Altria strides into vape market with $13B stake in Juul
RICHMOND, Va. (AP) - Altria, one of the world's biggest tobacco companies, is spending nearly $13 billion to buy a huge stake in the vape company Juul as cigarette use continues to decline.
The Marlboro maker said Thursday that it will take a 35 percent stake in Juul putting the value of the company at $38 billion, larger than Ford Motor Co., Delta Air Lines or the retail giant Target.
"We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes," Altria Chairman and CEO Howard Willard said in a prepared statement.
E-cigarettes and other vaping devices have been sold in the U.S. since 2007 and have grown into a $6.6 billion business.
Most devices heat a flavored nicotine solution into an inhalable vapor. They have been pitched to adult smokers as a less-harmful alternative to cigarettes, though there's been little research on the long-term health effects or on whether they help people quit.
The growing popularity of e-cigarettes has alarmed a number of health officials.
This week, Surgeon General Jerome Adams said parents, teachers, health professionals and government officials must take "aggressive steps" to keep children from using e-cigarettes. Federal law bars the sale of e-cigarettes to those under 18.
Federal officials are scrambling to reverse a recent explosion in teen vaping that public health officials fear could undermine decades of declines in tobacco use.
An estimated 3.6 million U.S. teens are now using e-cigarettes, representing 1 in 5 high school students and 1 in 20 middle schoolers, according to the latest federal figures.
Juul said Thursday that it recently began to take actions intended to prevent underage vaping. The company shut down its Facebook and Instagram accounts last month and halted in-store sales of flavored pods, which were viewed by many critics as a direct play for younger users.
Juul also said that it's also enhancing age-verification for its online sales and developing further technology solutions.
Juul Labs Inc., based in San Francisco, said it had initially hesitated to accept the investment.
"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," Juul said.
Juul will remain an independent company, but it gains access to Altria's massive infrastructure and services. Namely, Altria will help Juul secure space on store shelves beside traditional cigarettes. It will also help Juul reach smokers via cigarette pack inserts and mailings.
Under the agreement, Altria only entry into the e-cigarette market will be through Juul for at least six years.
Altria's investment comes about two weeks after the company stepped into the cannabis market an investment of around $2 billion in Cronos Group, the Canadian medical and recreational marijuana provider.
Shares of Altria Group Inc. fell 3 percent in early trading.