- Altria is in talks with Juul Labs to acquire a minority stake in the e-cigarette company
- Altria’s stock has declined 20% over the past year, but increased 2% following the announcement
- Juul Labs has been the subject of an FDA investigation and media controversy over their marketing campaigns, which may have been targeted to minors
Juul Labs is up for sale…. but to who?
Juul Labs, manufacturer of the wildly popular Juul e-cigarette (read our review here and our guide here) is in talks to sell a minority stake in their company to Altria according to a Wall Street Journal report. The move follows a few months of intense criticism for the San Francisco-based Juul Labs, which has been battling the media and the FDA over accusations that they deliberately targeted children with their advertising.
It’s important to note that this information is still preliminary, but if it’s confirmed it would represent a major restructuring in the growing e-cigarette industry. As of right now, the market is fragmented between independent e-cig manufacturers that create some of the most popular vproducts in the market, and the Big Tobacco companies that have been launching imitation products to stop their customers from switching over to independent vape companies like Juul Labs.
Why is Altria buying a stake in Juul?
If Altria does buy a stake in Juul Labs, it could be viewed as an admission of defeat. Despite intense marketing efforts, no Big Tobacco company has been able to successfully chip away at Juul’s 70% market share. If you can’t beat ’em, why not join ’em (or own them)? Altria’s stock popped 2% on the news, so it seems like investors agree that they’re better off investing in their competitor rather than fighting a losing battle.
Altria’s stock has fallen approximately 20% in the past year, as investors express concerns about their declining combustible cigarette business. Despite their best efforts, they have yet to crack the e-cig market. Altria could also benefit from ongoing efforts to secure FDA approval for the IQOS heat-not-burn device. The IQOS is manufactured by Phillip Morris International, but Altria has exclusive US distribution rights. If the IQOS gets approved and Altria successfully secures a minority stake in Juul, then they will be in the best possible position to take advantage of the changes that have been roiling the tobacco industry.