Dive Brief:

• Tobacco major Altria has agreed to buy e-cigarette startup NJOY for $2.75 billion in cash, according to a Monday press release.
• The agreement gives Altria access to the startup’s full product portfolio, including NJOY ACE, which Altria says is the only pod-based e-vapor product that the U.S. Food and Drug Administration has approved for marketing.
• Altria also announced it has exchanged its stake in e-cigarette company Juul for a non-exclusive license to use some of Juul’s heated tobacco technology.

Dive Insight:

Several years after making its nearly $13 billion investment in Juul, Altria is shifting its vaping strategy and putting more emphasis on startup NJOY, which has so far avoided the regulatory challenges that Juul has faced.

“We believe we can responsibly accelerate U.S. adult smoker and competitive adult vaper adoption of NJOY ACE in ways that NJOY could not as a standalone company,” said Billy Gifford, Altria’s CEO. “We believe the strengths of our commercial resources can benefit adult tobacco consumers and expand competition.”

No closing date for the NJOY deal has been listed yet.

NJOY has six products already approved by the FDA, including the NJOY ACE e-vapor device and five tobacco-flavored items. Currently, about 40% of NJOY’s sales are for tobacco-flavored products. It also has other products, notably in the contentious menthol category, awaiting review.

However, NJOY’s market share in the vaping category is low, Altria noted in its release, with the startup’s ACE device — its best-selling product — having just a 3% share of sales at c-stores and multi-outlet retailers in 2022. 

Reflecting the uncertainty around FDA approval of marketing orders for such items, the agreement with NJOY also includes later payments of between $125 million and $500 million that are contingent upon these menthol NJOY products receiving marketing approval. 

In the same vein, Richmond, Virginia-based Altria stepped out of its ownership of Juul in favor of a license to its technology in part because of the uncertainty around FDA approval for its products.

“We believe exchanging our JUUL ownership for intellectual property rights is the appropriate path forward for our business,” said Gifford. “JUUL faces significant regulatory and legal challenges and uncertainties, many of which could exist for many years.”

The vaping market in the U.S. is the largest smoke-free category in the U.S., accounting for half of sales in that category and encompassing 14 million adult consumers and $7 billion in revenue, according to the release.