Altria spending $12.8B for a stake in e-vapor company JUUL

Daniel Fowler
December 21, 2018

"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.

The statement argues that Altria's distribution network and retail reach will help expand Juul's reach, thereby decreasing the rate of combustible cigarette sales by encouraging smokers to migrate to e-cigarettes, citing industry-funded research finding e-cigarettes cause smokers to switch, resulting in declining cigarette use. The press release makes repeated mention of adult smokers - no accident, in a week when Juul was called out by name by the U.S. Surgeon General in an advisory declaring youth e-cigarette use an epidemic. The company is preparing fat bonuses for its workers, which will average about $1.3 million each, CNBC reported.

A study released by the National Academy of Sciences this year cited evidence that vaping among young people increases the risk of eventually smoking tobacco.

An illustration shows the contents of an electronic Juul cigarette box in Washington, DC October 2, 2018.

As part of the deal, Altria will give Juul access to its valuable retail shelf space, meaning Juul products will be sold alongside brands like Marlboro, Parliament and Virginia Slims.

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The deal, which is subject to antitrust clearance, would give Altria the right to nominate directors representing a third of Juul's board, the cigarette giant said. Accordingly, cigarette sales have been falling: In 2017, they were down 3.5 percent from the year before. In its release Thursday, Altria said Juul represented approximately 30 per cent of the US e-cigarette space, when factoring in online sales and products in specialty stores such as vape shops. In its release Thursday, Altria said Juul represented approximately 30 percent of the United States e-cigarette space, when factoring in online sales and products in specialty stores such as vape shops.

Juul has boosted its own lobbying spending, spending $890,000 so far in 2018, according to the Center for Responsive Politics. Just a few months ago, Juul was valued at $16 billion after Tiger Global Management led a $1.2 billion investment.

"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", the Burns CEO said. That is still far less than Altria's more than $7 million toward lobbying this year, making it the biggest spender in the USA tobacco industry.

Altria is taking out $14.6 billion in debt to finance the deal, and said Thursday they'd also reduce spending and will cut an unknown amount of jobs.

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