Dive Brief:

• Tobacco major Altria is in talks to buy vape startup NJOY and sell off its stake in Juul, according to a Monday report in The Wall Street Journal.
• If it goes through, the NJOY acquisition is reportedly worth “at least $2.75 billion” and could include more money if “certain regulatory milestones” are met, according to the article. 
• While it has faced some marketing denial orders, NJOY is one of the few e-cigarette makers that has already received marketing approval for several of its products from the U.S. Food and Drug administration. 

Dive Insight:

Absorbing NJOY would let Altria go full speed ahead on marketing the company’s approved e-cigarette products, and would let retailers stock those items with more confidence than the Juul brand currently provides. 

Juul is still in the middle of a fraught battle with the FDA for the future of its products after the federal agency issued marketing denial orders against them in June. While the decision has been suspended while the FDA takes another look at the documentation, uncertainty is rampant. If the company loses, those products will need to be removed from shelves.

Last fall, Altria discussed either licensing Juul’s U.S. intellectual property or selling its international business, but no agreement was reached, and instead the two companied ended their noncompete clause. 

If the deal for NJOY goes through, Altria will seek to avoid a repeat of what happened with its stake in Juul, which it bought for almost $13 billion in 2018 and which is now worth about $250 million, according to its fourth-quarter earnings report. 

While NJOY lacks the baggage of Juul, it also doesn’t have nearly the reach. It currently has about 3% of the e-cigarette market, according to The Wall Street Journal, well below Juul’s roughly 26% market share. The other major market leader is R.J. Reynolds’s Vuse line. 

According to Goldman Sachs’ Q4 Nicotine Nuggets report, most retailers believe that the fall of e-cigarettes in the fourth quarter could be blamed largely on Juul’s battle with the FDA. That same report noted that some respondents believe that “growth in other brands such as NJOY & Juice Head” could lead to 2023 being a growth year for e-cigarettes.

That will be important for the big tobacco companies as they continue to diversify in the face of plummeting tobacco use.