Why Altria Is Investing in Juul

Why Altria Is Investing in Juul

Earlier this month Altria, whose Marlboro Man branding was once a symbol of tobacco's popularity, said it would discontinue some of its own e-cigarette brands.

Marlboro cigarette maker Altria Group Inc on Thursday announced it would pay $12.8 billion USA to take a 35 per cent stake in Juul Labs Inc., a marriage between an old-line tobacco giant and a fast-growing electronic-cigarette rival looking to make inroads among smokers. That's the e-cigarette maker that dominates the vaping market here in the US, and which some public-health advocates worry is getting another generation hooked on nicotine.

The $12.8 billion deal, which gives Altria a 35 percent stake, values San Francisco-based Juul at $38 billion and will put its products next to Marlboro cigarettes on American retail shelves. The cigarette maker also agreed not to sell the shares for six years, during which Juul will be Altria's only e-vapor business.

He said the company ultimately was convinced the deal could "help accelerate our success switching adult smokers".

The deal has raised eyebrows given Juul's long-stated mission of giving adult smokers a healthier alternative to cigarettes. However, despite these risks, approximately two-thirds of JUUL users aged 15-24 do not know that JUUL always contains nicotine. With the new partnership, Juul and Altria will aim to "prevent youth usage through their announced initiatives, further technological developments and increased advocacy for raising the minimum age of purchase for all tobacco products to 21".

Benefiting from a rise in the number of youths taking to e-cigarettes, the startup is on track for US$2 billion in annual revenue.

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And he worries that the new giant will fight off efforts by the FDA to limit what the agency calls an epidemic of teen vaping.

E-cigarettes heat a liquid to generate a vapour. Newsweek has also reached out to Altria Group for comment. "Research shows that young people who vape are four times more likely to begin smoking deadly cigarettes".

Last month, in another diversification away from its traditional products, Altria made a $1.8bn investment in a Canadian cannabis producer, Cronos.

Altria on Thursday also announced a cost-cutting program that includes workforce reductions and reduced third-party spending, to save $500 million to $600 million annually by the end of 2019.

Altria and Juul's deal makes Juul worth more than twice what it was worth just a few months ago, and ahead of several other well-known companies, including Airbnb, Lyft, Pinterest and Elon Musk's SpaceX.

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