The Food and Drug Administration (FDA) is trying to eliminate one of the largest and most popular e-cigarettes on the market, paving the way for its rival to become the impregnable leader in smoking alternatives.
While the regulatory agency gave what appeared to be a fatal blow to Juul Labs by rejecting its marketing request for the Juul device and requiring it to remove all of its products from store shelves, Juul won temporary compensation from an appeals court, which suspended the order. until he can decide on the merits of the case.
Juul is partly owned by tobacco giant Altria (MO 2.09%), which acquired a 34% stake in the e-cigarette maker in 2018 for $ 12.8 billion. If Juul cannot convince a court that the FDA’s decision is “arbitrary and capricious and lacks substantial evidence,” as he states in his filing before the U.S. Court of Appeals for the DC Circuit, it will be a blow for what it once was. the dominant e-cig that can eventually lead to bankruptcy.
It would be an ignominious end for this flyer once he saw his fortune plummet as he went under FDA scrutiny to increase the use of e-cigarettes for teens, but one that would open the door. doors to Altria’s rival, British American Tobacco (BTI 3.34%). to practically have the market with your e-cig Vuse.
Image source: Getty Images.
Greetings to the new king
Juul had been the undisputed leader in electronic cigars with a market share close to 80%, but the FDA beat the company for its design, marketing and ingredients, which it alleged induced teens to start vaping.
The agency harshly cracked down on the electronic cig industry, including retailers, targeting illegal sales to underage users. The FDA also banned all e-cigarettes with gusto, despite their popularity among adults, because teens liked them too.
Juul responded by launching a $ 30 million marketing campaign against teen vaporization and supported raising the legal age to buy tobacco, but the negative press drum surrounding the device affected sales. Juul’s market share evaporated and Vuse surpassed Juul for the first time earlier this year.
Image source: Juul Labs.
Nielsen’s latest data places Vuse’s share at 35.1% compared to Juul’s 33.1%. Third place NJOY is far behind the leaders with a comparatively microscopic share of 3.1%. While NJOY and other e-cigarette makers will no doubt pick up a few Juul users after the device has been banned, it is British American’s Vuse brand that will almost certainly be crowned the indomitable king of e-cigarettes.
Defeating all who came
British American Tobacco is underway. Last year, it obtained a decision from the U.S. International Trade Commission that Philip Morris International’s IQOS heated tobacco device (PM 1.80%) infringed its patents and banned the import and sale of this device in the US.
Altria had partnered with Philip Morris, the world leader in e-cigarettes, to market and distribute IQOS in the United States. It had already introduced it in three states and planned to launch the device nationwide late last year, but the ITC ruling puts the kibosh in those plans.
Because Altria had also previously abandoned its own MarkTen e-cigarette brand in favor of joining forces with Philip Morris, it is the only large tobacco company to have no devices of its own to sell and the FDA has almost eliminated the rest of his investment in Juul. At the end of the first quarter, Altria has reduced the fair value of its Juul position to just $ 1.6 billion.
If the FDA is successful in killing Juul, British American Tobacco will essentially have no obstacles in its path to market dominance.
A profitable company
Vuse became profitable in the U.S. for British American during the second half of last year, and has been able to increase its share because it discounted the device and consumables to attract users. Earlier this month, he said he was now willing to raise the prices of both, which with a major competitor removed from the market, should give the tobacco stock a big boost in profits.
Steam’s revenue grew 59% last year to £ 927 million, while its own heated tobacco products, marketed under the glo brand, saw sales up 46% to £ 853 million. sterling. While British American still generates 85% of its revenue from cigarettes and other combustible products, the alternative smoking segment is its fastest growing business.
Now that the FDA has crowned him king of e-cigarettes, look for sales of steam and hot tobacco to build a deep competitive pit that few rivals can cross.