The mainstream media rumor mill is abuzz with news that The Altria Group may be investing a significant minority stake in the popular vape manufacturer Juul Labs. Discussions are said to be ongoing, and neither side is publicly confirming the story. But if the rumors turn out to be true, the secret deal could be finalized by the end of the year, according to anonymous sources.
Immediately after the breaking of the news in the waning days of November, 2018, Altriastock prices surged after being down by about 22 percent for the year. Meanwhile in more recent days, press releases issued by both Altria and the Canadian cannabis company Chronos confirm a similar investment collaboration to the tune of $1.8 Billion.
Unfortunately, not everyone is as elated over the proposed deal-in-the-making as Altria stockholders. Juul employees are said to be outraged over the notion that the world’s leading and most profitable vapor retailer would even consider partnering with a member of Big Tobacco. In a report by Gizmodo, some Juul staffers thought the news to be so ridiculous that they considered it Fake News. At least one employee called the proposed link-up a “deal with the devil.”
Why is Altria suddenly interested in vaping and marijuana?
Altria’s interest in expanding into new markets is a decision influenced by many factors. Firstly, sales of tobacco cigarettes have been in decline for over twenty years. In fact, the company’s overall cigarette shipping volume has dropped from about 212 billion units in the year 2000 to approximately 116 billion units in 2017. That’s a cumulative decline of almost 50 percent since the dawning of the new millennium.
As a publicly traded company, Altria’s board of directors has a fiduciary responsibility to its shareholders to keep profits up. When the U.S. Food and Drug Administration (FDA) banned the sales of flavored vaping products via conventional brick-and-mortar venues last month, Altria was forced to pull its cigalike brands of MarkTen and Green Smoke from store shelves across the nation.
Furthermore, the FDA is also actively and aggressively threatening to implement additional regulations prohibiting the sales of menthol-flavored combustible tobacco products. As these threats continue to increase in both frequency and severity, Altria needs to cover its bases. Juul and the marijuana-based Chronos might be the perfect vehicles for the tobacco giant to branch out against an ever-diminishing cigarette market.
What’s in it for Juul?
Juul Labs holds about 70-80 percent of the market share in the vaping industry. Besides the company employees, many within the vaping community itself are none-too-happy with Juul at the moment either.
Some blame the pod-style vaping maker for the FDA’s recent lowering of the proverbial hammer on the American vaping industry as a whole. Others are peeved with what many consider to be poor, if not downright kid-friendly, marketing practices which may have incited nationwide claims of a teenage vaping “epidemic.”
So, why would Juul risk annoying even more vaping enthusiasts by partnering with Big Tobacco? The answer is simple.
Altria and other tobacco companies like Phillip Morris and British American have spent decades perfecting their litigation skills to battle excessive government overregulation. This tremendous amount of legal expertise may come in handy for Juul, as fears of mounting lawsuits from teenagers, parents, and the FDA continue to escalate inside the company’s upper echelons.