With a sleek product that became a hit among 20-somethings and a headquarters in a trendy part of San Francisco, ecigarette start-up Juul Labs long occupied a different world from Big Tobacco. As it grapples with a public backlash over teenage vaping and the emergence of mysterious health problems linked to the habit, however, the company is increasingly having to become more like the industry it set out to upend.
This week, grizzled veterans of tobacco’s protracted legal and regulatory battles moved closer to taking control of Juul. Nine months after Marlboro maker Altria struck a $12.8bn deal to acquire a 35 per cent stake, Kevin Burns has been replaced as Juul’s chief executive by the tobacco giant’s chief growth officer, KC Crosthwaite.
The change was announced just as talks ended over a $200bn merger between Altria and Philip Morris International, a collapse caused in large part by investor worries about the former’s investment in Juul.
For all the immediate drama, Altria remains hopeful its investment in Juul will pay off in the longer term. Give it five years, predicted Altria’s chairman and chief executive Howard Willard after his company’s talks with PMI broke down without a deal, and Juul will be back on the front foot.
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By then, Mr Willard told the Financial Times at the Global Tobacco and Nicotine Forum in Washington, “I believe Juul will have navigated the challenges” associated with a surge in vaping among American schoolchildren.
“They’ll be a highly responsible player that leads in the US e-vapour market, and a leader in many markets overseas. But it’s going to take a significant amount of work — and a significant amount of investment — to navigate the next year or two,” he said.
For now, there is no let up in the scrutiny of Juul. Nancy Brown, head of the American Heart Association, said the installation of Mr Crosthwaite — who has taken charge with immediate effect — showed Juul was “fully embracing its identity as a tobacco company that prioritises profits over public