At least three significant tobacco corporations have held talks with Juul Labs to find a solution that would help the cash-strapped vape maker turn its business around. The discussions are still in their infancy.
As reported by the Wall Street Journal, Juul has held discussions with Philip Morris International (PMI), Japan Tobacco Group, and Altria Group in regard to a potential sale of the business, a significant investment, or a license or distribution agreement.
Why should I get Juul right now?
Although it's uncertain if possible partners would be willing to purchase Juul entirely, a collaboration would make sense for all of them. It might even make sense to buy Juul, which would entail taking on all of the company's debt and reputational issues. Juul is more in need of a savior now than ever before.
With the acquisition of Swedish Match, a manufacturer of snus and nicotine pouches, PMI has lately joined the American market. Although no vaping products are allowed for sale in the United States, the business does want to offer its IQOS heated tobacco product (HTP) here. It can take years to file a premarket tobacco application (PMTA) for a vaping device and have it approved by the FDA.
The U.S. division of PMI will not sell cigarettes or other combustible tobacco products, in contrast to Japan Tobacco and Altria. Juul might be a useful addition to a tobacco corporation that is committed to a world without smoking.
In contrast to Juul, Japan Tobacco's vape brand Logic, which manufactures two FDA-approved vaping products, has not had much success in the market. In addition, Logic is battling the FDA in court to maintain the availability of its menthol-flavored refills.
Although Altria now owns 35% of Juul Labs, the company recently wrote down the value of its $12.8 billion investment to just $1 billion. The maker of Marlboro cigarettes also terminated its non-compete agreement with Juul, allowing Altria to acquire another e-cigarette business or create its own line of vapor goods. The Journal also revealed that last summer, Juul and Altria held discussions on a potential licensing arrangement.
Juul's costs increase as its market share decreases.
For an estimated $1.7 billion, Juul Labs recently resolved hundreds of claims filed by people, cities, school districts, and American Indian tribes. A few months prior, the business consented to pay more than $400 million to resolve claims brought by 33 states.
In order to pay for such settlements, Juul substantially reduced expenses by firing a third of its staff and obtained additional equity investments from its current investors. Prior to receiving the emergency capital, Juul had thought about filing for chapter 11 bankruptcy last autumn.
Over the past two years, Juul's standing as the best e-cigarette available at convenience stores has diminished due to heightened competition from R.J. Reynolds' Vuse Alto, which currently leads the market, as well as hundreds other disposable vaping products. Juul's market share in the c-store/gas station vape segment has decreased from over 70% to less than 30% since 2018.
Juul is also at odds with the FDA Center for Tobacco Products, which ordered Juul's products off the market in a marketing denial order (MDO) that was given to the company last June. A federal court swiftly halted the MDO, and the FDA subsequently consented to reevaluate the directive; still, Juul will have to fight arduously to obtain FDA marketing permission.
