Altria makes a strategic move to take control of Juul

With the replacement of Juul CEO Kevin burns by Altria’s Chief Growth Officer K.C. Crosthwaite, Juul has dropped any pretense of not being a tobacco company. 

Juul also announced that the company is suspending all broadcast, print and digital product advertising in the U.S., and is refraining from lobbying the administration on its recently announced policy that would pull flavored e-cigarettes from the market that haven’t received marketing authorization from FDA, and would “comply with the final policy” when effective. through the premarket tobacco product application (PMTA) process. (Juul, however, is continuing to spend millions of dollars on ads that contain unauthorized reduced risk and cessation claims in its campaign to pass San Francisco Proposition C, which would replace the City’s existing e-cig regulations with ones Juul wrote.)  

PMI, the maker of hugely popular Marlboro cigarettes, recently obtained FDA authorization to market IQOS, its new heated tobacco product, in the U.S., and Altria and PMI are scheduled to launch IQOS in Atlanta imminently.  According to Juul’s announcement, Juul’s new CEO Crosthwaite played a key role in the commercial and regulatory efforts related to the U.S. launch of IQOS.

In short, it looks like Altria/Juul is following the standard Big Tobacco playbook of accepting short-term setbacks in order to secure long-term gains.  Specifically, Juul appears to be making an effort to disengage with the FDA over the agency’s recent warnings about making unauthorized reduced risk and cessation claims in its advertising so that Juul can concentrate on getting its PMTA approved by FDA so it can legally market its e-cigarettes. 

If Altria wasn’t committed to pushing Juul forward, they probably wouldn’t waste the time of such a valuable and successful executive – from the industry’s position -- as Crosthwaite.

Putting Crosthwaite in charge of Juul will also facilitate Altria’s integration of Juul with IQOS marketing.

PMI has already received FDA authorization to sell IQOS in the U.S., and is seeking authorization to market IQOS with reduced harm claims. (FDA’s decision to grant IQOS a PMTA was surprising and disappointing because even the FDA recognized that the evidence PMI submitted did not demonstrate that IQOS was statistically different from a cigarette in terms of actual health effects.)  Despite not yet being granted FDA approval to make reduced risk claims for IQOS, Altria and PMI  are already claiming that IQOS is safer than conventional cigarettes.

Like Juul, IQOS boasts a sleek, modern design that imitates Apple products, and is sold in stores around the world that imitate Apple stores.  Like Juul, IQOS is recharged electronically. And like Juul, IQOS comes in two menthol flavors (and these flavors are co-branded with Marlboro -- Marlboro Smooth Menthol and Marlboro Fresh Menthol). Nevertheless, Altria claims that IQOS will not be popular with youth, claims that the FDA has accepted.

Given the exceptionally low bar that the FDA set in allowing IQOS to be sold, Altria probably made a smart bet in putting Crosthwaite in charge of Juul.

This makes continuing efforts by localities and states to reign in e-cigs even more important.

Lauren Lempert collaborated with me to prepare this blog post.