U.S. tobacco company Altria has bought a 35% stake in e-cigarette startup Juul for $12.8 billion.
With declining trend in cigarette smoking among Americans, Altria’s investment in Juul could potentially help the former diversify into the alternative smoking market. Earlier this month, Altria entered the marijuana space by investing $1.8 billion for a 45% ownership in Canadian cannabis company Cronos Group. Juul has consumers in the U.S., Canada, Israel, Russia and the United Kingdom – thereby potentially allowing Altria to gain a broader global network. Juul, on the other hand, could leverage a big name like Altria to get top-shelf space at stores.
Interestingly, Juul promotes its products as smoke-free sources of nicotine for people wanting to quit smoking. Would that lead to a conflict in the partnership with cigarette giant Altria?
"We understand the controversy and skepticism that comes with an affiliation and partnership with the largest tobacco company in the US. We were skeptical as well," Juul CEO Kevin Burns said. "But over the course of the last several months we were convinced by actions, not words, that in fact this partnership could help accelerate our success switching adult smokers."
Altria said in a statement, "We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes”.
However, e-cigarette industry faces regulatory hurdles. With addiction to vaping reportedly on the rise among teenagers, federal lawmakers are trying to curb its consumption among young people. Federal law prohibits the sale of e-cigarettes to people under the age of 18. There were also reports of the Food and Drug Administration (FDA) expected to ban e-cigarettes last month, but the FDA ultimately decided to allow the selling of e-cigarettes only in parts of stores that are closed-off to teenagers.