Altria Stocks Tumble as Juul Sales Stagnate

Juul’s sales slide and loss of market share earlier this year was the first hint that new FDA ecig regulations, and proposed local restrictions were slowing the growth of the vaping industry. Additional insight into this trend was provided in Altria’s Q1 2019 earnings call.

Marlboro-maker Altria purchased 35 percent of Juul at the end of last year, and closed their own e-cig subsidiaries in the process. Altria’s MarkTen and GreenSmoke only had a sliver of the market, and they decided to jump on the Juul train instead. In their eagerness to capitalize on Juul's momentum, Altria abandoned their loyal customers, although excellent GreenSmoke alternatives remain available on the market.

Juul took the e-cig industry by storm in 2015 with several shrewd innovations to the existing cartridge based e-cig design. The Truth and Technology Behind Juul and Nic Salts Revealed, examines how Juul managed to disrupt the entire vaping industry with a simple device design and very potent nicotine concentrations.

Altria Stock Takes a Hit

Altria’s first quarter profits for 2019 tumbled 41 percent. The biggest threat to the tobacco giant’s earnings is an accelerating decline in cigarette sales and smoking. Altria’s bottom line also suffered from an outlay of $159 million to Canadian cannabis investment firm Cronos. But buried beneath this bad news was the fact that Juul’s sales are slowing.

As a result, the price of an Altria stock dropped 6 percent on April 24, although it has edged back up slightly over the last week.

E-Cig Restrictions Impacting Sales

In the last six weeks, Senator McConnell has proposed raising the smoking age to 21, and Congresswoman DeGette of Colorado threw a bone to the low-information contingent that is absolutely fixated on “teen-friendly flavors”. Her scientifically incompetent SAFE Kids Act typifies a counter-factual approach to e-cig regulation that does nothing but punish adult smokers.  

The fact that retro e-juice packaging is marketed to adults, and Juul Mint is the flavor most popular with teens simply does not register with those obsessed with the fruit flavor fallacy, the belief that sweet vape juices were developed to hook minors.

Actions taken against e-cig flavors, specifically Juul cutting flavor choices at brick and mortar outlets, are beginning to impact sales. There were 440 million nicotine cartridges sold in the first quarter of 2019, compared to 420 million in the last quarter of 2018. This 3 percent increase was significantly less than the 9 percent increase last quarter.

There are two primary reasons for the slowdown. Altria attributes the drop entirely to the fact that Juul stopped shipping fruit flavored pods to brick and mortar stores. A detailed study of 69,000 vapers by Dr. Konstantin Farsalino found that the majority of adult smokers who transition to vaping prefer these sweeter flavors. It makes perfect sense that transitioning smokers deprived of their preferred cigarette alternative would be less likely to make the switch.

Juul makes up a huge share of the vaping market, and any headwinds they face will slow the entire industry.

Juul Alternatives

The second challenge to Juul’s market supremacy is competition from refillable vape pod systems. We reviewed the best of the bunch in our feature on the Top Ten Juul alternatives. Refillable vape pods are optimized for the same potent nicotine salt ejuices that fuel Juul’s best-selling device. If you are not familiar with the term nicotine salt, it is an important innovation and is outlined in detail in our deep dive, What is Salt Nic?

Refillable pod systems generally have a larger battery and give you access to thousands of amazing flavors. Many refillable pods have multiple coil and pod options, so they work equally well with less potent freebase nicotine ejuices. This gives you a much wider range of nicotine strengths to vape, ranging from 0 to 6.5 percent.

Altria Wants to Eliminate Competition With E-Juice Flavor Ban

The threat posed to Juul by the more flexible refillable pod system is real. There is a reason why Altria wants a flavor ban. It would be akin to banning charging stations for electric cars in order to protect the internal combustion engine market. Sure there are work arounds, but open pod systems depend on a healthy selection of ejuice options.

Juul is marginally impacted by flavor restrictions, but as mentioned above their most popular flavor is mint. Moreover, they are protected by an enormous brick and mortar foot print due to their alliance with Altria. Any laws that lock in the status quo will benefit Juul tremendously.

On the other hand, a flavor ban would be a disaster for small e-juice manufacturers and the refillable vape pod devices and mods that capitalize on the flavors provided by this diverse industry.

This is why national flavor restrictions would benefit Juul-Altria. Essentially, a flavor ban would remove most of their competition with a stroke of a pen and lock in the Juul as the permanent face of the vaping industry.

Marginalized groups would suffer under strict new e-cig laws, and the company felt by many to be responsible for the teen vaping epidemic would emerge stronger than ever thanks to the lobbying efforts of their big tobacco allies.

FDA Vape Pod Ban

While the Senate pursues tobacco 21 laws, and the House looks at banning flavors, former FDA commissioner Scott Gottlieb has been making the talk circuit rounds and discussing an FDA ban on prefilled vape pods like Juul.  At least this approach successfully identifies the devices and flavors preferred by minors, but it has the drawback of punishing adult smokers who are looking to transition to non-combustible alternatives.

Until the teen vaping epidemic is ended, the vaping industry faces an existential threat. Public sentiment is being turned against e-cigs. San Francisco has proposed virtual e-cig prohibition. It is hard to believe that this is occurring in a city known to be a bastion of LGBTQ plus rights, and with a track record of supporting harm reduction measures.

Why is San Francisco's local government are so eager to fund safe injection sites and needle exchanges on one hand, while on the willing to punish groups with higher rates of smoking, like their sizable LGBTQ Plus community?

This is a great example of how illogical the fight against vaping has become.  We can only hope that the slow down in prefilled pod sales represents a shift in consumer preferences, or a hiccup caused by changes the brick and mortar model.

The other option, that fewer adult smokers are willing to transition to e-cigarettes is too terrible to contemplate. Iowa AG Thomas Miller’s letter to the FDA predicted that poorly designed e-cig regulations would cut off adults from smoke free cigarette alternatives.