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Altria writes down $4.5 billion from its investment in Juul

Facing increasing scrutiny from international and domestic regulators, the Altria Group has decided to write down its investment into the e-cigarette company JUUL by $4.5 billion.

That’s roughly one-third of the $12.8 billion that the tobacco giant had invested into JUUL a little less than one year ago.

What a difference a year has made.

JUUL, which has become synonymous with the vaping phenomenon that has swept the U.S., was once hailed as being at the forefront of a wave of companies that were making smoking obsolete and nicotine consumption safer for consumers.

The company began running into problems as its popularity increased exponentially (in part by allegedly turning to some of the same tactics big tobacco used to target underage consumers).

As the complaints began to roll in, and as JUUL was held responsible for an explosion in the use of tobacco products among underage Americans, the regulatory scrutiny also began to increase.

First the company was compelled to limit its sale of flavored tobacco products. Now it may be forced to pull all of its flavored products outright.

None of the company’s troubles have been helped by the wave of vaping related illnesses that have swept through the U.S. causing several deaths in users across multiple states.

Indeed, a new lawsuit against the company (filed two days ago) alleges that JUUL knowingly sold contaminated pods despite warnings from at least one employee.

First reported by BuzzFeed, the lawsuit was brought by Siddharth Breja, a former senior vice president of global finance at Juul from May 2018 to March 2019.

Breja alleges he was fired for complaining about the charge — a claim that a spokesperson for JUUL called “baseless”.

“[Breja] was terminated in March 2019 because he failed to demonstrate the leadership qualities needed in his role,”a spokesperson for JUUL wrote in an email. “The allegations concerning safety issues with Juul products are equally meritless, and we already investigated the underlying manufacturing issue and determined the product met all applicable specifications.”

The write down by Altria follows an announcement from JUUL that it intends to lay off around 500 people — or roughly 10% of its workforce.

China plans e-cigarette regulation as industry booms

China is taking steps to regulate its blossoming vaping market as health concerns over electronic cigarettes increase in recent times.

China’s National Health Commission has begun research into e-cigarettes and plans to issue legislation for the industry, said the head of the health authority Mao Qunan at a press conference this week. The attempt came as Chinese e-cigarette startups raised loads of venture capital over the past year in their fight to vie for attention in the world’s largest market of smokers.

Vaping suppliers in China range from little-known workshops that have come under legal attack from industry giant Juul, which is reportedly mulling a China entry itself, to venture-backed startups operating out of manufacturing hub Shenzhen. At least 20 e-cigarette companies in China have raised fundings since the beginning of 2019, according to data collected by Crunchbase.

These players are in effect up against state monopoly China Tobacco, which is the world’s biggest cigarette maker and provides the government with colossal tax revenues.

Some researchers support the use of vaping to help adults quit smoking while others have shown that e-cigarettes are just as addictive as traditional ones. The other major controversy is the growing use of e-cigarettes among teenagers, which has led to California’s plan to ban vaping product sales.

China is also applying more scrutiny to the new smoking technology. Research shows that the aerosol produced by heating up e-cigarettes can contain “a lot of harmful substances” and additives in e-cigarettes can “pose health risks,” said Mao. He also noted that equivocal labeling of nicotine level can misguide smokers and sloppy device standards can result in battery explosion and other safety incidents.

Like the U.S., China has seen a worryingly high vaping rate among young people, which is another reason that urges Beijing to hold the industry in check. The use of e-cigarettes by kids, teens and young adults has been proven unsafe because nicotine, which is highly addictive, can harm brain development.

In May, China drew up a set of standards (in Chinese) for e-cigarettes that specify the level of nicotine, the type of additives and other components and designs allowed in battery-powered cigarette devices.