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© Mike Segar / Reuters
Juul Labs Inc. announced that its chairman, Kevin Burns, was retiring and would be replaced by an executive of tobacco giant Altria Group Inc., which holds a 35% stake in the electronic cigarette maker.
The San Francisco company, which could be subject to a crippling ban on most of its products in the US, said Burns would be replaced by K.C. Crosthwaite, head of Altria's strategy. The company mentioned the need to focus on regulatory issues for having decided to call on Crosthwaite, who has experience working closely with regulators.
Juul said he would not lobby against the proposed ban on most flavored electronic cigarettes proposed by the Trump administration and suspend all advertising for US products.
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Also on Wednesday, Altria and Philip Morris International Inc. ended their discussions with a view to a possible merger of the two Marlboro manufacturers. The discussions were motivated in part by the threat that Juul represented for their traditional businesses, with some smokers being diverted from cigarettes.
Instead, Philip Morris said the companies would focus on launching their own cigarette replacement solution in the United States, a burn-in heater called IQOS. Unlike Juul, IQOS has been reviewed and licensed by the Food and Drug Administration.
The two sides have been negotiating for weeks, but the Philip Morris board has become increasingly uncomfortable with the deal in the context of the new US regulations, said one familiar with the matter.
Mr. Burns, a former partner of private equity firm TPG Capital and a member of yogurt maker Chobani, joined Juul in December 2017. The startup has grown rapidly and its stylish vaporizers, introduced in 2015, have already become a staple. Teen status symbol and were developing. problem in American schools.
In 2018, Juul reached an agreement with Altria, which invested $ 12.8 billion in Juul for a 35% stake and several seats on the board of directors. Mr. Crosthwaite, who led Altria's IQOS efforts, joined Juul's board of directors. The transaction values the startup at $ 38 billion and makes many employees millionaires.
However, the use of electronic cigarettes by minors continued to increase in 2018 and 2019, and federal health officials and anti-smoking groups blamed Juul. The company says it has not targeted adolescents, nor has it taken measures to combat the purchase of minors, and that its products are aimed at adult cigarette smokers wishing to switch suppliers.
Citing the wave of vaping among minors, the Trump administration announced earlier this month its intention to ban all electronic cigarettes, with the exception of those formulated to have a taste of tobacco. Prohibited flavors, including mint and menthol, account for more than 80% of Juul's sales.
Juul is the subject of several investigations, including a criminal investigation by California prosecutors and investigations by the Food and Drug Administration and the Federal Trade Commission on its commercial and marketing practices.
US health authorities have urged adults to stop taking steam while disease control and prevention centers are investigating an outbreak of respiratory illness that has left hundreds sick and eight dead. Juul has not been linked to diseases.
Juul sales in the United States fell in August when the authorities sounded the alarm about diseases, falling to $ 29 million in the four weeks ended Sept. 7, compared with 294 million in the four previous weeks, according to an analysis of Nielsen data by Wells Fargo.
Write to Jennifer Maloney at [email protected]
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