5 December 2018
If Marlboro -maker Altria takes a stake in Juul, it wouldn’t be the first time the founders of a company that’s sought to bill itself as a tool for eliminating cigarettes has partnered with Big Tobacco.
The $16-billion valuation startup’s cofounders, James Monsees and Adam Bowen, sold a minority stake in their first stab at the e-cigarette market toJapan Tobacco International. Ploom, founded in 2007 after the founders finished Stanford University’s graduate design program, advertised itself as a “cleaner, more flavorful alternative to the smoking experience.” But that didn’t keep it from forming a strategic partnership with Japan Tobacco in 2011 that enabled it to draw from the fifth-largest tobacco company’s science and marketing prowess.
“New products in the tobacco space — novel products in the tobacco space — were an unknown, and we would have to create awareness from the ground up for something that could compete with cigarettes in this very, well, sort of known and controlled universe,” Monsees told Forbes in August.
Fast forward seven years to the founders’ current startup, and they could be ready to link up with a tobacco giant again. The Wall Street Journal said last Wednesday that Altria is in talks to take a significant minority stake in San Francisco-based Juul, noting that a deal would likely be several weeks away, and there might not be one at all. A Juul spokesperson declined to comment. Altria did not respond to a request for comment in time for publication.
For Juul, a deal with Altria would likely be driven more by strategic benefits than raising capital. Juul raised $1.2 billion in new funding this summer and could generate more than $1 billion in sales this year. Altria could help Juul access more brick-and-mortar shelf space, as well as research and marketing resources — not to mention Altria’s customer base of smokers, many of whom are trying to quit.
However, as some Juul employees have pointed out, an Altria deal could also discredit the company’s proposition that it’s here to eliminate cigarettes through a safer alternative. While big tobacco companies are making and selling their own e-cigarettes, a growing market, traditional tobacco’s financial interest in traditional smokes is still massive. Cigarettes made up 84% of the $100 billion U.S. tobacco retail sales in the past year, while e-cigarettes and vaporizers made up 3%, according to Wells Fargo in August. Juul, which makes up three-quarters of U.S. e-cigarettes sales, could protect Altria from e-cigarette competitors and bolster its international reach (Juul is sold in the U.S., UK, Canada, Israel and Russia.)
Reports on deal talks come amid growing pressure from regulators on Juul and other e-cigarette makers to show they can do more to keep addictive nicotine products out of the hands of middle and high schoolers, about 3.6 million of whom use e-cigarettes in the U.S. alone, according to National Youth Tobacco Survey data.
Altria could offer real benefits to Juul, as Japan Tobacco did for Ploom. However, while Juul is embroiled in controversy, an Altria investment makes its mission a harder sell.
I’m a San Francisco-based reporter on Forbes’ tech team. I cover tech with an emphasis on the people, companies and innovations in the world of social and digital media. Before joining Forbes, I worked as a news writer and producer at The Wall Street Journal in New York. I h…