One of the world’s largest cigarette maker, Altria Group Inc., is in headlines with its biggest acquisition ever. Looking to expand beyond the slowly declining combustible cigarette sector, Altria invested $12.8 billion into the e-cigarette startup – Juul, thereby attaining 35% of the company’s shares reported WSJ. Altria values the California based startup at an enormous $38 billion, making it more valuable than some of the biggest names in silicon valley such as Airbnb Inc, and Elon Musk’s SpaceX.
According to the deal, Juul will have access to Altria’s shelf space. Meaning, it will sell their e-cigs and methanol products alongside Altria’s combustible cigarettes – Malbro, which is consumed by more than half of the United States of America. Marlboro will also put promotional material for Juul’s products in its cigarette cartons and support them with logistics and distribution.
Altria acknowledges the changing tides of the cigarette industry and believes this would be their window into the fast-growing e-cig business. Earlier this month, Altria also invested $ 1.8 billion in Canadian Cannabis company Cronos Group Inc, which gave the company a 45% stake.
We understand the controversy and skepticism that comes with an affiliation and partnership with the largest tobacco company in the US. We were skeptical as well. 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. We understand the doubt. We doubted as well.
Kevin Burns , CEO Juul Labs
While this may seem like a win-win deal for both the players, Altria’s investment is actually quite dicey. Juul has faced intense scrutiny by health and anti-smoking organizations over the past year due to the high percentage of underage user epidemic. While the legal age to purchase an e-cig is 18 years, it was found that 1 in 5 school students use these e-cigs. And many point fingers towards Juul as they are responsible for about 70% of the catridg based e-cigarettes in the USA.