The FDA Is Set To Ban Juul Products In U.S.: What Companies Could Benefit?

The U.S. Food and Drug Administration (FDA) is set to announce it will ban Juul brand e-cigarettes in the country, wiping away a significant chunk of the $21.63 billion industry of which Juul owns 41%, according to the Wall Street Journal.

Shares of Altria Group Inc MO, which owns a 35% stake in Juul, fell more than 9% after the news was delivered.

What Happened: This ends a protracted legal dispute between the FDA and Juul. Juul had already removed its flavor range, including Creme Brulee and Mango, from the market because the FDA claimed flavored tobacco products were targeted at minors.

Currently, only the Menthol and Tobacco Juul flavors are available in the U.S.

The Journal reported that this ban clears the way for Juul’s biggest rivals, NJOY Holdings and Reynolds American Inc., a subsidiary of British American Tobacco PLC BTI to keep tobacco-flavored e-cigarettes on the market.

This action follows Tuesday's indication by the Biden administration that it will create a proposed regulation to set a maximum nicotine level in tobacco products, thus lowering the quantity of nicotine in items sold in the U.S.

Why It Matters: Public health experts say this unprecedented move would have transformative consequences.

Despite the fact e-cigarette products have been permitted to stay on the market for years, the FDA requested the manufacturers to file applications in 2020 to keep their goods on the market.

Juul sold more than 18 million devices in the two years between 2016 and 2017 when it first gained enormous popularity. Juul, which had a market share of 75% in 2017, was valued at more than $15 billion. Altria spent $12.8 billion in 2018 to buy a 35% stake in the expanding e-cigarette business.

Since then, as lawsuits have mounted and more Americans have become aware of the risks associated with vaping, Juul has lost a substantial portion of the market.

Altria is the parent company for Philip Morris USA, U.S. Smokeless Tobacco Company, John Middleton, Helix Innovations and Philip Morris Capital Corporation.

Photo: Steve Heap via Shutterstock