Altria in Talks to Take Stake in JUUL Labs

Altria Group Inc. is in talks to take a significant minority stake in e-cigarette startup Juul Labs Inc., according to people familiar with the matter, a move that could give the Marlboro maker greater access to a rapidly growing but increasingly controversial segment of the nicotine market.

No deal is imminent, the people said, but should there be one it would be big: Closely held Juul, a three-year-old company based in San Francisco with more than 1,000 employees, was valued at $16 billion in a funding round this summer.

Juul’s rapid growth—it had $1.8 billion in retail sales in the year ended Nov. 17, according to Nielsen data cited by Wells Fargo—has made it one of the most valuable U.S. startups, but it has drawn criticism because of its products’ popularity with teens.

Altria sells its own e-cigarettes, including MarkTen and Green Smoke, though they make up only a fraction of its $25.6 billion in revenue. Juul commands the e-cigarette market, holding about 75 percent of share, according to Nielsen numbers compiled by Wells Fargo analyst Bonnie Herzog.

But parents, teachers and now regulators are demanding Juul stop what the FDA has labeled an “epidemic” of teen e-cigarette use. In response to regulatory pressure, Juul in November said it will halt selling most of its flavored nicotine pods for its e-cigarettes in retail stores.

In October, Altria said it will remove its MarkTen pod-based products and will stop selling all flavors except for menthol or tobacco in its cig-a-like products until the FDA reviews and approves them.

In addition to cracking down on e-cigarettes, the FDA is also pursuing a ban on menthol cigarettes. It could take years to finalize and implement a rule, which tobacco companies are sure to fight, but the possibility has weighed on tobacco stocks.

 

Todd “Bubba” Horwitz