Should the Marlboro Man be vaping?


In a deal steeped in conflicts, Altria, the largest tobacco company in the U.S., on Thursday closed on a massive investment in Juul, the U.S. leader in e-vapor that has vowed to make cigarettes obsolete.
Altria invested $12.8 billion for a 35 percent stake in Juul, giving the San Francisco-based start-up a $38 billion valuation.
For Altria, formerly Phillip Morris and best known for Marlboro cigarettes, the move further diversifies the company away from combustible cigarettes. With smoking use falling sharply in recent years, the investments strategy supports Altria’s long-term tobacco harm reduction goal.
At the same time, the stake provides a major foothold in the fastest-growing segment of the nicotine market. Said Howard Willard, Altria’s CEO, in a statement, “We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes.”
Vaping e-cigarettes is seen as less harmful than smoking traditional cigarettes.
With a services agreement, Juul gains access to prime shelf space at retail next to combustible cigarettes and opportunities for messaging inside cigarette packs and through mailings to adult smokers via Altria’s databases. Juul will have options to tap Altria’s sales organization that reaches 230,000 retail locations.
The deal was announced two days after the U.S. Surgeon General declared e-cigarette use by youth an ”epidemic,” carrying risks of driving lifetime addiction to nicotine. The FDA has threatened a ban on the devices if youth use can’t be curbed.
Juul has said its goal is to help adult smokers quit with a tobacco-free source, and both Altria and Juul said they were committed to preventing youth from using any tobacco products. Juul has already pulled flavored products from stores, enhanced age-verification online and eliminated social media accounts as part of the effort.
Some critics charge, however, that Altria’s marketing and distribution machine could pose much bigger challenges to the battle against teenage vape addiction. More worries were heard over potential lobbying efforts. Altria could steer Juul away from supporting efforts that impact traditional cigarettes, such as a proposal to reduce the nicotine levels in cigarettes.
- Altria Makes $12.8 Billion Minority Investment in Juul to Accelerate Harm Reduction and Drive Growth – Altria
- Altria Is Nearing a Deal to Take a 35% Stake in Juul – Wall Street Journal
- Juul May Get Billions in Deal With One of World’s Largest Tobacco Companies – The New York Times
- Juul Sheds Its Anti-Smoking Cred And Embraces Big Tobacco – Wired
- As smoking falls out of favor, Altria looks beyond tobacco – WTVR
- Juul sells 35% stake to tobacco giant. Now the e-cigarette maker is worth more than Airbnb or SpaceX – Los Angeles Times
- As vaping surges, teen cigarette smoking ticks up after decades of decline – CNBC
DISCUSSION QUESTIONS: How do you see Altria’s investment in Juul affecting the vaping category? Do you expect the move to stir up stricter regulatory efforts? How should retailers manage this controversial category?
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10 Comments on "Should the Marlboro Man be vaping?"
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Founder, CEO, Black Monk Consulting
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Business is business. This is a perfect acquisition for Altria, as was the acquisition of buying pot company Cronos.
But before we add bans on vaping, how about we add bans on tobacco?
Director of Planning & Loyalty, Moosylvania
I think Juul understands that their storyline of being a positive alternative to smoking traditional cigarettes has run its course with the American public and their foothold has been strongly established so they can at least somewhat acknowledge what they really are — an addiction replacement for the 21st century. (Plus getting a $38 billion valuation certainly doesn’t hurt). Even if regulatory efforts become stricter, I don’t think it will adversely effect Juul’s sales. Older generations won’t be impacted by the laws and it will only add to the allure of the product for the younger generation.
President, Co-founder, RetailWire
All true, Evan, but kind of sad, don’t you think, when companies toss away their core principles when because is on the table? Imagine if REI sold out to an oil company with a goal of using the retailer’s brand cred to support efforts to buy up public wilderness land for development? Would REI just say, “Well, hey, after all, money is money”?
Director of Planning & Loyalty, Moosylvania
Absolutely, but I would argue that Juul’s core values never really included “stopping the spread of teen (or any other addiction)”, so they aren’t betraying their platform. They simply found a new way to wrap a parallel product.
President, Global Collaborations, Inc.
I find this effort confusing. If nicotine is the addicting and dangerous substance, how does eliminating tobacco solve the problem when the alternative uses nicotine? Changing the delivery system does not eliminate the problem. Altria is changing the delivery system but is selling the same product — addiction to nicotine. The efforts to control or limit the new delivery system are ramping up. How has Altria changed their position from the old Philip Morris position of selling nicotine?
President, Protonik
This discussion is particularly difficult for me. Yes, I have continued to enjoy cigars and pipe smoking while society around has chosen a puritanical response — hating the smoker. We kick smokers outside, out of airports, out of all public places when we kick out smoking.
All this has been done for “morally good” reasons. But societies always drape harmful actions with morally good patinas — it’s quite common. We need always look at moral legislation with a cautious eye.
My recommendation: The medical community needs to stay on top of trends like vaping and e-cigarettes. It’s very easy for new technologies like these to give an apparent “free pass” by appearing to remove medical risks. But the rest of the world needs to take a pause on the exaggerated risks of fourth-hand smoke.
President, b2b Solutions, LLC
From a business point of view the investment makes sense. Altria had its own e-cigarette brands as did/do all the cigarettes companies. There were also other e-cigarette companies (far too many to count) vying for the vaping market. What Juul did was reposition the competition in the consumer’s mindset. Instead of looking like a cigarette it resembled a USB storage device. It had a cool visual appeal that the other did not. It quickly became the dominant vaping device with a reported 70 percent of the vaping market.
There has been and will be a lot of discussion of the harm reduction qualities of vaping versus smoking. Both deliver nicotine to the user. Smoking involves inhaling the smoke from burning tobacco. Vaping does not. I’m not a doctor but information I have read indicates that vaping does not involve the harm that inhaling smoke does. Are either good for you? No, but is one less harmful than the other? So far it appears that way.
CFO, Weisner Steel
Critics will never be satisfied. That’s integral to being a “critic,” so there will always be more regulation. Most retailers are “managing” it by getting out of it … probably a wise move if it’s only a sideline for them.
Director of Marketing, OceanX
The vaping industry especially as it relates to tobacco vs cannabis has had a total free ride and now we have another generation who will have to fight being addicted to tobacco. From a business side it makes perfect sense that a big tobacco company should own a big and innovative vaping company. The brilliant marketing that vaping is not bad for you should now be clearly seen for what it is — great marketing and great product with specific target to get more people — and specifically kids — to increase their tobacco consumption.