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September 30, 2022
4 min to read

Altria Ends Non-Competition Agreement with Juul

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Jim McDonald

In a move likely to shake up the convenience store segment of the vaping products market, Altria Group has abandoned its non-competition agreement with Juul Labs. Altria’s option to end the agreement was triggered when Juul’s value dropped below 10 percent of Altria’s original investment, according to a Thursday Securities and Exchange Commission filing.

Altria, one of the world's largest cigarette manufacturers, will now be free to develop new vape products or buy other existing brands. Juul will also be able to sell part or all of itself to another company without Altria’s permission—although any potential buyer would have to think hard about taking on the political baggage and possible legal liabilities that would come with a Juul purchase.

Altria and Juul: marry in haste, repent in leisure

Altria bought 35 percent of Juul Labs in December 2018 for the astonishing price of $12.8 billion, which made Juul’s $38 billion value (on paper anyway) greater than the Ford Motor Company. Since then, the tobacco giant has steadily written down the value of its purchase until it reached a low of $450 million in June—less than 3.6 percent of what Altria originally paid.

Just two weeks before announcing its investment in Juul Labs, Altria had abandoned its own unpopular MarkTen and Green Smoke vaping brands. The timing of the two events triggered accusations of anti-competitive collusion between the two companies, which eventually led to a lawsuit by the Federal Trade Commission, which sought to nix the purchase agreement. (The FTC is still pursuing the charges, despite an administrative law judge’s preliminary ruling in favor of Altria and Juul.)

Altria's move to end its non-compete agreement with Juul Labs follows an especially challenging period for Juul, which had already been under fire for years from tobacco control groups and their supporters in Congress. In June the FDA issued a marketing denial order (MDO) for all current Juul products, ordering them off retail shelves. A day later, a federal court issued a temporary stay of the MDO, and two weeks after that, the FDA backed down and put the denial on hold. Soon after, Juul agreed to pay dozens of states over $400 million to settle complaints it targeted youth in its marketing. The company still faces thousands of lawsuits from individuals, municipalities, school districts and Indian tribes.

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NJOY is a natural target for Altria

In July, there was speculation, fuelled by the company's own statements, that longtime independent vaping manufacturer NJOY LLC could be sold to a major tobacco company. NJOY has received FDA authorizations for its pod-based NJOY Ace, and for two versions of its disposable cigalike the NJOY Daily, but has struggled to accumulate the funds needed to expand its production and distribution capabilities to compete effectively with Juul and Vuse.

NJOY would be a natural target for Altria. But the partial split with Juul could also make NJOY more attractive to companies wishing to block Altria from the c-store/gas station segment of the vaping products market. Altria’s sometime-partner Philip Morris International (PMI), which has no current U.S. product offerings, could become an instant player here by purchasing NJOY. Imperial Brands, which received a marketing denial for its myblu device, may also be eyeing NJOY.

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Juul: how the mighty have fallen

Juul Labs' market share has fallen more than half from its 2018-2019 high, when its flagship device called the JUUL held as much as a 70 percent share of the c-store vape market. The JUUL has recently dropped to the number two spot among c-store products, behind the Vuse Alto pod vape sold by RJ Reynolds, which has still received no FDA marketing authorization decision. Juul’s c-store market share has declined to 28.1 percent. The most popular c-store vape products currently are various brands of flavored disposable vapes.

Juul is unlikely to find sympathy among smaller vape industry players, which regularly face business-destroying bills in state legislatures lobbied for by Juul. In 2019, when the company’s help was most needed, Juul quit the Vapor Technology Association (then the most prominent industry group), citing its opposition to a lawsuit the VTA was pursuing against the FDA. Juul said it was “committed” to the FDA’s premarket authorization process.

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Jim McDonald

Vaping since: 12 years

Favorite products:

Favorite flavors: RY4-style tobaccos, fruits

Expertise in: Political and legal challenges, tobacco control haters, moral panics

Jim McDonald

Smokers created vaping without help from the tobacco industry or anti-smoking crusaders, and I believe vapers have the right to continue innovating to help themselves. My goal is to provide clear, honest information about the challenges vaping faces from lawmakers, regulators, and brokers of disinformation. I’m a member of the CASAA board, but my opinions aren’t necessarily CASAA’s, and vice versa. You can find me on Twitter @whycherrywhy

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