Altria, the maker of Marlboro cigarettes, announced Thursday that it had made a $12.8 billion investment in Juul Labs, the vapor company critics accuse of helping to create a teen smoking epidemic.
The investment makes Altria a minority shareholder, with a 35 percent stake in Juul, the heavyweight of the vapor market. Altria’s investment has more than doubled Juul’s valuation as of this summer. Juul is now worth $38 billion.
Critics see the partnership as a means of cementing a future of widespread smoking in America. Juul is claiming the opposite. The San Francisco-based start-up has painted itself as the antidote to traditional tobacco products, and the company said in a news release that its partnership with Altria is a way to boost its core mission: helping adult smokers abandon cigarettes in favor of something purer and safer.
“We understand the controversy and skepticism that comes with an affiliation and partnership with the largest tobacco company in the U.S.,” Juul chief executive Kevin Burns said in the release. “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.”
The terms of the deal allow Juul to stay fully independent, according to the release, while using Altria’s infrastructure, such as sales and distribution services. Juul will also have access to Altria’s retail shelf space and be allowed to advertise on some of Altria’s products.
Since Juul was introduced to the market in 2015, the USB-shaped smoking device that delivers concentrated nicotine has become ubiquitous. In just three years, it has captured about 70 percent of the e-cigarette market, according to a Wells Fargo analysis of Nielsen sales data, and tobacco use has fallen to a historic low. But the product’s explosive popularity among teens has drawn criticism from the public and regulatory agencies that, despite Juul’s claims to the contrary, argue the company has targeted young smokers with sweet vapor flavors and marketing that glamorizes smoking.
On Tuesday, the U.S. surgeon general declared teen e-cigarette use an epidemic, pointing to data from the Centers for Disease Control and Prevention and the Food and Drug Administration that said tobacco use within 30 days had risen 75 percent among high school students in the past year.
“We have never seen use of any substance by America’s young people rise as rapidly as e-cigarette use is rising,” Health and Human Services Secretary Alex Azar said in a statement. “Combustible cigarettes remain the leading cause of preventable death in the United States, and providing an effective off-ramp for adults who want to quit using them is a public health priority. But we cannot allow e-cigarettes to become an on-ramp to nicotine addiction for younger Americans.”
Amid an FDA crackdown, Juul said it is taking steps to curb underage use of electronic cigarette, such as taking flavored products off retail shelves, stepping up age-verification measures and ditching social media promotions. The partnership with Altria will help Juul be more aggressive in efforts to keep its products out of the hands of teenagers, the company said.
But critics argue the deal proves Juul is prioritizing profits over safety by teaming up with Big Tobacco, which benefits from a rise in underage smoking.
“The proposed Altria-Juul deal would join companies that sell the most popular cigarette and the e-cigarette brands among kids,” the Campaign for Tobacco-Free Kids tweeted shortly before the deal was formally announced. “It’s about protecting profits, not public health.”
The FDA unveiled an initiative last year to reduce the amount of nicotine in cigarettes, a step that was well-received by public health advocates and made waves in the tobacco industry. However, it has yet to take similar action with e-cigarettes, which use highly concentrated nicotine. A single Juul pod, for example, contains the same amount of nicotine as an entire pack of cigarettes. An alignment with Juul might give Big Tobacco a foothold, ensuring that legions of teens are introduced to smoking, potentially growing into consumers of combustible tobacco products.
Still, Juul is declaring the company’s future depends on providing an alternative for adults while not endangering teens.
“Our intent was never to have youth use Juul products. But intent is not enough; the numbers are what matter, and the numbers tell us underage use of e-cigarette products is a problem,” Burns said in the release. “When you take a step back, our success ultimately depends on our ability to get our product in the hands of adult smokers and out of the hands of youth.”