Key Regulatory Dynamics Shaping Nicotine and Cannabis

Regulatory Dynamics in Nicotine and Cannabis has been identified by industry leaders and through Euromonitor International’s global analyst network as one of the most important themes for clients in the nicotine and cannabis industries. The impact of regulation across both the tobacco and the cannabis industries is immense, with the former experiencing ever-tightening frameworks, often even on newer, perceived less harmful forms of consumption, and the latter going through a period of rapid, if uneven, liberalisation. This theme examines the key elements of regulatory mechanics in each industry, analysing where one may influence the other in the longer term.

Regulation is fundamental to both industries

Regulatory frameworks determine the performance of nicotine and cannabis, and while they are ostensibly moving in contrasting trajectories, each industry will remain heavily shaped by its legislation, making compliance capability table stakes for involvement.

Tobacco has long been the most regulated CPG industry, with its legislative frameworks influencing its performance. So fundamental to tobacco is regulation that the public health bodies and third sector organisations which drive it are significant industry stakeholders in their own right. They have developed a “science of intervention” which has made tobacco a crucible of legislative measures in other industries, not least cannabis.

Tobacco regulation enters the endgame

Since the watershed smoking and health reports in the UK and US in the 1960s, global tobacco regulation has grown increasingly restrictive in an effort to control the harms that have become increasingly associated with combustible tobacco use.

These have included and evolved through measures aimed at preventing uptake and depressing volumes (such as excise and marketing restrictions) and those aimed at denormalisation (such as public use bans and plain packaging). After decades of (in some cases, increasingly moderate) declining incidence rates, countries are beginning to embrace even more radical measures aimed at the phasing out of, as a minimum, combustible tobacco use – often referred to within the public health community as the “endgame”.

Despite decades of increasingly restrictive measures, tobacco regulation continues to evolve with the likely expansion of birth year bans, providing a concrete existential endpoint for legal sales of cigarettes

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The illusion of cannabis legislative liberalisation

In contrast to tobacco, the legislative narrative around cannabis is one of sweeping liberalisation, and to a large extent this is warranted.

Across most markets in Euromonitor International’s Voice of the Consumer: Cannabis Survey, cannabis is more visible and more acceptable than at any time in modern history

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Greater visibility and acceptance over the last five years is due to hundreds of millions more global citizens gaining access to either medical or adult-use cannabis.

However, these facts are in peril of disguising an equal truth, which is that many of these changes in regulatory frameworks are not indifferent to whether consumption of cannabis decreases – they are aimed at the same kind of control and depression of consumption as tobacco control legislation. The German health minister, responsible for bringing forward his government’s recent legalisation plan, frequently refers to cannabis as a “gateway drug” and frames the legalisation process as a means of controlling the “harms” of cannabis use.

The increasing cross-pollination of vice regulation

Tobacco is one of the major engines of regulatory innovation from a CPG perspective and it has, and will continue to have, a significant degree of influence on cannabis regulation. Currently, the general public are more likely to want cannabis regulated as tobacco than any other industry, public health advocates tend to reach for tobacco-like measures such as excise and product and marketing restrictions, and regulators see tobacco regulation as the primary model for evolving cannabis legislation.

Taxation is a central tobacco control measure and one that has been adopted readily by models of recreational cannabis regulation

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Whilst rates of excise thus far have tended to be lower than those on tobacco products, they have still caused issues for industry profitability in some markets (particularly in California and Canada).

Aligning future of nicotine and cannabis regulation

In the short term, the trajectories of tobacco and cannabis regulation are likely to continue to diverge as the bulk of regulatory emphasis on the former falls on the endgame, in particular for combustible products, while liberalisation (albeit slow, staggered and incremental) is the order of the day within cannabis.

However, as use of high-risk tobacco dwindles (being coercively phased out in an increasing number of markets), it is likely that, with profiles as substances with limited evidence of physical harm combined with a history of stigmatised use, nicotine and cannabis regulation becomes more closely aligned.

As higher-risk tobacco use declines and attitudes towards cannabis consumption evolve, regulation of each will increasingly run in parallel. In the longer term, societies will need to settle on treatment of the ongoing use of both.

Learn more about emerging trends in the nicotine and cannabis legislative environments in our report Regulatory Dynamics in Nicotine and Cannabis