Altria Secures $12.8B Minority Stake in Juul

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Altria and Juul logos

Altria Secures $12.8B Minority Stake in Juul

12/20/2018
Altria and Juul logos

RICHMOND, Va. — After several weeks of speculation, Altria Group Inc. made a $12.8-billion investment in Juul Labs Inc. The move represents a 35-percent economic interest in Juul, valuing the San Francisco-based vapor company at $38 billion.

"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," said Howard Willard, Altria's chairman and CEO.

"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," he added. "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."

According to the companies, the service agreement will accelerate Juul's mission to switch adult smokers to e-vapor products. Juul will remain fully independent.

"Altria's investment sends a very clear message that Juul's technology has given us a truly historic opportunity to improve the lives of the world's one billion adult cigarette smokers," said Kevin Burns, CEO of Juul. "This investment and the service agreements will accelerate our mission to increase the number of adult smokers who switch from combustible cigarettes to Juul devices."

As part of the service agreements:

  • Altria will provide Juul access to its premier innovative tobacco products retail shelf space, allowing Juul's tobacco and menthol-based products to appear alongside combustible cigarettes. Juul's flavored products will continue to only be available on Juul.com.
  • Altria will enable Juul to reach adult smokers with direct communications through cigarette pack inserts and mailings to adult smokers via Altria companies' databases.
  • Altria will apply its logistics and distribution experience to help Juul expand its reach and efficiency and Juul will have the option to be supported by Altria's sales organization, which covers approximately 230,000 retail locations.

The news comes on the heels of Altria's decision to discontinue the production and distribution of all MarkTen and Green Smoke vapor products, and VERVE oral nicotine containing products, as Convenience Store News previously reported.

The decision, according to the company, was driven by the current and expected financial performance of these products, coupled with regulatory restrictions that burden Altria's ability to quickly improve these products.

In announcing that move, Altria said it would refocus its resources on more compelling reduced-risk tobacco product opportunities.

Silicon Valley-based Juul has built an industry-leading position in the vapor category. The company has quickly grown both revenue and share, and today represents approximately 30 percent of the total U.S. e-vapor category. Juul has a deep innovation pipeline and currently operates in eight countries, with rapid international expansion plans, according to a joint release.

"This is a unique and compelling opportunity to invest in an extraordinary company, the fastest growing in the U.S. e-vapor category. We are excited to support Juul's highly-talented team and offer our best-in- class services to build on their tremendous success," Willard added.

Richmond-based Altria's wholly owned subsidiaries include Philip Morris USA Inc., U.S. Smokeless Tobacco Co. LLC, John Middleton Co., Sherman Group Holdings LLC and its subsidiaries, Nu Mark LLC, Ste. Michelle Wine Estates Ltd., and Philip Morris Capital Corp.  (Altria holds an equity investment in Anheuser-Busch InBev SA/NV.

Convenience Store News will update this story throughout the day.