A vaping-related lung disease has killed 18 people so far.
2019 has been a rough year for the tobacco giant Altria. The company’s shares are down more than 33% from a year earlier…
In the U.S., the rates of cigarette smoking continue to decline. That’s good for the public’s health but not great for Altria’s business model.
Over the past 10 years, the company has been steadily moving into the e-cigarette industry. At the end of 2018, Altria acquired 35% equity in the e-cigarette company Juul Labs.
This $13 billion investment made sense at the time … But Juul has quickly turned into a liability in recent months. However, Altria’s new tobacco device finally gained regulatory clearance from the FDA. And according to most analysts, the device is launching just in the nick of time.
The Backstory on Altria’s Juul Investment
The problems with Juul started off slowly … States started banning flavored tobacco like the one the company offers. Then President Trump stated he wants to pass a nationwide ban on flavored e-cigarettes.
But over the past month, things really escalated. A deadly lung disease was linked to vaping. According to the CDC, 1,080 cases have been reported across the U.S. and 18 people have died so far.
The outbreak seems to be linked to products that use THC. But no one has determined a single product or chemical exposure that’s causing the outbreak. The majority of the illnesses reported are from males under the age of 35.
The CDC’s recommendation is that consumers refrain from using any vaping or e-cigarette products. And Juul received an additional blow when Walmart announced it would stop selling e-cigarette products in light of the recent outbreak.
Will Iqos Give Altria the Momentum It Needs?
For the past decade, Altria has been working on a tobacco device called Iqos. Iqos is not a vaping device, and it contains fewer toxins than cigarettes. The device heats up the tobacco without burning it so it still gives users the same nicotine rush.
The device was approved by the FDA in April, with strict guidelines that the company only markets the device to adults. According to Piper Jaffray analyst Michael Lavery, the launch of this new product came just at the right time.
This week, Altria is launching the product in Atlanta in its brand-new Iqos store. Customers will be able to test out the product in “trial rooms.” The company plans to open another store in Georgia later in the month.
The product has done quite well in Russia and Japan. However, sales have been considerably slower in both Canada and the U.K. It’s unclear how U.S. consumers will respond to Iqos in light of the recent problems with vaping.
Jamie Johnson is a Kansas City-based freelance writer who writes about finance and business. She covers a variety of personal finance topics including trading, investing, loans, and credit. Jamie’s work has been featured on InvestorPlace, GOBankingRates, Yahoo Finance, and Business Insider.