Tobacco company, Altria Group Inc., has agreed to a $12.8 billion investment for a 35% stake of the large vaping company, Juul Labs Inc. Altria will now be participating in the vaping industry only through Juul.
Altria made the strategic move for the following reasons:
- Provides a significant stake in the largest and fastest growing e-vapor company with a highly talented management team, successful in-market products and strong innovation pipeline.
- Offers exposure to strong revenue and volume growth opportunity with attractive unit economics and to significant international growth plans and global e-vapor profit pool.
- Better positions Altria with adult smokers interested in alternatives while continuing to compete vigorously in all other tobacco product markets.
The agreement made between the two companies will help increase Juul’s mission of switching adult smokers to vaping. Juul will still remain a fully independent company but will now have access to Altria’s services and infrastructure.
Altria will be providing Juul with access to its retail shelf space, letting Juul place their tobacco and menthol products by combustible cigarettes. Flavored products made by Juul will still only be available for purchase through their website Juul.com.
Juul will also have access to Altria’s databases, allowing the company to directly communicate with adult cigarette smokers through cigarette pack inserts and mailings. Having the ability to work with Altria, Juul will be able to expand its efficiency and reach with Altria’s distribution and logistical experience. Juul also as the option to have support from Altria’s sales organization that covers around 230,000 retail stores.
“We are taking significant action to prepare for a future where adult smokers overwhelmingly choose noncombustible products over cigarettes by investing $12.8 billion in Juul, a world leader in switching adult smokers,” said Altria CEO & chairman, Howard Willard. “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 toward that goal. We strongly believe that working with Juul to accelerate its mission will have long-term benefits for adult smokers and our shareholders.”
“Today, we have been joined by an unlikely—and seemingly counter-intuitive—investor in our journey,” said Juul CEO, Kevin Burns. “We understand the controversy and skepticism that comes with an affiliation and partnership with the largest tobacco company in the U.S. 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 understand the doubt. We doubted as well. We made it very clear that any investment would need to meet demanding and specific criteria to ensure that they are committed to our mission.”
Under their agreement, Altria is not allowed to obtain anymore shares of Juul above the 35% interest. It was also agreed that Altria will not sell or transfer any of the shares for six years after closing. As long as Altria provides its services to Juul, the tobacco company is participating in the vaping industry through Juul only. Altria has said they’re committed to doing so for at least six years.