Marlboro Maker Ditches Juul and Buys NJOY

The Wall Street Journal reported last week that Altria was in advanced talks to buy closely held NJOY for at least $2.75 billion and divest its stake in Juul.

Altria has spent tens of billions of dollars over the past decade in an effort to pivot toward less-harmful products as U.S. cigarette smoking declines, but its efforts have largely flopped. The company tried and failed to develop new e-cigarettes that appealed to smokers. It then spent nearly $13 billion on a stake in Juul. The vaping market leader’s valuation quickly evaporated. 

Swamped by lawsuits alleging that it had targeted minors, Juul came close to filing for bankruptcy last year. Juul has since settled much of that litigation but its future remains in question amid a dispute with the FDA over whether its e-cigarettes can remain on the U.S. market. Juul has said it never targeted young people and has been working to regain the trust of regulators and the public.

The Federal Trade Commission sued to unwind Altria’s investment in Juul, a case that was pending when Altria said Friday that it had divested from the embattled e-cigarette maker. The stake for which Altria had paid $12.8 billion is now worth only $250 million, Altria said. Altria traded its equity for nonexclusive rights to some of Juul’s intellectual property related to heated tobacco devices. 

Altria’s decision to acquire NJOY was informed by lessons the tobacco giant learned from its failed Juul investment, Altria Chief Executive

Billy Gifford

said Monday on a call with analysts and reporters.

“One is certainty. This is an authorized product versus a pending product. There are no litigation challenges. The youth usage is minimal,” Mr. Gifford said. “The other is about control. This is about 100% ownership versus a minority investment.”

NJOY has obtained clearance from the FDA to sell its tobacco-flavored e-cigarettes in the U.S., a hurdle that so far has eluded the two biggest brands: Juul and Vuse Alto, which is owned by Reynolds American Inc.

Juul has appealed the FDA’s decision to order its products off the market; the agency’s review of Vuse Alto is still under way. 

NJOY is the No. 3 e-cigarette brand in U.S. stores tracked by Nielsen but has a very small market share, representing about 3% of the market. Juul accounts for about 26%.

Altria said that consumer awareness of NJOY is low because of NJOY’s small sales force. Altria said its research showed that once adult smokers and adult e-cigarette users try NJOY’s Ace brand, it performs on par with Vuse Alto, the leading e-cigarette brand. 

Altria said it expects the NJOY deal will boost cash flows within two years and add to its adjusted per-share earnings within three years of closing. Altria left its 2023 profit targets unchanged.

Tobacco companies are jockeying for position to grab pieces of the U.S. e-cigarette market as regulators reshape the industry, deciding which products can stay and which must go. The Biden administration has said it plans to mandate the reduction of nearly all nicotine in cigarettes, adding urgency to cigarette makers’ efforts to find other avenues of growth.

Altria last year formed a partnership with Japan Tobacco Group to develop and sell heated tobacco devices in the U.S. and abroad. Heated tobacco devices contain solid tobacco leaf, and heat the substance to a temperature below the point of combustion so that they don’t emit the harmful compounds present in cigarette smoke.

Write to Robb M. Stewart at [email protected]

The Wall Street Journal reported last week that Altria was in advanced talks to buy closely held NJOY for at least $2.75 billion and divest its stake in Juul.

Altria has spent tens of billions of dollars over the past decade in an effort to pivot toward less-harmful products as U.S. cigarette smoking declines, but its efforts have largely flopped. The company tried and failed to develop new e-cigarettes that appealed to smokers. It then spent nearly $13 billion on a stake in Juul. The vaping market leader’s valuation quickly evaporated. 

Swamped by lawsuits alleging that it had targeted minors, Juul came close to filing for bankruptcy last year. Juul has since settled much of that litigation but its future remains in question amid a dispute with the FDA over whether its e-cigarettes can remain on the U.S. market. Juul has said it never targeted young people and has been working to regain the trust of regulators and the public.

The Federal Trade Commission sued to unwind Altria’s investment in Juul, a case that was pending when Altria said Friday that it had divested from the embattled e-cigarette maker. The stake for which Altria had paid $12.8 billion is now worth only $250 million, Altria said. Altria traded its equity for nonexclusive rights to some of Juul’s intellectual property related to heated tobacco devices. 

Altria’s decision to acquire NJOY was informed by lessons the tobacco giant learned from its failed Juul investment, Altria Chief Executive

Billy Gifford

said Monday on a call with analysts and reporters.

“One is certainty. This is an authorized product versus a pending product. There are no litigation challenges. The youth usage is minimal,” Mr. Gifford said. “The other is about control. This is about 100% ownership versus a minority investment.”

NJOY has obtained clearance from the FDA to sell its tobacco-flavored e-cigarettes in the U.S., a hurdle that so far has eluded the two biggest brands: Juul and Vuse Alto, which is owned by Reynolds American Inc.

Juul has appealed the FDA’s decision to order its products off the market; the agency’s review of Vuse Alto is still under way. 

NJOY is the No. 3 e-cigarette brand in U.S. stores tracked by Nielsen but has a very small market share, representing about 3% of the market. Juul accounts for about 26%.

Altria said that consumer awareness of NJOY is low because of NJOY’s small sales force. Altria said its research showed that once adult smokers and adult e-cigarette users try NJOY’s Ace brand, it performs on par with Vuse Alto, the leading e-cigarette brand. 

Altria said it expects the NJOY deal will boost cash flows within two years and add to its adjusted per-share earnings within three years of closing. Altria left its 2023 profit targets unchanged.

Tobacco companies are jockeying for position to grab pieces of the U.S. e-cigarette market as regulators reshape the industry, deciding which products can stay and which must go. The Biden administration has said it plans to mandate the reduction of nearly all nicotine in cigarettes, adding urgency to cigarette makers’ efforts to find other avenues of growth.

Altria last year formed a partnership with Japan Tobacco Group to develop and sell heated tobacco devices in the U.S. and abroad. Heated tobacco devices contain solid tobacco leaf, and heat the substance to a temperature below the point of combustion so that they don’t emit the harmful compounds present in cigarette smoke.

Write to Robb M. Stewart at [email protected]