The looming demise of Juul Labs represents a big opportunity for tobacco giant Altria Group (MO -0.57%) to reenter the electronic cigarette market.

Having previously given up its own ambitious e-cig growth strategy in exchange for an ownership stake in Juul, which at the time was an industry colossus with a 75% market share, Altria has watched the value of its $13 billion investment go up in smoke. At the end of June, the cigarette maker had written down the value of Juul to a meager $450 million, a 96% loss in value.

Now Altria has dissolved its noncompete agreement with Juul, meaning it is free to enter the market in a big way. Analysts expect it will try to buy its way back in rather than develop its own products, and though Altria has been unsuccessful twice before with that strategy, the tobacco company just might be able to win this time.

$50 bills rolled to look like cigarettes.

Image source: Getty Images.

Strike three, you're out

The end could be near for Juul Labs. It has gone from industry leader to a quickly fading No. 2, and is reportedly looking to finance a potential Chapter 11 bankruptcy filing. Unable to withstand the withering fire of the Food and Drug Administration (FDA) over its purported responsibility for an increase in teen vaping, as well as a potential ban on its device from store shelves, Juul looks like it may be taking its last hit.

That would be the second strike Altria takes in the reduced-risk category after its backup plan of partnering with Philip Morris International to distribute its heat-not-burn tobacco device similarly cratered after IQOS was found to violate British American Tobacco patents.

Although Altria and Philip Morris are reportedly still figuring out how they can get around the import ban, the international tobacco stock's announcement it was buying Swedish Match means it no longer needs Altria to gain entry to the U.S. market. Swedish Match has a large domestic presence for selling its nicotine pouches. It means Altria could very quickly be the only major tobacco company without an e-cig on the market.

Although Altria once had its own e-cig, the MarkTen brand never really caught on, so developing a new product could take too long. That's why analysts expect it to buy a competitor. Many believe privately held NJOY might make the perfect takeover target.

A way to smoke the competition

British American replaced Juul as the e-cig leader with its Vuse brand earlier this year and is now pulling away from the pack. According to the most recent Nielsen data, Vuse had a 39.7% share of the market last month, up from 39%, compared to Juul's share declining to 28.1% from 29.4%. It marks the first time Vuse has held a double-digit lead over Juul. 

NJOY is a distant third at 2.8% and Imperial Brands' blu eCigs comes in fourth with just a 1.4% share. There was a time when blu was the industry leader, but it has long since faded from the scene as the cigarette companies poured billions of dollars into the space. It's why Altria acquiring a company like NJOY would be a good move.

The e-cig maker has already won FDA approval for NJOY Daily, a disposable e-cig, as well as for the NJOY Ace, the first pod-style device to gain market approval. 

Because of Altria's vast distribution network in convenience stores, gas stations, and retail outlets across the country, as well as the sizable financial support it could provide, the devices would give Altria a chance to leapfrog into contention as retailers would give them immediate and prominent shelf space.

If Altria also rebranded them under the Marlboro brand, they would have an additional competitive advantage because Marlboro remains the most popular combustible cigarette by a wide margin, with a 43% share of the cigarette market. 

Altria hasn't had much success so far trying this tactic, but it might just find success this time by buying its way in again.