British American Tobacco Plc (BAT) has invested in German cannabis startup Sanity Group GmbH along with rapper Snoop Dogg’s Casa Verde Capital, reports Bloomberg.

Berlin-based Sanity has received USD 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 use the rest to prepare for the potential legalisation 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 report said.
BAT’s bet underscores the promise of the German market, Europe’s largest economy with more than 83 million people. While cannabis use is rising, the number of people smoking cigarettes across the developed world is decreasing, forcing companies such as BAT to target new areas for growth. Kingsley Wheaton, Chief Growth Officer at BAT, said: “Investing in Sanity Group is another example of BAT’s ongoing work to explore numerous areas beyond nicotine, positioning BAT for future portfolio growth across a range of categories and geographies.”
Germany has yet to legalise recreational cannabis, but action is expected sooner rather than later. Although several governments have made U-turns or dragged their feet on pledges to legalise weed, 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.”
With cannabis stocks taking a hit from recession fears and poor investor sentiment, Hänsel said the current environment has made it harder for cannabis startups to raise cash. Indeed, Big Tobacco’s forays into the cannabis space have been hurt by the industry’s recent stock declines, Bloomberg said.