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© Reuters. PHOTO FILE: This illustrated image shows JUUL e-cigarette vaping capsules
By Harry Brumpton and Chris Kirkham
(Reuters) – Tobacco Company Altria Group Inc. (N 🙂 is in talks to take a 20 to 40 percent minority stake in electronic cigarette maker Juul Labs Inc., said people familiar with the subject on Wednesday.
The companies refused to comment.
Large tobacco companies, including the maker of Marlboro Altria, have invested in e-cigarettes as smoking rates in the US are falling, but these products have lost significant market share in the past year. because of the growing popularity of Juul.
Discussions have been going on for a few months and the size of the stake could change, the sources said. The talks could still break because of the many shareholders and regulators involved, said a source.
Such an agreement could allow Juul to continue to grow with reduced risk, said the population, without losing control of the company.
Juul's vape devices, which look like a USB stick, have helped the company quickly become the leader in the US e-cigarette market, rising from 13.6% of the market in early 2017 to more than 75% this month. here, according to one Wells Fargo (NYSE 🙂 badyzes Nielsen's retail data.
Juul's elegant design and sweet flavors, including mango and cream, make it particularly popular among high school students. "Juuling" has become synonymous with vaping, with young people posting videos and photos of themselves using the product at school or with friends, often under the hashtags # must4juul or #juullife.
Juul's electronic liquid also has a much higher nicotine content than previous versions of American electronic cigarettes. The company says its products are only for adults seeking to convert from traditional cigarettes.
Earlier this month, the US Food and Drug Administration announced new restrictions on the sale of flavored tobacco products, including fresh mango and cucumber from Juul, to age-restricted stores and online merchants using age verification checks.
But Juul, launched in 2015, was valued at more than $ 16 billion on the basis of a funding cycle conducted in July 2018, according to the PitchBook Data Inc. venture capital database.
Early investors in Juul included Tao Capital Partners, led in part by Nicholas Pritzker, who was previously head of the Hyatt hotel empire. Other investors include Fidelity Investments Inc. and Tiger Global Management, according to PitchBook.
Altria has invested in the e-cigarette industry in recent years through its subsidiary Nu Mark, which sells devices such as MarkTen electronic cigarettes in convenience stores and tobacco shops across the country. . In 2014, Altria acquired the e-cigarette start-up GreenSmoke Inc. for $ 110 million.
Altria products, however, have lost much ground to Juul over the last year, as have electronic cigarette brands from other major tobacco companies.
The market share of British American Tobacco Plc (L :), which sells Vuse electronic cigarettes, went from 21.4% of US sales in February to 9.6% this month, while Altria's share fell from 11.1 % to 4.4% over the same period, according to Nielsen The data.
Any potential investment in Juul has its own set of risks.
Juul, headquartered in San Francisco, has faced increased pressure from US regulators as the growing popularity of flavored electronic cigarettes among teens has sparked fears of a new generation of nicotine addicts.
Federal data released earlier this month showed a 78% increase in the number of high school students who reported using e-cigarettes in the last 30 days, compared to the previous year, which coincides with the rise in popularity of Juul.
Altria shares fell more than 20% during the year as cigarette consumption continued to decline in the United States. Federal data earlier this month indicated that smoking among US adults was about 14% in 2017, its lowest level ever.
Altria shares rose 1% to 55.55 dollars after Wednesday's bell.
The Wall Street Journal first reported on negotiations earlier Wednesday.
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