It has been a turbulent week for the tobacco industry. On Sept. 25, Altria Group Inc. and Philip Morris International Inc. announced that they would not proceed with their proposed megamerger. Minutes before, Juul Labs Inc. announced that CEO Kevin Burns had stepped down, replaced by Altria executive K.C. Crosthwaite.
Source: AP Photo |
Altria, owner of a 35% stake in Juul, gave no reason for the deal's collapse, simply stating that an agreement could not be reached. More pointedly, Philip Morris said in its release: "Global data, based on four years of use, show that IQOS is not significantly appealing to youth or to nonsmokers," referring to its heated-tobacco product.
It is impossible to look past the furor surrounding Juul's marketing practices and popularity among children, and the rapid regulatory crackdown, as the driving factors behind the end of merger talks. "The underlying reason is likely to have been an inability to align on a convincing vision of the medium-term future of vaping both in the U.S. and globally — in particular in light of extreme scrutiny on the Juul brand," Euromonitor International senior industry manager Shane MacGuill said.
Crosthwaite's appointment, along with Juul's move to immediately withdraw all U.S. advertising and to not lobby the Trump administration, shows that Juul and part-owner Altria understand the severity of the vaping crisis. "This decision by Juul recognizes that this is a critical time for the company," said Altria CEO and Chairman Howard Willard.
Onlookers have not ruled out a second attempt at a merger should the regulatory situation become more favorable. But for the immediate future, Altria must prioritize ensuring that its bet on Juul does not go up in smoke.
Chart of the week

Automotive
Source: S&P Global |
Volkswagen dismisses new 'dieselgate' charges as 'groundless'
German prosecutors on Sept. 24 charged VW CEO Herbert Diess, Chairman Hans Dieter Potsch and ex-CEO Martin Winterkorn with market manipulation.
Logistics firms see companies 'swiftly' adapting to post-Brexit reality
Many shipping companies believe the longer-term direct impact may be minimal as supply chains adapt, but some in the industry warn that customers are not ready and that certain sectors such as automotive will face a "devastating impact."
Retail
Amazon in the Middle East: Leveraging a lucrative growth opportunity
The e-commerce giant is making aggressive moves to expand in the fast-growing region even as global sales growth slows.
Amazon in the Middle East: Competition, regulation could stymie ambitions
The American company is one of several e-commerce players jockeying for market share in the Middle East.
Source: Alibaba |
New Alibaba chairman's 1st investor day suggests more diversified future
Daniel Zhang laid out a plan that largely mirrored that of his predecessor, Jack Ma, but hinted at a greater emphasis on digital services beyond the company's core e-commerce offering.
After blockbuster China debut, Costco faces stiff competition, tariff threat
Costco made headlines after the overwhelming response to its Shanghai store's opening day but faces an uphill task to succeed where many international retailers have struggled.
Food, Beverage & Tobacco
Phillip Morris-Altria merger vaporized by Juul, regulatory pressure: analysts
However, some industry experts still said the tobacco giants could someday combine.
Congress members ask e-cigarette makers to stop ads; retailers to pull tobacco
The moves come as the government continues to probe illnesses and deaths relating to vaping and a surge in youth e-cigarette use.
IPO window still open, but some having trouble getting through
A handful of big transactions helped boost IPO activity earlier in 2019, but several high-profile IPO hopefuls have hit speed bumps on their path to going public.
Dining out: US restaurant sales growth slows further in August
Sales at U.S. restaurants continued to slow as the sector saw steady gains in employment, a rise in the cost of eating out and a jump in stock price for most of the top publicly traded restaurant companies.
S&P 500 Consumer Discretionary and Staples Indices

Consumer Edge is a weekly collection of critical developments across the automotive; retail; and food, beverage, and tobacco industries. Drawing on exclusive analysis and value-added content from the Consumer News team at S&P Global Market Intelligence, it is published every Thursday.



