Robert BarnesE-cigarette brand Juul Labs Inc. has entered discussions with three giants in the tobacco industry over a possible purchase amidst the company’s financial issues.
According to Wall Street Journal and other sources, Philip Morris International Inc, Japan Tobacco Group, and of course, Altria Group Inc have been in discussions with Juul for some time.
This was sparked when Juul Chief Executive K.C. Crosthwaite and other executives traveled to Switzerland where Japan Tobacco International and Philip Morris International are located.
The discussions are in their early stages as WSJ sources claim that nothing is imminent.
Juul was once the biggest name in e-cigarettes, making it potentially a valuable purchase for the big tobacco companies wanting to capitalize on its popularity years ago.
What’s Next for Juul?
These discussions are very likely Juul’s last hope in surviving the constant onslaught that they have received since their troubles began in 2019.
In addition to this, big tobacco companies are fighting for their stake in a market that is shifting hugely.
Under the Biden administration, a federal ban on menthol cigarettes is on the horizon. This would mean that these companies will need to figure out a way to keep the revenue coming in through alternate means – particularly vaping, given its popularity.
Buying into a company like Juul will certainly come with its considerations. Juul has suffered massively through lawsuits and legal problems, causing the company to lose its status as the leader of the e-cigarette market with a huge majority share.
This has even led to Altria, who bought a 35% stake of the company in 2018, reconsidering their relationship with Juul.
Altria announced that it was to end its non-competition agreement with Juul in September last year.
Juul and the FDA
Having three big tobacco companies taking interest in Juul may seem like a good thing, but the vape manufacturer still faces an enormous problem.
The Food & Drug Administration issued marketing denial orders to all of Juul’s products in June, 2022.
This would have meant that these products would have had to be pulled from the shelves, but almost immediately thereafter, Juul was able to gain a temporary stay from a federal court. This allowed them to continue selling their products for the time being.
Despite dodging this damning fate, it does not change the fact that the FDA has Juul in its sights. This has been widely believed to be the result of Juul’s infamy among anti-vape groups and the FDA’s hopes to gain favor in removing them from the market.
This begs the question, “What do these companies have to gain from purchasing Juul?”
The Companies in Question
Altria, Japan Tobacco, and Philip Morris are the key players that are in discussion with Juul. However, there are still a number of unknowns around why each of them are talking with Juul and what their goals are.
Altria may seem to be the most obvious of the lot. After acquiring a stake in Juul a number of years ago, their options are rather limited.
It is rumored that Juul and Altria reached late-stage discussions regarding the potential selling of Juul’s international business or license of its intellectual property.
Allegedly, these talks fell through as a result of Juul’s preparations for a potential bankruptcy.
Another reason the two may be in discussion is that Altria is hoping to acquire all of Juul.
However, this will require their case with the Federal Trade Commission, which is aiming to undo the 2018 investment, to reach its conclusion. This will be required before Altria will be able to purchase Juul outright amidst antitrust concerns.
Japan Tobacco and Altria may be looking to use Juul’s brand to market a new line of products that they hope to be authorized by the FDA.
This speculation rises from a partnership between the two being formed in October, 2022. However, this would be focused on producing heated-tobacco devices rather than e-cigarettes.
It remains unclear what role Philip Morris plays in these discussions. It is possible that the group wants to take the Juul brand international, free from the FDA’s jurisdiction.
Unfortunately with these big companies, if nothing comes to fruition, we may never know what these talks were about.
Juul’s Financial Woes
Juul has not had an easy history in the last few years. The once-great e-cigarette manufacturer has suffered greatly from both legal actions and controversy.
The company’s problems came during a period of infamy whereby the public and lawmakers had deemed the company to be using marketing tactics at the expense of the underage population. This resulted in countless lawsuits piling up.
The e-cigarette manufacturer’s financial issues came to a head just last year when they were ordered to pay a settlement that totaled roughly $1.7 billion.
Knocking on the Door of Bankruptcy
Things had gotten so bad for the company that rumors of bankruptcy began to spread. Experts noted that Juul’s actions around October, 2022 were indicative of a company preparing to file for Chapter 11.
One of the main causes for this speculation was a massive layoff of 400 employees in November. The move was allegedly made to cut the company’s operating budget by 10% to avoid bankruptcy.
This tough decision, along with acquiring a cash infusion from Nicholas Prtizker and Riaz Valani, are some of the primary reasons that Juul was able to stay afloat. However, it is likely that they are in need of more financial backing from a big tobacco company.
In Summary
Juul executives have entered talks with Altria Group Inc, Japan Tobacco Group, and Philip Morris International, leaving experts speculating over a potential purchase or investment in the near future, according to Wall Street Journal.
WSJ sources state that there is nothing in the immediate pipework, but given Juul’s status as one of the most successful e-cigarette manufacturers, as well as one of the most infamous, many eyes will be watching to see what the future holds.
Russ Ware
Versed Vaper Team
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