British American Tobacco Plc has invested in German cannabis startup Sanity Group GmbH along with rapper Snoop Dogg’s Casa Verde Capital — the tobacco giant’s latest bet on pot as it diversifies beyond nicotine.
Berlin-based Sanity secured $37.6 million in the BAT-led Series B funding round, according to founder and Chief Executive Officer Finn Age Hänsel. Nearly half of the amount will go toward strengthening Sanity’s medical business, while the company will spend the rest on preparing for the potential legalization of recreational marijuana in Germany. Separately, BAT said the investment, via one of its wholly owned group companies, gives it a noncontrolling minority stake in Sanity.
The tobacco giant’s bet highlights the promise of the German market, which is Europe’s largest economy and has more than 83 million people. While cannabis use is rising, the number of people smoking cigarettes is decreasing across the developed world, forcing companies such as BAT to eye new areas for growth.
Germany has yet to legalize recreational cannabis, but action is expected sooner rather than later. Although several governments have made U-turns or dragged their feet on pledges to legalize pot, Germany’s coalition government is “working actively on it and really want to come to a good draft of the law by the end of this year,” Hänsel said. “This is really a priority topic for the government.”