Vaping is steadily taking the place of cigarettes. Photo/123RF.
Altria, one of the world's biggest tobacco companies, is spending nearly US$13 billion (NZ$19 billion) to buy a huge stake in the vape company Juul as cigarette use continues to decline.
The Marlboro maker said Thursday that it will take a 35 per cent share of Juul, putting the value of the company at US$38 billion, larger than Ford Motor Company, Delta Air Lines or the retail giant Target.
"We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes," Altria Chairman and CEO Howard Willard said in a prepared statement.
E-cigarettes and other vaping devices have been sold in the US since 2007 and have grown into a US$6.6 billion business, and it is already intersecting with another seismic shift in the US — the legalisation of marijuana across the US.
The investment comes about two weeks after Altria stepped into the cannabis market with an investment of around $2 billion in Cronos Group, the Canadian medical and recreational marijuana provider.
North American consumer spending on legal cannabis is expected to grow from US$9.2 billion in 2017, to US$47.3 billion by 2027, according to Arcview Market Research, a cannabis-focused investment firm.
Altria Group isn't the only major corporation attempting to incorporate marijuana sales.
This week Anheuser-Busch InBev, the maker of Budweiser, partnered with medical cannabis company Tilray in a US$100 million deal to research cannabis-infused drinks for the Canadian market. In August, Constellation Brands announced a US$4 billion investment in another Canadian pot producer, Canopy Growth, the largest to date by a major US corporation in the cannabis market.
With nicotine-based vaping, devices heat a flavored nicotine solution into an inhalable vapor. They have been pitched to adult smokers as a less-harmful alternative to cigarettes, though there's been little research on the long-term health effects or on whether they help people quit.
The growing popularity of e-cigarettes has alarmed a number of health officials.
This week, Surgeon General Jerome Adams said parents, teachers, health professionals and government officials must take "aggressive steps" to keep children from using e-cigarettes. Federal law bars the sale of e-cigarettes to those under 18.
There is a scramble in the US to reverse a recent explosion in teen vaping that public health officials fear could undermine decades of declines in tobacco use.
An estimated 3.6 million US teens are now using e-cigarettes, representing 1 in 5 high school students and 1 in 20 middle schoolers, according to the latest federal figures.
Juul said Thursday that it recently began to take actions intended to prevent underage vaping. The company shut down its Facebook and Instagram accounts last month and halted in-store sales of flavoured pods, which were viewed by many critics as a direct play for younger users.
Juul also said that it's also enhancing age-verification for its online sales.
Juul Labs, based in San Francisco, said it had initially hesitated to accept the investment from Altria.
"But over the course of the last several months we were convinced by actions, not words, that, in fact, this partnership could help accelerate our success switching adult smokers," Juul said.
Juul will remain an independent company, but it gains access to Altria's massive infrastructure and reach. Namely, Altria will help Juul secure space on store shelves beside traditional cigarettes. It will also help Juul reach smokers via cigarette pack inserts and mailings.
Under the agreement, Altria's only entry into the e-cigarette market will be through Juul for at least six years.
- Associated Press