F. Scott Fitzgerald once wrote that “there are no second acts in American lives.”
Except that was just a throwaway line in the notes for The Last Tycoon, a book he never finished that was slapped together and edited by his friend Edmund Wilson.
Fitzgerald did write an essay called My Lost City years earlier though, in which he wrote, “I once thought that there were no second acts in American lives, but there was certainly to be a second act to New York’s boom days.”
We’ll never know for sure if Fitzgerald’s optimism soured during his tragic decline or if he just left a note for himself to revisit and ponder a familiar theme in a new work.
He never put the shorter pessimistic version in one of his works himself. There is always a chance for a second act during “boom days” and Fitzgerald knew it.
One of the most unlikely of disgraced, once iconic companies appears to have found its chance for a second act. Its epitaph was all but written up until the last couple months.
Now it has secured big stakes in a pair of businesses in their “booming days” that will keep it alive, and maybe even allow it to thrive, for many years to come.
No More Cowboys
Up until recently, you could easily have believed that what once was the king of American tobacco had been put out to pasture.
In 1976 Phillip Morris was the leading cigarette brand in the U.S.A. and the second largest tobacco company in the world. It sponsored I Love Lucy and owned Miller Brewing, Nabisco, and Kraft foods.
Almost three decades later it would start a well-deserved and spectacular collapse. In the process, the international company cut out the domestic business and it was rebranded as Altria to try and gloss over its past misdeeds.
It no longer owns most of its old holdings and seemed destined to pay dividends and buy back shares until it slowly faded out of existence. It’s fallen from number 11 on the Fortune 500 list in 2003 to 154.
However, Altria is betting big on a second act. It is paying a whole lot of money to get into marijuana and vaping products. It just may work.
The first move it made was actually to exit part of the rapidly growing vaping market. It ditched almost all flavored e-cigarette products — about 20% of its revenue came from the segment — to stick to regular, menthol, and mint flavors. That removes some risk by staying in the FDA’s good graces.
Then it took a 45% stake in Cronos Holdings for $1.8 billion. Finally, it is putting $13 billion into a 35% stake in JUUL Labs, the biggest e-cigarette company in the U.S.A.
The days of cowboy ads and ashtrays built into desks, cars, and armrests are long since gone. Finally the company has figured out a way to move past them.
Far From Alone
Altria’s timing couldn’t have been better if only because its window of opportunity was rapidly closing.
Other companies that have been looking for a way into a rapidly expanding market have made big, bold moves.
It started with Constellation Brands, a massive international alcohol company, putting $4 billion into Canopy Growth.
Altria just beat out an announcement from another massive alcohol company, AB InBev, which just teamed up with Tilray.
Then there are companies like Coca-Cola, Heineken, and Molson. And investors like Warren Buffett and Peter Thiel. And private equity firms and hedge funds.
The longer they wait, the less likely there will be a significant stake in the best buyout targets for them. Plus it will only get more expensive as the best marijuana companies keep growing along with their market.
The same goes for small investors looking to make a hefty profit off of the premiums these companies will pay to get in on the game.
If you don’t already have positions in the best buyout targets, this is your last chance.
