JUUL Labs purchased VMR Products, the parent company of V2 e-cigarettes in a $75 million deal earlier this month. The transaction occurred with almost no publicity.
The Florida-based VMR had been majority-owned by High Praise Enterprises, a subsidiary of Chinese company Huabao International Holdings Ltd. Huabao purchased a 51 percent interest in VMR Products in 2015 for $23 million, and will reportedly realize a $23.5 million profit from the sale to JUUL.
Huabao is a Hong Kong-based holding company that owns, among other interests, China’s largest flavoring manufacturer. Through one of its subsidiaries, Huabao is approved to sell vapor products by the Chinese State Tobacco Monopoly Administration, the government agency that controls the tobacco industry.
JUUL Labs had not returned our request for comment at the time of publication, but sources tell Vaping360 that the purpose of the deal is to give JUUL access to the Chinese market. Although e-cigarettes were invented in China, and the Chinese city Shenzhen is where most vaping products are manufactured, vaping is so far a fringe practice in the huge country. A product like JUUL, with government-sanctioned access to the market, could be hugely profitable.
China has 300 million smokers, and the state-owned Chinese National Tobacco Company is the world’s largest cigarette company. About two-thirds of Chinese men smoke cigarettes, and more than a million citizens die each year from smoking-related disease.
We reported in August that China is considering e-cigarette regulation. But as of now, vapes are not classified as tobacco products, as they are in the U.S., and there are no specific regulations governing their sale or manufacture. China offers nearly unlimited opportunity for a well-financed vaping company with approved access to the market.
VMR Products owns several vapor brands, most notably V2. The company sells cigalikes and simple vape pens, and also dry herb vaporizers. The V2 brand also has a strategic partnership with Turning Point Brands, a small tobacco company that has recently ventured into the vapor industry, buying such brands as Vapor Shark and VaporBeast.