Altria buys stake in JUUL: What it means

 

By Betsy Brock
Research Director

Altria, the maker of Marlboro cigarettes, recently purchased a stake in JUUL, the company that manufactures the wildly popular e-cigarette with the same name. JUUL controls approximately 70 percent of the e-cigarette market. The company started in 2015 and is valued at $38 billion.
JUUL’s stated mission is to “improve the lives of the world’s one billion smokers by eliminating cigarettes.” The company’s merger with Altria, the country’s largest cigarette company, calls this mission into question. It is hard to understand how a company can strive to eliminate cigarettes from the marketplace while partnering with a company that controls the largest cigarette market share in the U.S.
Altria paid $12.8 billion for a 35 percent ownership stake in JUUL. As a part of this agreement, Altria agreed to adopt and support the JUUL mission, provide JUUL with premier tobacco product retail shelf space, allow JUUL to communicate with consumers via cigarette pack inserts and marketing databases, allow JUUL to remain in control, apply logistics and distribution experience to help JUUL, and provide funds that benefit JUUL employees and investors.
This agreement means JUUL will have access to Altria’s vast and substantial marketing networks. Altria typically controls the most valuable and noticeable shelf space behind convenience store cash registers on the so-called tobacco “power wall.” Further, Altria has a consumer marketing database with an estimated 25 million names.
JUUL is taking other steps to expand their reach. They recently hired a full-time lobbyist who is based in Minnesota. The lobbyist who has extensive experience lobbying for the medical device industry will lead lobbying efforts in Minnesota, Iowa, North Dakota, and South Dakota.
Despite JUUL’s success, the company does face uncertainty. In 2018, the FDA opened an investigation into JUUL.
The FDA ordered JUUL to turn over company marketing and scientific reports in order to determine if JUUL targets youth with marketing.
In mid-September, the FDA took it one step further. The FDA put JUUL and four other e-cigarette companies on notice with 60 days to prove they have the systems in place to ensure that young people can’t access these products. Failure to do so could result in the removal of these products from the market.
JUUL’s partnership with Altria likely means JUUL will have access to Altria’s vast legal expertise and resources. Altria is known for vigorously pursuing legal battles. The company is not afraid to challenge the federal government. It is hard to know what this could mean for the FDA’s planned JUUL crackdown or for the future of JUUL itself.

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