Juul and Altria End Non-Compete Agreement

Once, Juul was a company that dominated the vaping industry by a huge margin. Recently, Juul has been going through rough times. The company is worth much less than it was at its peak. Juul has also ended a non-compete agreement with their parent company, Altria Group Inc. This means Altria, if it decides to do so, can enter the vaping industry.

Juul’s First Mass Layoffs Happened After the EVALI Vaping Scare

EVALI is an awkward phrase for E-cigarette or Vaping Product use Associated Lung Injury. The term came up when many vaper suddenly got ill. Many suspected they got sick due to illegal, black-market THC vapes. EVALI was not associated with THC vapes until after the outbreak. This meant legal nicotine vape companies were blamed for the illnesses as well.

Juul suffered heavy backlash due to its perception. Juul was seen as the vape device of choice for illegal, underage vapers. As a result of the outbreak, Juul limited its product line by removing many flavors. Only tobacco and menthol pods remained on sale. After the outbreak, Juul laid off 650 of its workers.

Marketing Denial Orders
Like many vape companies, Juul also received Marketing Denial Orders (MDOs) from the Food and Drug Administration (FDA). Like many other companies, Juul fought back against their MDOs. Juul was also granted a stay. This means Juul could sell their products while their case is in court. Juul’s legal battle is not particularly significant, but legal issues cost money. Legal fees are expensive. While Juul is still one of the larger vape companies, the costs of going to court could still weaken them.

Altria Breaks off their Non-Compete Agreement with Juul

For context, Altria Group Inc. is the parent company of both Philip Morris and Juul Inc. Previously, Juul and Altria agreed not to compete with each other. Juul would stay out of the cigarettes, and Altria would stay away from vaping devices. Since that agreement is over, Altria is free to enter the vaping market if it chooses to do so.

Altria entering the vaping market would not be good news for Juul. Juul as a company is much weaker than Altria. Their brand name is associated with the worst side of vaping. They’ve had to lay off massive amounts of employees while trying to fight a government organization in court. They have shrunk considerably as a company. Juul’s stock has lost 95% of its value since it was first bought by Altria. This leads into the next point.

Bankruptcy?

There are many sources that say Juul is also considering filing for chapter 11 bankruptcy, including Bloomberg and Wall Street Journal. Chapter 11 bankruptcy allows a company to remain in business while the courts and creditors figure out how to settle finances and often, reorganize the company. The goal of filing for bankruptcy is to keep a company alive so that it can pay its creditors. If Juul files for this type of bankruptcy, they will still be around for a while.

Both Altria and Juul can go many places after their non-compete agreement has ended. No matter what either company does, their effects will likely be felt in the vaping industry.

Références:

Altria’s $13 billion Juul investment has lost 95% of its value

Juul’s massive layoffs include 245 workers in Bay Area – San Francisco Business Times

Juul Taps Centerview for Financing Amid Stay on FDA Ban

 

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