the recent anti-legalization effort by Insys Therapeutics underscores.

Third, even if the feds legalized cannabis tomorrow, a Bayer-Monsanto mega-corporation probably won’t result in any retail cannabis products for some time. It’s true that Bayer has already partnered with pharmaceutical firms that are doing trials of cannabis drugs. Also, Monsanto may be less than candid when it says it hasn’t (yet) tinkered with cannabis’s genetics. But however far along their respective cannabis research efforts are, turning research into commercial product takes years, especially in a market as heavily regulated and politically fragmented as cannabis will continue to be.

Fourth, when it comes to the rise of Big Cannabis, a Bayer-Monsanto merger would merely add to a process that is already well underway. The seed and drug industries are hardly the first mainstream sectors to try to colonize cannabis. Since the start of state legalization, nearly every outside industry with a conceivable cannabis play—tobacco of course, but also food and beverage, clothing, health & wellness, tourism, and Silicon Valley venture capital—has been scrambling to bring the cannabis sector out of the margins and into the mainstream.

More to the point, as the cannabis community itself has matured, it has been moving incrementally toward a business model that, if one didn’t know better, looks surprisingly corporate. For example, with competitive pressures squeezing retail margins, a steady stream of independent retailers have been selling out to larger, more cost-efficient retail chains. This is especially the case in Colorado. Likewise, in a mirror image of the larger faming business, struggling small-scale cannabis farms are being consolidated into larger scale operations whose managers (and investors) are anxiously adopting any method, or technology, that might help them boost output and lower costs. Five or ten years from now, will those farms turn their noses up at a genetically engineered cannabis strain that promises more bang for the buck? More to the point, will their customers?

And therein lies the rub. It may be tempting to see mergers like this one as a threat to the traditional cannabis community, a culture that values a diverse mix of independent small-scale operators. Make no mistake: A merger of this magnitude does promise big changes for global agriculture. But in a cannabis sector that is looking more and more like any other consumer sector, the larger factor may the changing priorities of the cannabis consumer. In the end, the customer’s dollar determines which products—and companies—succeed or fail.

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Paul Roberts

Paul Roberts writes about business, technology, and natural resources. His work has appeared in The Los Angeles Times, The Washington Post, The (UK) Guardian, National Geographic, Rolling Stone, Harper’s, and other national publications. His latest book, "The Impulse Society," was published in 2014. He lives in Washington state.

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  • Jason Barker

    “Look what happened in Washington state on July 1st 2016 when patients lost safe access to medical cannabis- that new approach to their program was funded by George Soros and his influence on DPA as revealed by the Seattle Times on September 22, 2012. George Soros is one of the biggest and most important shareholders of Monsanto Agrochemical Company and Halliburton. Peter Lewis got his source of great wealth from Progressive Insurance. The following chart, from The Washington Times, shows how this funding was provided in further detail.” – see more at http://www.dukecitywellness.com/2016/07/the-medical-patients-voices-must-be.html

  • Rick01234

    If Monsanto wants in with GMO Cannabis, then they better come up with superior mite resistant strains to solve the pesticide issues, we already have the high THC/CBD strains we know and love, so the only thing that Monsanto/Beyer can bring to the party is highly mite resistant strains, or a miticide that isn’t toxic to any life form on the planet. I’m leaning towards the non toxic miticide, it would take decades of genetic research to prove GMO resistant strains really are that, but the hardest part is that insects do adapt fast to any such GMO genetics, and then we’re back where we started in a few years. This is evolution at work, and even Monsanto/Beyer can’t change that fact of life.

  • Open Minds

    I’m not a fan of Big anything taking over the cannabis industry, but the author of this article has made some erroneous reporting by conflating issues.
    1) Bayer is not “working” or “developing” a cannabis based drug with GW Pharma – they bought the marketing rights to certain markets which is completely different than “working” or “developing” the drug. GW Pharma sold these marketing rights to raise funds. To quote GW Pharma:
    “GW has entered into collaborations for Sativex with the following major pharmaceutical companies: Otsuka in the United States; Almirall S.A. in Europe (excluding the United Kingdom) and Mexico; Novartis Pharma AG in Australia and New Zealand, Asia (excluding Japan, China and Hong Kong), the Middle East (excluding Israel) and Africa; Bayer HealthCare AG in the United Kingdom and Canada; Neopharm Group in Israel; and Ipsen in Latin America (excluding Mexico and the Islands of the Caribbean. These agreements provide our collaborators with the sole right to commercialize Sativex in their territories for all medical indications.”

    2) The author then states that:”Yes, some in Big Pharma are now reportedly lobbying in favor of legalization” but the links leads to an article on George Soros’ effort to legalize cannabis in the US. George Soros is not Big Pharma and is not associated with Big Pharma. And just because Soros owns Monsanto stock it doesn’t mean anything. Soros has over $4 billion dollars invested in over 170 companies, including Monsanto. People need to stop freaking out about the so called Monsanto-Soros link. George Soros is known to lean towards liberal causes which is why he donates money to the ACLU and the Drug Plicy Alliance.

    The most likely result which the author does point out, is that Big companies will try to buy out successful up & coming companies in the cannabis industry. But this has always been the case in all industries.