JUUL STATEMENT ABOUT ALTRIA MINORITY INVESTMENT AND SERVICE AGREEMENTS

Company News

December 20, 2018

JUUL’s mission is simple – to improve the lives of the world’s one billion adult smokers by providing the first true alternative to combustible cigarettes.

It’s a simple but powerful north star that guides us through the challenges that surround our category and our company. We are driven by the huge opportunity in front of us – finding a solution to the number one source of preventable death in the world – cigarette smoking. Through all of these challenges, we will listen to our critics. We are not perfect. We are constantly learning and getting better at what we do.

We have made huge progress and are showing unprecedented signs of success in our mission:

• Switching data shows that almost 50% of smokers who purchase JUUL switch from combustible cigarettes within 90 days.
• Cigarette decline rates in the US are at record levels with the last 2 months demonstrating decline rates at almost 3x the previous 3-year average. The single most important driver of this decline is JUUL’s growth.

As we have said before, our intent was never to have youth use JUUL products. But intent is not enough, the numbers are what matter, and the numbers tell us underage use of e-cigarette products is a problem. As a result, we recently began implementing a number of actions to prevent underage vaping, including stopping the sales of flavored products to retail stores, enhancing age-verification for our online sales, eliminating social media accounts, and developing further technology solutions.

Today, we have been joined by an unlikely – and seemingly counterintuitive – investor in our journey. Altria today announced a minority investment of $12.8 billion into JUUL for a 35% ownership in the company along with services to accelerate our mission. We understand the controversy and skepticism that comes with an affiliation and partnership with the largest tobacco company in the US. We were skeptical as well. But over the course of the last several months we were convinced by actions, not words, that in fact this partnership could help accelerate our success switching adult smokers. We understand the doubt. We doubted as well. We made it very clear that any investment would need to meet demanding and specific criteria to ensure that they are committed to our mission:

1. An investor would have to adopt and support our mission. Today Altria did that with its largest investment and stated, “We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes by investing $12.8 billion in JUUL, a world leader in switching adult smokers. We have long said that providing adult smokers with superior, satisfying products with the potential to reduce harm is the best way to achieve tobacco harm reduction. Through JUUL, we are making the biggest investment in our history to achieve that goal. We strongly believe that working with JUUL to accelerate its mission will have long-term benefits for adult smokers and our shareholders.”
2. An investor would have to back up its commitment with tangible actions and real value outside of its financial investment. Altria has agreed to provide us services that will accelerate our ability to get JUUL in the hands of adult smokers:
   1. Altria will provide JUUL access to its premier innovative tobacco products retail shelf space, allowing JUUL’s tobacco and menthol-based products to appear alongside combustible cigarettes. JUUL’s flavored products will continue to only be available at JUUL.com.
   2. Altria will enable JUUL to reach adult smokers with direct communications through cigarette pack inserts and mailings to adult smokers via Altria companies’ databases.
   3. Altria will apply its logistics and distribution experience to help JUUL expand its reach and efficiency, and JUUL will have the option to be supported by Altria’s sales organization, which covers more than 230,000 retail locations.
3. An investor would have to allow JUUL to remain in control. As part of this investment JUUL remains fully independent and retains full operating control. Altria has stated it will be subject to a standstill agreement that will not allow them to acquire additional shares above its current 35% level.
4. An investor would have to provide funds that would benefit our employees and our investors. As part of this investment investors and employees will receive immediate and long-term benefits.

As a result, we are excited about the opportunity presented by Altria, its investment and service agreements. We are fully committed to our mission and our values. We know we need to earn trust and prove that this partnership may provide the opportunity to improve upon our early successes and better equip us to tackle the opportunities and challenges that lie ahead. When you take a step back, our success ultimately depends on our ability to get our product in the hands of adult smokers and out of the hands of youth. When adult smokers try it, it works. And, the impact is life-changing. This investment and service agreements helps us do just that.