From 2014 to 2018 Altria sold its own e-cigarette brands in the United States (US). In December 2018, following controversy over the increasing appeal of e-cigarettes to America’s teenagers, Altria discontinued its e-cigarette products to focus on “more compelling reduced-risk tobacco product opportunities”.
Late December 2018 the tobacco company announced that it had bought a minority stake in e-cigarette market leader JUUL, the company at the centre of national media attention and critical commentary, and an investigation by the Food and Drug Administration (FDA) into whether the company ran advertising campaigns that intentionally appealed to non-smoking youth.
- 1 Discontinuation of E-Cigarette Brands
- 2 35% share in E-Cigarette Manufacturer JUUL
- 3 Cooperation Agreement with Philip Morris International
- 4 TobaccoTactics Resources
- 5 Notes
Discontinuation of E-Cigarette Brands
In December 2018, Altria announced that it would discontinue its own e-cigarette brands MarkTen and Green Smoke as “we do not see a path to leadership with these particular products and believe that now is the time to refocus our resources”.
Altria first trialled MarkTen, produced by its subsidiary Nu Mark, in Indiana in August 2013. The product was launched nationally in July 2014, and by January 2018 MarkTen held a reported 11.4% market share of the US e-cigarette market.
Green Smoke Inc.
In April 2014 Altria acquired e-cigarette company Green Smoke Inc. for nearly US$110 million in cash and $20 million in incentive payments. Green Smoke was founded in 2008 and had operations in the U.S. and Israel.
Following the discontinuation of its own e-cigarette brands, Altria announced on 20 December 2018 that it had purchased a 35% share of e-cigarette manufacturer JUUL for US$12.8 billion.
Howard A. Willard III, Altria’s CEO, said of the purchase: “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”. He added: “We strongly believe that working with JUUL to accelerate its mission will have long-term benefits for adult smokers and our shareholders”.
Matthew Myers, president of the Campaign for Tobacco-Free Kids, has called Altria’s purchase of Juul shares “truly alarming”, adding that it brings together the two companies that have been the most successful in marketing their highly addictive products to children.
An “Independent” Company
- JUUL’s e-cigarettes will be sold alongside Marlboro and other Altria cigarette brands;
- JUUL pack inserts will be added to Altria cigarette products;
- The distribution of JUUL products will be supported by Altria’s logistics services; and
- Altria will support JUUL in its negotiations with the FDA.
FDA Angered: ‘No Evidence that Public Health Concerns Drove Altria’s Investment’
At the time of purchase, JUUL held a reported 75% share of the US e-cigarette market. It was also at the centre of a controversy relating to teenagers’ use of its products, with FDA Commissioner Scott Gottlieb stating that “…youth use of JUUL represents a significant proportion of the overall use of e-cigarette products by children”.
Altria’s acquisition of JUUL shares clearly angered the FDA. In February 2019 FDA Commissioner Scott Gottlieb demanded a meeting with Altria's CEO in which “Altria should be prepared to explain how this acquisition affected the full range of representations you made to the FDA and the public regarding your plans to stop marketing e-cigarettes and to address the crisis of youth use of e-cigarettes”.
Altria, Juul, and Gottlieb met in March 2019 but media reported that Gottlieb had found the meeting “difficult” and had indicated that “he did not come away with any evidence that public health concerns drove Altria’s decision to invest in Juul”.
Cooperation Agreement with Philip Morris International
Since December 2013 Altria has held a cooperation agreement with PMI. The financial terms of the agreements have not been disclosed.
Under the agreement, Altria gained the right to exclusively sell in the US two heated tobacco products being developed by PMI, and in return PMI has the right to exclusively sell Altria's products outside the US. The companies also said they would work together on scientific assessments and regulatory authorisations of these products (the commercialisation of these products in the United States is subject to approval by the FDA).
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- Altria Group Inc, Altria Makes $12.8 Billion Minority Investment in JUUL to Accelerate Harm Reduction and Drive Growth, 20 December 2018, accessed January 2019
- M. Fox, Juul now has ‘800-pound gorilla’ to fight FDA, experts warn, NBC News, 20 December 2018, accessed January 2019
- Reuters, Marlboro company buys 35% stake in Juul e-cigarette maker for $12.8bn, The Guardian, 20 December 2018, accessed January 2019
- A. LaVito, Maker of popular Juul e-cigarette says it wants to help stop teens from using its products, CNBC News, 25 April 2018, accessed January 2019
- S. Gottlieb, Letter to Howard A. Willard III, Chairman and Chief Executive Officer Altria Group Inc, dated 6 February 2019, FDA website, accessed March 2019
- K. Rooney, A. LaVito, Altria shares fall after FDA’s Gottlieb describes ‘difficult’ meeting on Juul], CNBC News, 19 March 2019, accessed March 2019
- A. Edney, FDA Chief to Keep Heat on E-Cigarette Makers as He Departs, Blomberg.com, 19 March 2019, accessed March 2019
- Philip Morris, Altria team up on cigarette alternatives, Reuters, 20 December 2013, accessed January 2019