Cigarette maker Marlboro’s bad bet on Juul


In 2019, we wrote that Altria’s $12.8 billion investment for a 35% stake in vaping product maker Juul risked becoming one of the worst corporate investments ever. .

June 2022 update: It’s the worst business investment ever.

Driving the news: The Food and Drug Administration issued a marketing denial order on Wednesday that prohibits the sale of Juul products in the United States, according to the WSJ. The FDA has yet to comment.

What there is to know: It’s more about Juul than vaping, as the FDA has allowed some Juul competitors to keep tobacco-flavored products on the market (fruit- and mint-flavored vapes were banned in 2020).

  • Most of Juul’s revenue comes from the United States, although its products are available in five other countries. Altria, which is best known for making Marlboro cigarettes, had already reduced the value of its Juul investment to just $1.7 billion by the end of 2021 (matching the mark from the previous year).
  • Former FDA commissioner Scott Gottlieb, who led the original charge against Juul, told Axios on Tuesday, “They’ve cleared three vaping products, so if they do deny Juul, it’s likely to be based, in the least in part, on the legacy of misuse of this product Juul will sue and argue that such justification is outside the scope of the claim, but I believe it is entirely on point. This product cannot shake the way it has been abused in the market by children and how Juul has positioned it for such abuse.”

Somewhere else: Altria also continues to fight an FTC antitrust complaint related to its investment in Juul, winning the first round in February (FTC appeals in full). The company and/or Juul are also defendants in more than 50 class action lawsuits and more than 3,000 other vaping-related lawsuits, by filing of titles.

Offer details: Altria, under the terms of its investment in Juul, is not allowed to develop or commercialize alternative vaping products until at least the end of 2024. The only caveat would be if Juul is banned from sale in the United States , but that would of course eliminate almost all of Juul’s remaining value.

The bottom line: Altria is not unlucky here, even though it had good reason to believe the FDA would let it continue selling menthol-flavored tobacco and vapes.

  • Juul was already hairier than a Yeti when Altria invested, but it still seemed to get a risk premium rather than a risk reduction. Now, as the smoke begins to literally clear, Altria has nothing but lawsuits and regrets to show for this decision.


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