Altria will pull its e-cigarette pods from the market
Move is in response to underage use in a market where it has fallen behind upstart Juul
Altria Group Inc. said it would pull its e-cigarette pods from the market and discontinue the sale of most flavored e-cigarettes in response to mounting concerns about a surge in underage use of similar products.
The move by the maker of Marlboro cigarettes comes after antismoking groups and U.S. health officials including the Food and Drug Administration have warned about a public health crisis from widespread use of e-cigarettes by teens and other children.
Altria’s e-cigarettes, sold under the MarkTen and Green Smoke brands, are just a small slice of the U.S. market, which is currently dominated by upstart Juul Labs Inc. Juul sells its devices online in flavors such as mango and cucumber.
Altria represented 9% of the U.S. e-cigarette market for the year ended Oct. 6, according to a Wells Fargo analysis of Nielsen data. That doesn’t include online sales. Juul accounted for 62%.
Altria said it would continue to sell e-cigarette products that resemble traditional cigarettes but limit them to tobacco, menthol and mint flavors until the FDA gives it approval for other flavors. These so-called cig-a-like devices have been less popular among children than devices that use refill pods containing flavored liquids.
The company said about 80% of its e-cigarette volume from the third quarter will remain on the market after it pulls the pod products and other flavors.
Given Altria’s small share of the pod business, some analysts
have worried that rising sales of Juul devices could steal market share from Altria and also cannibalize the traditional cigarette business, where Marlboro still dominates the market.
On Thursday, Altria reported third-quarter revenue rose 1.6% from a year ago, but sales for the first nine months of the year are down 1.2% from a year ago to $19.3 billion.
Shipments of Marlboro cigarettes were down 5.8% in the nine months, though Altria offset those declines with higher prices.
Altria said it would support federal legislation requiring a minimum age of 21 to purchase all tobacco products, including e-cigarettes. Federal law currently
sets the minimum age at 18, though six states have raised the minimum age to 21.
“We believe e-vapor products present an important opportunity for adult smokers to switch from combustible cigarettes,” Altria CEO Howard Willard wrote in a letter to the FDA. “Yet, the current situation with youth use of e-vapor products, left unchecked, has the potential to undermine that opportunity for adult smokers.”
Shares of Altria were down 1.5% in early trading Thursday.
Altria’s move comes after the FDA warned in September that it could impose new restrictions on e-cigarette sales, including potentially banning flavors. The agency had asked Juul, Altria,
British American Tobacco PLC and other major e-cigarette manufacturers to present convincing plans for reducing teen use or risk having their products yanked from the market.
Mr. Willard said the company supports raising the minimum age to 21 because federal data show that young people gain access to tobacco through their friends. He said 5% of tobacco consumers are between 18 and 20 years old, representing 2% of cigarette smokers and 15% of e-cigarette users.
The FDA “appreciates any voluntary steps companies can take to address the youth access and appeal of e-cigarettes,” a spokesman said.
“All policy options are on the table, including taking additional steps to address flavors that appeal to kids and combat illegal sales to minors.”
After years of declining U.S. smoking rates, sales of e-cigarettes have jumped in the past year, fueled in part by online startups selling vaporizers and nicotine-laced liquids. Each $4 Juul pod contains as much nicotine as a pack of cigarettes.
The number of high-school students who used e-cigarettes in the past 30 days has risen roughly 75% since last year, according to preliminary federal data. That would equate to about three million, or about 20% of high-school students. Meanwhile, use among middle-schoolers increased nearly 50%.
Juul, which was valued at $16 billion in a funding round this summer, has said its products are intended to help adult smokers quit and that it has taken several steps to combat underage use, including raising its minimum purchase age on its website to 21, adding age-verification tools to its website, and limiting how many pods one customer can buy each month.
Nearly a third of 13-to-18-yearolds who responded to a survey conducted in May by The Wall Street Journal with research firm Mercury Analytics said they currently vape. Most of the teens who vape said they are doing it for reasons other than to quit smoking, according to the Journal’s survey conducted in 49 states. More than half said they do it because they like the flavors that e-cigarette liquids come in and they think vaping is fun. More than two-thirds said they believe vaping can be part of a “healthy life.”