Altria has bought a $12.8 billion piece of the mango-flavored pie from Juul. The company that “controls half of the American tobacco market” with brands like Marlboro (another kid-friendly favorite) now owns 35% of the company that controls 70% of the cartridge-based e-cigarettes in the U.S.
It’s an interesting move for Juul, whose product is designed to get adult smokers off cigarettes, to team with a company known as “Big Tobacco.” Juul CEO said Altria “agreed to support Juul’s mission to wean people off cigarettes. And in the process, Altria now has access to Juul’s distribution network and will put Juul next to Marlboro on the shelf. When you get Altria coupons and mailings, expect to see inserts advertising the Juul brand.
It shouldn’t be surprising that these two companies came together, as both are successful at marketing and gaining a large percentage of teens as customers. Marlboro cigarettes is still highly used by teens and topped the “list of preferred cigarette brands” by teens in 2016. And although the tobacco industry denies it, teens are heavily exposed to advertising. Without their teen base, cigarette companies would go out of business. This merger should worry parents because it just gave the tobacco industry “direct access to a new pipeline of millions of youth e-cigarette users.” Most Juul users were not smokers to begin with and research shows “young people who vape are four times more likely to begin smoking” cigarettes.”
And what did Juul get out of this merger? Some hefty bonuses to the tune of $1.3 million for Juul employees and billions for the founders. The founders each own 3.6% or $1.36 billion apiece. Not bad considering their holdings were valued at $843 million back in July.
This isn’t the first e-cigarette company that Altria has invested in, but it is the most profitable. Altria also owns Mark Ten and Green Smoke. As they move away from cigarettes, they are adding other smokable products like marijuana companies in Canada and American states where it is legal. It should be noted that while it is legal in some states, it is still illegal under federal law. They will also market Philip Morris’s “heat not burn” IQOS device which is popular in other countries but does not have FDA approval in the U.S.
While the deal is said to have “long-term benefits for adult smokers,” it is not the adult smokers who made Juul famous. Like the tobacco industry before them, Juul has gained popularity and profitability on the backs of our teens, making them addicted to a product they need to inhale when in truth they didn’t want to inhale in the first place. Will we ever get control back?
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