Should the Marlboro Man be vaping?
In a deal steeped in conflicts, Altria, the largest tobacco company in the U.S., on Thursday closed on a massive investment in Juul, the U.S. leader in e-vapor that has vowed to make cigarettes obsolete.
Altria invested $12.8 billion for a 35 percent stake in Juul, giving the San Francisco-based start-up a $38 billion valuation.
For Altria, formerly Phillip Morris and best known for Marlboro cigarettes, the move further diversifies the company away from combustible cigarettes. With smoking use falling sharply in recent years, the investments strategy supports Altria’s long-term tobacco harm reduction goal.
At the same time, the stake provides a major foothold in the fastest-growing segment of the nicotine market. Said Howard Willard, Altria’s CEO, in a statement, “We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes.”
Vaping e-cigarettes is seen as less harmful than smoking traditional cigarettes.
With a services agreement, Juul gains access to prime shelf space at retail next to combustible cigarettes and opportunities for messaging inside cigarette packs and through mailings to adult smokers via Altria’s databases. Juul will have options to tap Altria’s sales organization that reaches 230,000 retail locations.
The deal was announced two days after the U.S. Surgeon General declared e-cigarette use by youth an ”epidemic,” carrying risks of driving lifetime addiction to nicotine. The FDA has threatened a ban on the devices if youth use can’t be curbed.
Juul has said its goal is to help adult smokers quit with a tobacco-free source, and both Altria and Juul said they were committed to preventing youth from using any tobacco products. Juul has already pulled flavored products from stores, enhanced age-verification online and eliminated social media accounts as part of the effort.
Some critics charge, however, that Altria’s marketing and distribution machine could pose much bigger challenges to the battle against teenage vape addiction. More worries were heard over potential lobbying efforts. Altria could steer Juul away from supporting efforts that impact traditional cigarettes, such as a proposal to reduce the nicotine levels in cigarettes.
- Altria Makes $12.8 Billion Minority Investment in Juul to Accelerate Harm Reduction and Drive Growth – Altria
- Altria Is Nearing a Deal to Take a 35% Stake in Juul – Wall Street Journal
- Juul May Get Billions in Deal With One of World’s Largest Tobacco Companies – The New York Times
- Juul Sheds Its Anti-Smoking Cred And Embraces Big Tobacco – Wired
- As smoking falls out of favor, Altria looks beyond tobacco – WTVR
- Juul sells 35% stake to tobacco giant. Now the e-cigarette maker is worth more than Airbnb or SpaceX – Los Angeles Times
- As vaping surges, teen cigarette smoking ticks up after decades of decline – CNBC
DISCUSSION QUESTIONS: How do you see Altria’s investment in Juul affecting the vaping category? Do you expect the move to stir up stricter regulatory efforts? How should retailers manage this controversial category?