INSUBCONTINENT EXCLUSIVE:
After a long year fighting underage use of its products, Juul Labs has today struck a deal with Altria Group, the owners of Philip Morris
USA and makers of Marlboro cigarettes.
The deal values Juul at $38 billion, according to Bloomberg, and injects the company with a fresh
$12.8 billion in exchange for a 35 percent stake in Juul Labs.
Here what Juul Labs CEO Kevin Burns had to say in a prepared statement:
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
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
We doubted as well.
He goes on to explain the strict criteria Juul Labs had for a potential investor, particularly one from the Big Tobacco
For one, Altria entered into a standstill agreement that limits the company ownership in Juul to 35 percent
Altria must also use its database and its distribution network to get the message of Juul out to current smokers.
For the past year, many
have seen Juul as a dangerous toy for teenagers
In November, FDA Commissioner Scott Gottlieb announced new measures for the e-cig industry meant to keep the products out of the hands of
One of those measures includes restricting the sale of flavored non-combustible tobacco products beyond the usual cigarette flavors of
tobacco and menthol.
But after nearly a year of playing defense, this new deal marks a bit of an offensive push from Juul Labs
The company has always stressed that its main goal is to give smokers a meaningful alternative to combustible cigarettes
Partnering with Big Tobacco may not seem like the best way to do that, optically speaking
But Altria has agreed to a few measures that would get information about Juul into the hands of actual smokers, including:
providing Juul
with access to its retail shelf space, meaning that Juul tobacco and menthol products will be merchandized right alongside Altria
combustible cigarettes
Altria will include direct communications about Juul to adult smokers through cigarette pack inserts and mailings via
Altria companies& databases
Altria will support Juul via its logistics and distribution networks, as well as its sales team which works with
more than 230,000 retail locations
In the release, Altria said that part of the reason for the investment is simply that the organization
understands change is coming to the tobacco industry.
Howard Willard, Altria Chairman and Chief Executive Officer, had this to say in a
prepared statement:
We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible
products over cigarettes by investing $12.8 billion in JUUL, a world leader in switching adult smokers
We have long said that providing adult smokers with superior, satisfying products with the potential to reduce harm is the best way to
achieve tobacco harm reduction
Through JUUL, we are making the biggest investment in our history to achieve that goal
We strongly believe that working with JUUL to accelerate its mission will have long-term benefits for adult smokers and our
shareholders.
Altria has made a few big moves lately, including acquiring a 45 percent stake in cannabis company Cronos earlier this month
The company also announced this month that it would discontinue its own e-cig products, including all MarkTen and Green Smoke e-vapor
products, and VERVE oral nicotine products.
&This decision is based upon the current and expected financial performance of these products,
coupled with regulatory restrictions that burden Altria ability to quickly improve these products,& read the press release
&The company will refocus its resources on more compelling reduced-risk tobacco product opportunities.&
Now we know that those opportunities
look like an extra-long thumb drive called Juul.
