Smoking break worth billions
Pair’s big idea captures market for e-cigarettes
Adam Bowen and James Monsees were pursuing master’s degrees in product design at Stanford when they decided to do something about their smoking addictions.
That was the beginning of what eventually would become Juul Labs, now a US$15 billion ($22.5b) e-cigarette maker with a product so popular it’s used as a verb.
“They’re becoming synonymous with the e-cigarette market,” Bloomberg Intelligence analyst Ken Shea says of San Francisco-based Juul. “They’re a phenomenon of a company.”
Bowen, 43, and Monsees, 38, founded Ploom in 2007, sold the name eight years later to Japan Tobacco and renamed their company Pax Labs. Around the same time, the pair introduced a USB-shaped e-cigarette and called it the Juul. Last year, Juul was spun out from Pax and has gone on to swallow the market.
Its growth has been meteoric, with Juul’s dollar share of e-cigarette sales soaring to 53 per cent of US sales from 16 per cent at the end of 2017, according to data from market researcher IRI. Reynolds American’s Vuse Ciro is next biggest with just 10 per cent.
Bowen and Monsees came up with their big idea while taking a smoke break one night in 2004 as they faced a deadline on their thesis proposals, according to a 2012 profile in Stanford Magazine.
The men, who declined to comment for this story, each owned 5.6 per cent of Juul after a July funding round that gives them stakes worth US$843 million apiece. That figure is poised to grow with e-cigarette sales, which have almost tripled in the past year. While e-cigs comprise just 3 per cent of tobacco-industry sales today, Shea expects it will be as much as 25 per cent within a decade.
Wells Fargo analyst Bonnie Herzog, who calls Juul the “brand to beat”, led a survey that found it is attracting new tobacco users rather than luring them from traditional cigarettes and other e-cigarette brands. Juul’s stated mission is to help adults quit smoking cigarettes.
It’s hard to say why Juul has become so popular when e-cigarettes have been around for more than a decade.
“Some products just go viral,” Shea says, citing the 1980s Cabbage Patch Kids craze as an example. But dolls aren’t addictive. Most of Juul’s single pods contain the same amount of nicotine as a pack of cigarettes. That’s one of the highest levels of nicotine content in the US e-cigarette market, according to the US Centres for Disease Control and Prevention. Juul also comes in flavours like mango, cucumber, fruit and creme, which may appeal to children.
Flavours in e-cigarettes have become the focus of a US Food and Drug Administration investigation into underage e-cigarette use. In September, the FDA threatened to pull such products from the market if the industry doesn’t do more to combat growing use among children and teens.
Juul is under particular scrutiny because of its market dominance. Last month, FDA inspectors took more than 1000 pages of documents on sales and marketing from its headquarters.
While the FDA pressure is a concern, most retailers don’t think it will have a “meaningful or lasting impact on either Juul or the broader vapour category,” according to the Wells Fargo report.
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