Dive Brief:

• Juul Labs is in talks with Philip Morris International, Japan Tobacco Group and Altria Group about a potential “sale, strategic-investment, licensing or distribution deal” with the e-cigarette company, according to a Wall Street Journal report.  
• The vape maker was valued at $1 billion in October by Altria, which already owns more than a third of the company, but had to lay off 400 workers, make deep cuts to its budget and secure more funding in November to avoid bankruptcy.
• While Juul has recently settled thousands of lawsuits related to youth-targeted marketing, it is still fighting marketing order denials (MDOs) from the U.S. Food and Drug Administration that would ban all of its current e-cigarettes from being sold in the U.S.

Dive Insight:

With cigarette use down by around two thirds in the last two decades, tobacco companies are looking to diversify away from reliance on burning tobacco products. While cigarette sales were down almost 5% in the fourth quarter of 2022, e-cigarette sales were roughly flat, according to data from Goldman Sachs and NielsenIQ. 

And since Juul currently commands about 26% of the total e-cigarette market, according to those firms, it would ordinarily be a strong acquisition candidate. 

However, Juul’s future is still up in the air. The FDA is reconsidering its MDOs, but the company is still waiting for a final decision, expected in June. If the FDA doesn’t reverse its decision, Juul will need to apply again with new or updated products, The Wall Street Journal noted.

Goldman Sachs’ latest “Nicotine Nuggets” report said that if you excluded Juul, e-cigarettes saw “solid growth” in last years fourth quarter. 

This isn’t the first time Juul and Altria have been in sale talks. The Wall Street Journal reported that, just last fall, the companies discussed a deal to either license Juul’s U.S. intellectual property or sell its international business, but talks didn’t go anywhere. Altria subsequently ended its noncompete clause with Juul, which opened up the possibility of it working with another company. 

The discussions also come as e-cigarette market leader Vuse, owned by British American Tobacco, got hit with two MDOs on menthol vaping products by the FDA, indicating the category is still under careful scrutiny. Flavored tobacco items are particularly in focus for the FDA, which called them a “known and substantial risk with regard to youth appeal, uptake and use.”