Who is JUUL, the electronic cigarette that made Marlboro manufacturers invest 12.8 billion
The tobacco industry is facing changes derived from new laws and a new vision of the population, which are putting their future at risk. Given this, many companies are looking to change their strategy to focus on technology, which in theory would ensure its survival.
The biggest and clearest example of this was in December 2018, when the Altria Group, owners of Philip Morris USA and makers of Marlboro cigarettes, made a tremendous $ 12.8 billion investment in JUUL, a relatively young company that is causing a lot of noise thanks to its interesting technological / social focus within electronic cigarettes.
Ok, who or what is JUUL?
JUUL is an electronic cigarette that was born in 2015 as a project of the American PAX Labs. In 2017, and after seeking a change in the marketing strategy, JUUL becomes an independent company that focuses on the manufacture of this peculiar electronic cigarette .
JUUL's approach is to try to offer a cigarette that does not look like the rest of the cigarettes, since its design is very similar to a USB memory. In fact, its charging system is based on a small USB magnetic base that can be connected to any port or plug with the use of an adapter.
That technological approach, supported by an attractive design, made JUUL become the most popular electronic cigarette in the United States in late 2017. Until September 2019, JUUL had a market share of 75%, the largest for a brand in the country.Today, JUUL owns 75% of the electronic cigarette market in the US, the largest in the country.
This cigarette is made in Shenzhen, China, while its cartridges or 'JUULpods', which are the adapters that offer the flavor, are made in the United States. According to the company, the key flavor ingredient in JUUL lies in small amounts of nicotine salts extracted from the tobacco leaf, making it "healthier than consuming a 'normal' cigarette."
The company started with 200 employees and today they already have more than 1,500. Its marketing began in the United States and today they already market their products in countries such as Germany, the United Kingdom, Canada, South Korea, Ireland and the Philippines.
According to the company, each cartridge offers up to 200 vapes and only contains 5% nicotine, which is equivalent to 59 mg / ml. JUUL markets its 'pods' in eight different flavors, Virginia Tobacco, Classic Tobacco, Mint, Menthol, Creme, Fruit, Cucumber and Mango. Here it should be noted that for the moment the company has decided to withdraw the 'pods' of flavors due to the recent controversy of the "vaping disease".
JUUL's price starts at $ 35 for a single cigarette, or $ 50 for a kit that includes the cigarette and four cartridges. While the 'pods' are priced from $ 16, in a package that includes four cartridges of the same flavor.
Being the most popular electronic cigarette in the United States comes with consequences, as this has led to a great deal of research by the FDA (Food and Drug Administration), which has resulted in changes in laws. and restrictions for its sale.
This is due to a growing participation of adolescents in this vaping market, which has served to increase the popularity of JUUL, but also its problems. For example, the company had to close its social networks and change all its advertising; You are no longer authorized to sell flavor pods in physical stores, which is only limited to your online store; and those who want to buy online, and must demonstrate by means of an identification and social security number that they are over 21 years old.
The old wolf disguises itself as a sheep
As I mentioned, being the most popular electronic cigarette in the world brings its advantages and disadvantages. Today, JUUL is valued at $ 38 billion and confirmed that the Altria Group will make a capital injection of $ 12.8 billion, in exchange for a 35% stake in the company.
This announcement brought with it a series of criticisms of JUUL, who in the end, after handling a speech against the tobacco industry, decided to yield to pressure. However, Kevin Burns, CEO of JUUL, has come to clarify that this move will bring a number of benefits for both his company and the company that owns Philip Morris.
Some of the brands owned by Altria Group.
"We understand the controversy and skepticism associated with affiliation and association with the largest tobacco company in the US. We too were skeptical. But over the past few months we were convinced by the actions, not the words, of that in fact this partnership could help accelerate our success in changing adult smokers. We understand all the uncertainty. We had it, too. "
According to JUUL, this agreement will only allow Altria Group to have a 35% stake in the company, no more, at least for the time being. While JUUL will have access to the entire Altria database and distribution network, with which they will seek to reach a greater number of possible consumers.
On the other hand, JUUL will have a space next to Altria products in retail stores, which today are more than 230,000 chains, which also includes the entire sales force and access to the design and advertising area.
On the side of Altria, who in recent years has made interesting strategic moves, including the acquisition of a 45% stake in the Cronos company, focused on cannabis products. As well as the closure of its own e-cigarette division, including all MarkTen and Green Smoke products, and VERVE oral nicotine products.
Given this, it seems that Altria is betting everything on JUUL, who they see as their savior to stay in business, since the majority of their consumers are turning to the electronic side. In other words, Altria wants to keep its customers, only now it will be through a new product, which is not just any, since it is the fashionable electronic cigarette, the one that has the most consumers and the one that due to the prohibitions has been become the object of adolescent desire.
JUUL before the "vaping disease"
During the month of August of this 2019, alerts were fired after the United States Center for Disease Control (CDC) confirmed the presence of a mysterious lung disease that seems to be related to the use of electronic cigarettes. This has led to the hospitalization of more than 600 people and the death of at least 30.
Early research points to vitamin E acetate. But while research continues, the United States Food and Drug Administration (FDA) has recalled some products and banned the use of others, such as flavor capsules.
Since then, JUUL has been bogged down in new regulations and legal discussions against vaping, although JUUL is not being specifically held accountable. The focus is on flavored vaping variants, which they claim drives their use in minors and supposedly makes a new generation addicted to nicotine.
This caused a drop in sales and the appreciation of JUUL, as well as the dismissal of its CEO. Even Altria seeks to reduce its investment in the company by 4.5 billion dollars, this due to the controversy surrounding the company, which, even before the mysterious diseases, had a promising future in sight.
A few days ago, Juul presented plans for a restructuring, where a reduction of between 10 and 15% in its workforce is expected, as well as the dismissal of several high-ranking executives, such as its chief financial officer.With updated information as of December 2019.