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CEO Q&A : Altria Boss on Getting Into Weed, Taking Risks

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03/22/2019 | 11:16pm EDT

By Jennifer Maloney

Howard Willard, a two-decade veteran of Altria Group Inc., took over as CEO of the Marlboro maker last year and quickly struck two deals that have upended the company: investing in e-cigarette startup Juul Labs Inc. and in Canadian cannabis grower Cronos Group. He sat down with The Wall Street Journal in February for an interview. Here are edited excerpts:

On getting into the cannabis market:

I would say that over the two years prior to me becoming CEO we had, a number of times, done a deep analysis of the cannabis business.

I was surprised in the course of a year how I went from believing it was going to be a long time, or maybe never that it was going to be legal, to being convinced that it becoming federally legal in the U.S. was highly likely or even inevitable.

We went out and we met with most of the large Canadian companies, and we very quickly became convinced that the world-wide opportunity was quite attractive. There was an increasing number of countries around the world that were legalizing it both medically and recreationally, and so it was an interesting opportunity even beyond the U.S. market.

On changing the corporate culture:

For our business, for a long time, we had a pretty stable business, and we had a somewhat risk-averse culture. We sort of ingrained that in people. So they have to, in some respects, keep the best of that, but leave a lot of it behind and be more innovative. Frankly, just to be more welcoming to all employees.

We've picked up speed because I believe now that the pace of change in the tobacco business has accelerated. The benefit you can get from having a diverse and inclusive workforce is even greater. I think it's well-proven that diverse teams make better decisions, faster decisions, and are more willing to challenge the status quo and innovate, and that's going to be critical to our success.

On investing in Juul and shutting down Altria's e-cigarette business:

In the first three-quarters of 2018 it became pretty clear that Juul was a unique and compelling product and that compared to our existing e-cigarette products, we were not going to beat them in the marketplace.

Then we had to start talking about well, could we leapfrog them, and the challenge we faced was that because any new product had to be approved by the FDA, there was probably a three- to five-year delay before an entirely new or evolved product could be placed in the market.

It was a fairly clear-cut decision, but I think it was an emotional decision for us because we had put our best people to work on the e-vapor organic effort. They have developed very satisfying products that early on were converting adult cigarette smokers. It just so happened that in the end Juul came up with a more compelling product and started to grow more rapidly.

On the FDA and youth vaping:

We've been working with the FDA for quite some time. We were the only major tobacco company that supported regulation of the industry by the FDA, and we've been regulated by them since 2009, and we worked very hard to be a responsible player in the industry.

[FDA chief Scott Gottlieb] was quite influential at convincing us to change our position on the minimum age of purchase of all tobacco products. We've traditionally supported 18, we're now supporting 21, and we're trying to accomplish that not only at the federal level but also at the state level. I believe that's probably the single biggest thing we can do to help drive down youth usage of e-vapor products.

Stocks mentioned in the article
ChangeLast1st jan.
ALTRIA GROUP -0.95% 42.57 Delayed Quote.-13.81%
CRONOS GROUP INC. -1.98% 10.37 Delayed Quote.-26.43%
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Howard A. Willard Chairman, CEO, COO & Executive Vice President
William F. Gifford Vice Chairman & Chief Financial Officer
George Muñoz Independent Director
Thomas F. Farrell Independent Director
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