Altria, the cigarette maker behind the Marlboro brand in the US, has launched a joint venture with Japan Tobacco in its latest push into the burgeoning market for smoke-free alternatives.
The partnership in heated tobacco will give Altria a fresh chance to gain a foothold in the $28bn smokeless tobacco market after several unsuccessful attempts. It will also give the company the opportunity to grow outside the US, its main market, where it has had exclusive rights to sell the Marlboro brand since it was carved out from Philip Morris in 2008.
Altria chief executive Billy Gifford said he believed the tie-up and Altria’s product pipeline “position us well to increase adoption of smoke-free products”. Altria will invest $150mn in the joint venture Horizon Innovations, and will hold a 75 per cent stake. Japan Tobacco will have a 25 per cent stake.
Previous efforts include e-cigarette brands MarkTen and Green Smoke, which Altria abandoned in 2018 citing sluggish sales. Subsequently, Altria took a 35 per cent stake in the e-cigarette manufacturer Juul Labs, which has since had its products banned by the US Food and Drug Administration and is facing possible bankruptcy.
This month, Altria also exited a partnership with Philip Morris that gave it US commercialisation rights for IQOS, a line of e-cigarettes. PMI paid $2.7bn to regain the rights.
Chris Growe, analyst at Stifel, said the partnership gave Altria “a real fighting chance” of competing against IQOS.
The joint venture is centred on two products: Japan Tobacco’s heated tobacco stick Ploom and Altria’s Marlboro-branded heated tobacco products.
“You combine the Marlboro branding — in a market where it’s a 43 per cent market share — and a really good device that can utilise the Ploom product,” said Growe. “It gives Altria the best chance of competing against IQOS in the US market.”
As part of the joint venture, Japan Tobacco has also committed to launch Altria’s heated tobacco devices in an international market by 2025, and the two companies are planning to develop other smoke-free products, possibly including vapes. Last month, Altria ended its non-compete agreement with Juul.