Big news in the world of big brands: Altria has taken a 35% stake in Juul, the privately-owned California startup that has taken the e-cigarette world by storm with its signature sleek-black vape pen, and a tidy 70% market share in the process.
It's kind of simple, really. While Philip Morris has been trying to invent its own cigarette alternatives – it owns iQOS, a heat-not-burn concept sold outside of the US and has reportedly invested more than $4.5 Billion in it over the last 10 years – it found a company that has out tech-ed them and outsold them in just three years. Kind of a no-brainer: if you can't build it, buy it.
From a marketing perspective, this is a pure (and big) horizontal line extension. Philip Morris is not going to stop selling cigarettes anytime soon – not when their Marlboro brand is the category leader in a roughly $100 Billion US tobacco market. But they are girding against their slow and steady demise by diversifying their tobacco portfolio.
Current Juul advertising features testimonials of former smokers talking about how Juul has helped them to quit smoking actual cigarettes. And their off-the-line marketing campaign, focused almost solely on social media, featured celebrities (like Dave Chappelle and Katy Perry,) as proud Juul-ers.
This investment may just be a pre-IPO valuation manipulation. If Altria is looking to capitalize on any opportunities it can find, it may just be pumping up Juul's value so that it can drive eventual profits right to the bottom line, whether it cannibalizes their cigarette business or not.
And it may not be that nefarious at all. Altria has a duty to its shareholders to seek out opportunities, and one way to do that is to segment the market and give their target audiences what they (both) want. Cigarettes for some, e-cigs for the rest. If you've got the resources, why not own the leader in both categories?
Concurrently, Juul is undertaking several clinical studies to drive evidence-based claims ahead of their required submission to the FDA in August of 2022. Imagine what their value will be with any kind of favorable decision (and some accompanying language that sniffs of a "safer than cigarettes" authorization,) then?
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